The election campaign is heating up in Hungary

2010-01-19

Prognosis

 

Elections and campaign

  • The president is expected to announce the dates of the 2010 general election in late January, with the first round likely to fall on April 11 and the second on April 25. Since Easter falls on the first weekend of April, the election can only be held on the following weekend at the earliest. The campaign will begin to heat up in the second part of January; the government will stop making substantial decisions and focus on assisting the MSZP campaign. In the current phase of the campaign, the MSZP is preparing to introduce its candidates in the constituencies, while Fidesz is enlisting volunteers and soliciting donations.
  • The MSZP will concentrate on “safe” constituencies where their candidates have the best chances of retaining power, such as Budapest’s 13th and 18th districts and industrial cities such as Kazincbarcika. At the moment, it seems that the maximum number of constituencies that MSZP can win is 25 out of 176. (The MSZP needs at least 25 to 30 constituencies in order to block Fidesz from gaining a two-thirds majority, which would empower them to amend Hungary’s Constitution).
  • The campaign will be characterized by the MSZP and Fidesz trading accusations of corruption. This may primarily improve the position of the radical right Jobbik party, which will be trying to attract new voters by campaigning against the “criminal political elite.” At the same time, the arrest of a Jobbik politician in city of Keszthely in connection with fraud charges may damage the party’s image and give ammunition to its opponents.

 

Policy plans of Fidesz

  • The impending change in government is causing serious insecurity among government employees. Fidesz, which opinion polls show is all but certain to take power, has announced plans to replace a large number of public servants. People expect major restructuring, layoffs and personnel changes that could paralyze the public administration in the coming months.
  • Fidesz is presenting specific elements of its policy plans to the public – but withdraws them at the first sign that they may threaten party’s election success. Its proposal to reform the pension system by implementing a “Swedish model” may generate the loudest debate of the campaign, as the MSZP wants to “take back” its traditional voters from the “hard core” camp, the pensioners.
  • Since Fidesz wants to maximize votes, it will not release a comprehensive political program covering all issues. In fact, in line with its policy of “having its cake and eating it, too,” Fidesz politicians have recently denied the existence of plans to restructure the public media and the pension system. They will probably employ the same tactic in the future: Floating trial balloons in the media to sound out the public mood, while remaining noncommittal on specific policy issues. This also suggests that Fidesz is not “hiding” its policy plans; rather, it has not developed a set of policies covering all important areas.

 

Slovakia and Hungary: Stoking the Conflict

  • The conflict between Slovakia and Hungary over the Slovak language law is likely to heat up again due to the upcoming election campaign. Recent statements by Slovak Prime Minister Robert Fico (the odds-on favourite to win the 2010 election) foreshadow worsening relations after Hungary’s new government takes power. In Fico’s view, Slovakia must defend itself against nationalist attacks by Viktor Orbán, who is virtually certain to become Hungary’s next head of government.

 

Strikes and demonstrations

  • The success of the six-day strike by Budapest’s public transport company, BKV Zrt., increases the likelihood of strikes at other public companies. The rising tide of strikes is closely related to Fidesz’s political agenda: The leaders of the most active labour organizations have maintained close contacts with Fidesz, and the recent labour actions demolish the achievements of the Bajnai government on a symbolic level. At the same time, in the future Fidesz is not expected to openly support unpopular labour organizations, and an increasingly strong trade union sector would be against Fidesz’s interests on government.

 

László Sólyom: Looking to the Right?

  • The recent conflict between Hungarian President László Sólyom and the government is expected to intensify. Sólyom's critical statements and his politically motivated vetoes of legislation may be explained by his hopes for a second term. As the nomination will take place under the watch of the next administration in 2010, the president must gain the confidence of Fidesz. Relentlessly criticizing the government may be an excellent tool to that end. But should Fidesz win the election, it may be hesitant to renominate Sólyom: In the past few years, a number of conflicts have developed between Fidesz and the president. Sólyom, who was the first president of the Constitutional Court and is a “defender” of the constitutional system, may stand in the way of Fidesz’s plans to amend the Constitution in the next term.

