Political meddling - backroom agreement over commercial radio stations

2009-11-02

Prognosis

 

Government stability

  • Socialist MP József Karsai's suggestion that members rejecting the budget bill should leave the faction in the near future does not seriously threaten the passage of the bill. The politician, featured prominently in the media but with little political weight, has no support within the faction and the majority of socialist party politicians would not improve their chances for re-election by taking independent positions. While a few representatives can be expected to vote against the bill, its passage is not in doubt.

 

Parties reach backroom agreement over commercial radio stations

  • The cancellation of the operating licenses of two commercial stations with the largest audience (Sláger and Danubius) and granting these to radio stations affiliated with MSZP and Fidesz represents gross and blatant interference in the media. Due to the involvement of foreign interest groups, such as the EBRD and American Emmis media company, the brewing conflict has international implications as well. A favourable court decision (expected to take quite some time) is far from guaranteed. Political meddling in the world of media is not a recent development: in the past, the radio stations forced to close now and other television stations were subject to similar bargains in the media commission dominated by political parties.
  • The current decision mobilises primarily the smaller parliamentary parties (MDF and SZDSZ) as the deal is the result of a compromise between Fidesz and MSZP. The new frequency allocation may lead to adverse consequences for both parties. The decision is not only criticised by the President and the Prime Minister, but the two major parties have been steadily and vigorously assailed by the tabloids and commercial TV-s with the largest impact on public opinion, adding fuel to public discontent with politics in general.
  • The decision represents a risk primarily for Fidesz. The move increases general disappointment with the political elite and may strengthen Jobbik besides smaller parliamentary parties.
  • The disappearance of Sláger and Danubius radios from the media market provides additional evidence of the degree political forces have come to dominate the Hungarian economy: adding to this, the recent waterworks incident in Pécs and Fidesz’ threats to review privatisations may significantly impair the assessment of the domestic economic environment and, in some sectors, actually worsen the investment climate.

 

MSZP: looking for a candidate

  • MSZP will name its prime ministerial candidate at its December convention; at this point there are no front-runners for the position. While the socialists are clearly trying to avoid April's public nominating process that cost them dearly at the polls, the party itself is deeply divided on this issue; i.e., the diversity of names discussed so far reflects genuine dilemma and uncertainty.
  • As most prominent socialist politicians would not like to give their face to an all but lost election, the party is most likely to nominate someone with no ambition to play a major role in the party’s reconstruction after 2010. If the party hopes to build its 2010 campaign on the achievements of the Bajnai-cabinet, the nomination of an outside expert may be a logical decision. If, on the other hand, the Socialists’ primary goal is to mobilize the socialist camp with its confidence shaken in the past two years, it is likely to nominate one of its “grand old men”, someone of the stature of László Kovács European Comissioner and former foreign minister.
  • In an important development of the past few weeks, the Socialists have “given up” on the nomination of Gordon Bajnai. The prime minister has reiterated on several occasions that he would not accept the nomination for 2010, although his political return over the longer term cannot be ruled out as yet.

 

Dual citizenship

  • In Parliament Fidesz submitted a new proposal for granting dual citizenship: the draft would ease the situation of Hungarians across the borders as far as it would not tie citizenship to permanent residency in Hungary.
  • This may be the first step in realising Fidesz’ strategy: granting the voting right to ethnic Hungarians abroad, most of whom sympathise with rightist parties in Hungary. However, a cautious policy is warranted as “pushing too hard” for dual citizenship may not only poison the relationship with Slovakia, but also with Romania, treated by Viktor Orbán as a strategic ally.
  • The rejection of the proposal would be that best possible outcome for the largest opposition party: according to recent polls, the majority of society supports dual citizenship and following its rejection MSZP could be depicted again as the party going against national interests. Moreover, Fidesz could add yet another positive objective to its effort to win a two-thirds victory at the polls. However, the party wouldn’t be worse off if Parliament passed the required legislation; it could claim victory from opposition and diminish the risk of Jobbik appropriating the issue for itself following the 2010 election.

 


 

 

Key points to watch: calendar for the next weeks

 

Economic events

 

02.11. Securities issues statistics (NBH, september 2009.)
05.11. Balance sheet of insurance companies (NBH, Q3 2009.)
05.11. Benchmark yields on government debt securities (NBH, october 2009.)
05.11. Average yields of government securities at auctions (NBH, october 2009.)
05.11. The Budapest Stock Index (NBH, october 2009.)
05.11. Preliminary data about the change in the industrial output (KSH, september 2009.)
06.11. International reserves (NBH, october 2009.)
06.11. External trade (KSH, jan.-sep. 2009, preliminary)
11.11. Consumer prices (KSH, october 2009.)
12.11. Statistical balance sheet (NBH, october 2009., preliminary)
12.11. Agricultural prices (KSH, jan.-sep. 2009.)
13.11. Gross Domestic Product (KSH, Q3 2009, preliminary)
13.11. Industry (KSH, september 2009.)
16.11. Preliminary financial accounts (households, general government, NBH, Q3, 2009.)
16.11. Average daily turnover reported by resident credit institutions on the Hungarian FX market (NBH, october 2009.)
16.11. Other MFI loans to non-financial corporations (S.11) by economic branches (NBH, october 2009.)
17.11. Construction (KSH, september 2009.)
17.11. Number of employees and earnings in the national economy (KSH, jan-sep 2009.)
18.11. International reserves – foreign currency liquidity (NBH, october 2009.)
23.11. Distribution of securities holdings by sector (NBH, Q3 2009.)
23.11. Retail sales (KSH, september 2009.)
26.11. Statistical report (KSH, september 2009.)
26.11. Employment and unemployment (KSH, aug-oct 2009.)
27.11. Investment (KSH, Q3 2009.)
30.11. Aggregated balance sheet of credit institutions (NBH, october 2009.)
30.11. Household and non-financial corporations sector interest rates (NBH, october 2009.)
30.11. Balance sheet of investment funds (NBH, october 2009.)
30.11. Industrial producer prices (KSH, october 2009.)

 

 

Political events

 

03.11. Memorial day commemorating the victims of Roma murders
07.11. The Teacher's Democratic Union demonstrates against the government's austerity measures
16.11. Orbán Kolompár's court trial begins
18.11. Danubius and Sláger radios lose their broadcasting license
20.11. Socialist deputy-mayors depart
22.11. Midterm mayoral election in Józsefváros
25.11. Hearing of EU commissioner-candidates gets under way
30.11. ORTT (Radio and Television Commission) president László Majtényi leaves his post

 


 

 

Leading trends

 

Fidesz preparing for governance

 

In the past few weeks Fidesz announced a number of specific measures it would implement if it won the election: it plans to create a smaller, 200-member of Parliament, reform party financing and make it easier for ethnic Hungarians to apply for citizenship. As all these issues require a two-thirds majority vote, clearly Fidesz attempts to place the concept of constitutional majority in a positive light. This makes eminent sense: as support for the Socialists continues to be extremely low, their campaign is likely to focus on preventing Fidesz from gaining a two-thirds majority in Parliament, destroying democratic institutions. Therefore, in its campaign the largest opposition party is expected to claim that even a simple majority cannot be taken for granted, while a constitutional majority would allow the implementation of reforms supported by the majority of the electorate. Fidesz leaders do not claim to envision a two thirds majority by themselves: while the party has ruled out the possibility of a coalition with Jobbik and MSZP (although in the case of MDF it has made no such unequivocal statements) it leaves open the option of cooperating with these parties on specific issues.

 

 

 

 

Break-up of the coalition in Budapest

 

In Budapest MSZP has cancelled its coalition with SZDSZ. The timing was no accident: according to the electoral law, the assembly cannot be dissolved one year prior to the general election, i.e., the threat of an early election is ruled out. With the decision the Socialists try to pass the increasingly onerous consequences of BKV-scandals to SZDSZ. However, the move is rather symbolic as MSZP is expected to support major policies from the outside. In other words, while the management of the city will not come to a halt, debates will become more shrill and public. Although following its decision MSZP alluded to a liaison between Fidesz and SZDSZ, this script won’t work at a time when the largest opposition party enjoys strong position and Fidesz faction-head in the city council, István Tarlós was criticized by his party when he showed readiness for compromise. As to avoid even the appearance of cooperating with the city’s leaders, Fidesz withdrew all its delegates from the Supervisory Boards of city-owned companies. Rising political tension in Budapest and the increasing instability of once firmly left-wing Budapest electoral districts is well demonstrated when, in the current situation, Viktor Orbán and István Tarlós jointly present Fidesz’ program for Budapest.

Fundamentally, the break-up of the coalition demonstrates the further decline of deputy-mayor, Miklós Hagyó's power: based on leaked information, MSZP's national presidency tried to force the deputy-mayor to voluntarily relinquish his job and top position on the party list and Hagyó simply hoped to pre-empt this by abandoning the coalition. While Hagyó shouldn’t be seen as a failed politician, it is clear that today the former deputy-mayor (once aggressively extending his reach) has been forced on the defensive even in his immediate power base and lost much of his influence within the party. With all that, he cannot be ignored when it comes to bargaining within the party. While István Tarlós is likely to remain Fidesz’ mayoral candidate in Budapest, MSZP is expected to nominate the other socialist deputy-mayor, Csaba Horváth.

 

 

The continuing slide of the base rate

 

As in previous months, inflation in September remained well below earlier expectations: year-two-year prices increased by 4.9%, while compared to August prices actually fell by 0.1%. This is mainly explained by the fact that due to a dramatic drop in domestic demand retailers are unable to pass on excise tax and VAT increases to consumers. This means there is no significant inflationary pressure in Hungary, which improves the Central Bank’s scope for action: accordingly, at its last meeting the Monetary Policy Committee slashed the base rate by an additional 0.5%. The rate cut series is expected to continue at a slower pace, for the Central Bank hopes to avoid an upward correction at a later date. Along with the rate cuts political pressure on the National Bank of Hungary may decrease; earlier both MSZP and Fidesz representatives attacked the Central Bank for the high base rate.