 


 

 

Key dates to watch

 

Political events in the coming months

 

 

Economic events and data releases in the coming month

 

 

 


 

 

Leading Trends

 

New components in the Fidesz program


Fidesz has presented new details of its policy program over the past two weeks, with housing policy apparently one of the cornerstones of its platform. The party is considering consolidating new-home construction, housing policy and problems facing the construction industry into a single policy package that it will address through a 10-year plan. The party’s policy expert, László Mádi, acknowledged that a new home-subsidy program can “hopefully” be introduced starting in 2011 in the form of either a VAT- or personal income-tax allowance. The construction of rental units is a top priority and, according to László Mádi, some form of subsidy is conceivable for these as well.

According to online news portal Index, Fidesz plans to consolidate MTV (public television), Duna TV and Hungarian Radio into a single public broadcasting company headquartered in public television’s recently opened Óbuda complex. Index also claims that the party plans to close MTI (Hungarian News Agency) and replace it with a government news service employing no more than a handful of staff. Following the publication of the article, Fidesz deputy spokesman András Cser-Palkovics specifically denied only the reports of plans to close MTI.

Former Fidesz Finance Minister Mihály Varga talked about his party’s plans on pension reform in an interview with economic weekly Figyelő. Should Fidesz form the next government, it would harmonize pension payments with economic production and introduce the so-called “Swedish model”: In other words, the government would make the first (government-run) pillar of the system similar to private pension funds and introduce self-regulating mechanisms to make the system fully self-sufficient. It would introduce a system of individual accounts and create a close correlation between deposits and future benefit payments. Also, in any given year total pension payments would be covered by deposits. However, in light of Hungary’s demographic conditions (a high elderly population and a low employment level), funds available for pension payments would have to be reduced, i.e,  Fidesz would either have to reduce pension benefits or increase the retirement age.

A fierce debate broke out. Not surprisingly, the president of Fidesz’s pensioner forum, László Iván (who has little clout within the party), described these unpopular ideas as “confabulations” and made it clear that Fidesz’s only objective was to preserve the buying power of pension benefits. Even Mihály Varga himself later denied plans to introduce the Swedish model.




The Slovak-Hungarian conflict heats up again


Developments in the past few weeks made it patently clear that last summer’s meeting in the north Hungarian town of Szécsény between Hungarian Prime Minister Gordon Bajnai and Slovak counterpart Robert Fico did little to resolve the debate over Slovakia’s law that forbids Hungarian to be spoken in public offices. In the middle of December 2009, the Slovak government ordered the language act’s enforcement and even made its provisions harsher than in the original version. They completely ignored objections raised by the Hungarians. The Fico government has also failed to offer any substantial response to the European Commission’s determination that Slovakia violated E.U. regulations when it refused to allow Hungarian President László Sólyom to enter the country on August 20, 2009. Bajnai's diplomatic strategy appears to have failed. Neither Slovakia’s language act nor its decision to ban President Sólyom from the country have had any repercussions. The European Union is loath to mediate, evidently out of concern that it might strengthen the position of either party.

In the remainder of its term, the Hungarian government has the following alternatives:

  1. It can continue its Szécsény strategy and try to find support for its position at international forums. However, such appeals have failed to yield any results so far, and may also elicit criticism from the domestic opposition.
  2. It can take a firm position and, similar to the Slovak side, try to resolve the situation by “arm-twisting.” Presumably, this is exactly what Fico would like to achieve, as countermoves by Hungary would divert attention from economic difficulties in Slovakia and help mobilize supporters of Fico’s party, Smer. In other words, a confrontational approach by Hungary would paradoxically benefit Fico. The Slovak premier may also benefit if Fidesz, hoping to prevent its rival Jobbik from gaining support, resorted to jingoistic rhetoric and hostile statements against Slovakia.



A rising number of presidential vetoes


With the approaching election, the relationship between the Bajnai government and the President Sólyom is gradually deteriorating. In the past month, Sólyom has vetoed the pension-reform bill, the public administration act, the act on the public procurement office and the enactment of the new Civil Code. In an interview with a weekly magazine, Sólyom described his relationship with Bajnai as stable, but said it would have been better if early elections had been held last autumn. Referring to a position taken by the Budget Council, Sólyom expressed regret that this year’s budget includes a number of wilful infractions of the law.

When he first took office, Bajnai made a visible attempt to develop a good working relationship with the president – a clear break with the policy of his predecessor, Ferenc Gyurcsány's. But Sólyom's recent actions may make it necessary for Bajnai to change his stance. Some of the laws the president vetoed, such as the act on public procurement and pension reform, are directly tied to the government, thus the prime minister will be forced to defend them. The conflict is all the more likely to deepen, since Sólyom may be hoping for a second term under a Fidesz government. Relentlessly criticizing the current government may be a useful tool for currying favour with Fidesz.