 

 

Two market-leading commercial radio stations to be closed

 

Following the decision by ORTT (National Radio and Television Commission) as of November the frequencies of Sláger and Danubius radios will be allocated to other media players. The decision is based on a compromise between MSZP and Fidesz; in effect, the two parties divided the two frequencies among themselves. It is important to note that earlier the same charges had been levelled against the stations that lost their frequency now: in the last few years a number of decisions affecting the media-market were clearly the result of compromises between otherwise opposing parties. However, the current decision is especially egregious for a number of reasons: in their tender offers the two consortia operating the new radio stations, Advenio and FM1, promised to pay 50% of their revenues in concession fees, a target they are expected to meet only if they outsource their ad revenues to an outside company, i.e., they will meet their payment obligation at the promised rate, although in a significantly smaller volume. In other words, the bidders took advantage of a loophole in the tender document, while other applicants had been disqualified for the very same trickery.

ORTT president László Majtényi left the meeting before the decision was taken and resigned his post a few days later to protest the position taken by the commission, and Gordon Bajnai, László Sólyom, MDF and SZDSZ voiced their opposition as well. Today, the press attaché of the American Embassy also criticized the decision affecting one of the American investors, Emmis, which ran Sláger Radio.

The current decision fits the trend of the past few years where the two major parties gain control over an increasingly large section of the media market. In effect, the public media has been taken hostage by parliamentary parties, reflecting the prevailing balance of power. This is ostensibly contradicted by recent events at public television (taking the morning news program, Nap-Kelte, off the air and the removal of several announcers affiliated with the left) as these moves simply demonstrate that MTV's current management hopes to consolidate its position in anticipation of a change in government.

In the past few years powerful media consortia tied to Fidesz and MSZP have emerged on the commercial media markets as well. However, it is apparent that the premise, whereby the left enjoys an overwhelming advantage in the domestic media since the regime change, has been reversed in the past two years.

In this context, the deficiency of the legal regulatory framework continues to be the most serious issue, a problem not expected to be remedied in the medium term. Without a reform of the legal environment, a less-than-market-friendly and in many ways highly restrictive regulatory system is perpetuated, which may force media players to abandon the market. While an amendment of the media act was prepared in 2008, the act passed on December 8, 2008 was sent by President László Sólyom to the Constitutional Court for a review and the act has never been promulgated. The declared purpose of the act passed by a large majority (363 ayes, 10 nays and 2 two abstentions, with only MDF delegates voting against) was to ensure the transparency of Hungarian media, especially concerning the financing and personnel policies of public media, as well as reducing political influencing. However, the act was not supported by the profession and, in fact, it would only have increased political meddling, particularly in the public media.

 

 

The issue of party financing is back on the agenda

 

Last week Prime Minister Gordon Bajnai submitted to parliament and anti-corruption package: according to an underlying study (by GKI Gazdaságkutató Zrt., an economic research institute) party treasuries collect approximately annual HUF 30 billion in illegal funds, and in return contributing businesses receive roughly 10 times that much, i.e., around HUF 300 billion. This explains why in Hungary public procurements cost 25% more than in Western Europe. The findings of the study and the Prime Minister’s proposals have moved the issue of corruption, in public discourse closely tied to the anomalies of party financing, back to the centre of political debate. The issue has gained new urgency when this week Transparency International and Freedom House published their recommendations for the regulation of campaign financing. While MDF, SZDSZ and MSZP all promised to support proposals advanced by civic organizations, Fidesz would prefer to reform the system along its own agenda only following the elections. The strategy is not without risks as in the interim period the other parties may accuse Fidesz of perpetuating deficient regulations. The issue of party financing offers an opportunity for the smaller parties, while it carries more risk for Fidesz and MSZP: current conditions benefit primarily the two large parties and in the past both have already obstructed the reform of campaign financing.

The anti-corruption package submitted by the Prime Minister contains few new ideas; its recommendations are contained in proposals advanced by other parties and civic organizations in the past. In one of the major changes, the new legislation would offer whistle-blowers reporting corruption cases protection and compensation. Regardless of the future of the proposed bill, the anti-corruption drive may benefit Gordon Bajnai: (1) voters associate corruption with the entire political elite; by taking a strong position against these practices Bajnai consolidates his image as a non-party professional and distances himself from corruption cases tainting MSZP, (2) by submitting the package, the government may claim another achievement beyond the passage of the budget, belying the impression that it is no more than a single-issue caretaker government supervising budget procedures, (3) the anti-corruption campaign is supported by the socialists as well, as the proposed restrictions would cause difficulties primarily for Fidesz, which is expected to win the next election.

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