However, it cannot be taken for granted that Fidesz will renominate Sólyom. The president has shown himself to be a highly autonomous figure in Hungarian politics. In the past few years he has sharply criticized Fidesz and has also voiced disagreements with some of its policies. For instance, Sólyom is considered a defender of the present Constitution, which Orbán has described as “unlovable.” The president is also opposed to any reference to God in a new Constitution. In other words, should Fidesz win a two-thirds majority in Parliament, Sólyom would be seen as an obstacle to constitutional reform. At the same time, Fidesz supported Sólyom in 2005 and in the past few years has frequently expressed support for his positions. Fidesz would therefore be hard put to come up with arguments for abandoning the man it had publicly promoted as a highly accomplished leader.


Complications over the gasoline tender


Hungarian state vehicles will purchase their fuel from Austrian-owned ÖMV instead of Hungarian oil refiner Mol after the Austrian company won a bid for the government’s business. ÖMV offered fuel at a more favourable price, representing a savings of HUF 100-200 million a year for the budget. However, the decision has come under attack from several directions: Government agencies claim there are fewer ÖMV petrol stations in Hungary than Mol stations, meaning it will be more difficult to find a place to fill up. The opposition MDF party claimed that the decision entitles the Austrian company to register the license plate numbers of all vehicles operated by law enforcement agencies, representing a risk to national security. This issue is aggravated by a government decree that law enforcement agencies may only purchase fuel from companies that enjoy national security protection. Mol is currently the only such company operating in Hungary. The government was forced to correct its mistake and remove ambulance services, fire fighters and law enforcement agencies from the list. However, ÖMV may challenge this decision, claiming the deal would no longer be profitable unless these vehicles are included. As a result, the fuel tender and the mistakes committed by the government may remain on the agenda.


The 2009 deficit could be on target


Public finances registered a surplus of HUF 205 billion in December, exceeding the Finance Ministry’s preliminary projected target of HUF 135 billion (a number that analysts had called already overly optimistic). The higher-than-expected surplus is due to a sharp rise in excise-tax income: Tobacco companies purchased an exceptionally large number of warranty seals at the end of 2009, adding around HUF 30 billion to the monthly balance. The Hungarian Electric Works (MVM)’s HUF 20-billion dividend payment to the government in December may have contributed to the sizable surplus as well.

With the publication of December data, it became clear that the government has managed to meet its cash-based deficit target (taking into account revenues and expenditures between January 1 and December 31). At the same time, the accrual-based deficit target applied by the EU and IMF (looking at all the factors related to the subject year regardless of when they happened) will be known only at the end of March. However, the currently available data suggests that this  target is all but certain to be reached. This could be a boon for the Socialists in the last stretch of the campaign when Fidesz is likely to attack the current budget as untenable.


Frequency Case: Danubius Wins in Court


According to a first-instance ruling by the Metropolitan Court of Budapest, the ORTT (National Radio and Television Board)’s tender for two nationwide radio frequencies was unlawful as it failed to disqualify Advenio Zrt., operator of the Class FM radio station. The court ruled that the ORTT should have rejected the company's application due to a shareholder's conflict of interest.  The issue is uncomfortable for both Fidesz and the MSZP, who are accused of prevailing upon ORTT to award frequencies to their political allies, including Advenio. At present, the ruling has no more than a symbolic importance: The court did not annul the licensing agreement, so the station may continue to operate. On the other hand, the decision is subject to appeal, which means that the case may drag on for some time to come. The legal wrangle will keep the issue on the front burner, providing smaller parties with an opportunity to harass Fidesz and MSZP.


Strikes


The government managed to avoid major strikes during the budget talks last autumn, but the frequency of labour actions and strike threats have escalated in the past few weeks. Before Christmas, Hungarian Postal Service workers held a strike demanding the company pay HUF 100,000 to each employee from the sale its real estate holdings. Soon afterwards, workers at Volán, a long-distance bus service, threatened to strike for a 4.9 % wage increase. In January, employees at BKV (Budapest Transport Authority) walked off the job for six days. The current strikes are different from past labour actions: This time, the fight involves workers’ own interests instead of government economic policy. Still, Fidesz politicians were clearly encouraging the work stoppage.

Prognoses for GDP and budget deficit, 2010


 

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