Economic and political alternatives?

It is ironic that I have to talk about economics when it is neither the center of my interests nor my strength. However, given the general economic situation and Hungary’s particular problems I’m afraid I can’t ignore the topic. In response to the current economic and political situation, suggestions abound, most of which are untenable.

Today let me cover the suggestions of two economists–Lajos Bokros and László Békesi, both of whom had rather short tenures as finance ministers in the Horn government. Although the Gyurcsány government reduced the size of the government bureaucracy by about 10%, Bokros and Békesi want to make even deeper cuts. But then, what will Hungary do with the unemployed former civil servants? They think that the country offers too generous pensions: 85% of the people’s former salary as opposed to other countries where it is at most 75%. Fine, but try to tell the pensioners that from here on they will receive less money. Another suggestion: they would cut out the so-called thirteenth-month pension payment that was introduced not long ago. Furthermore, they suggest raising the retirement age (which, by the way, the government is talking about), but even the mention of it is followed by an outcry. The government, they argue, is too generous when it comes to supporting new mothers who can stay at home with their children for three years with generous stipends. But if the government followed these two gentlemen’s advice, the reaction would be that the government doesn’t care about Hungarian demographics. Or try to tell the folks over 65 that from here on they will have to pay for tickets on streetcars, buses, trains. If this government is unpopular now, just imagine what would happen if it followed their advice.

Don’t misunderstand me. In theory, I agree with Bokros and Békesi to a large extent, except I don’t think that they understand the political implications of introducing such measures. There could be a revolution, especially under the present circumstances. And, even if the government stayed in power, there would be plebiscites. Plebiscite after plebiscite. Surely, this road leads to nowhere.

There is a large dose of hysteria in Hungary today when economic issues are mentioned. Even those who should know better concentrate only on the economic indicators of the last year or so. Indeed, overall growth was very low, but most of the loss came as a result of cutting back in the public sector. If we look at the private sector alone, there was a healthy 4.5% growth in the GDP. One cannot demand a cutback in government expenses and then be terribly surprised that economic growth suffers. But from recent figures some people already know that Hungary will be the poorest country in Europe! Although there is real success in reducing the budget deficit, the Hungarian population doesn’t give a hoot about that. But they sure would care about a drastic reduction of social services.

Moving on to the political maelstrom. Given the situation created by the referendum the most incredible rumors are circulating, some of which have already found their way into the written media. Yesterday there was an article about a cabinet reshuffle. According to this piece both the minister of health and the foreign minister will be sacked because the SZDSZ wants to give up the ministry of health and take over the foreign ministry. In addition they would break up the ministry of education and culture, and Bálint Magyar (SZDSZ) would again be the minister of education instead of István Hiller (MSZP). Apparently this complicated nonsense is just that. And then Magyar Nemzet, the mouthpiece of Fidesz, announced today that Ferenc Gyurcsány will not be the prime minister of Hungary by the summer. The newspapermen of Magyar Nemzet already seem to know what he will do instead: he will be the head of the company building the Southern Stream! Surely, this brilliant idea comes from Germany where Gerhardt Schroeder, after losing the elections, was hired by Gazprom to be in charge of building the Northern Stream between Russia and Germany.

There are also rumors about the fate of the health care bill. One version claims that the bill will be withdrawn, a total Fidesz victory. Both MSZP and SZDSZ politicians deny this. They claim that the reforms will go on, but they have to find a way to alter the bill in such a way that no referendum can be held concerning its provisions. Surely, it will be some time before a suitable solution is found. I understand there are also some plans to change the financing of family doctors. Instead of being paid per patient they could receive compensation based on actual services rendered. But this at best is in the planning stage.

Finally, there are rumors about the fate of the coalition itself especially since János Kóka announced yesterday that if there is no reform there is no coalition either. Given the SZDSZ’s internal problems, such an announcement is rather surprising. Kóka’s fate seemed to be in question when it was discovered that during his election to the post of party leader four people voted illegally. The story is rather murky. One of the "illegal SZDSZ voters" went to HírTV and broke the news: he was hired to vote for Kóka. This was received with some skepticism because the person who allegedly hired these people was a strong supporter of Gábor Fodor. During the internal investigation of the case the "non-delegates" changed their story and said that they in fact voted for Gábor Fodor. In any case, since Kóka received thirteen extra votes the four votes are neither here nor there. Nonetheless, several people belonging to the Fodor camp are outraged, and rumor has it that the party may split in two. Nice! Especially for a party which at the moment wouldn’t even receive 5% of the votes. Anyway, Kóka’s announcement about the breakup of the coalition is no more than an idle threat. Early elections would bring certain defeat for the MSZP, and SZDSZ most likely wouldn’t even get into parliament. Who would want that? I can’t imagine such a move even from the politically not too astute SZDSZ leaders.

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I do not know Eva – The current situation does not seem like a good one. As you write there will be plebiscite after plebiscite and Fidesz will be allowed to do their stunt until 2010, without being challenged to take their responsibility. I do not believe in watering down the already watered-down reforms any more. Maybe it is better to take a tactical “final” stand and either; 1) Split the coalition formally and MSZP continues with a minority government. We still have 2 small parties and the threat of a total Fidesz win, with 2/3 majority in a new Parliament, and the expected total disappearance of both SZDSZ and MDF, could actually broaden the parliamentarian base for some of the reforms needed. Who knows maybe some Fidesz -MPs, who do the same thing locally would support some of the reforms, if they could influence them? 2) If nothing else works – admit defeat right now and retreat to a safe place. Let Fidesz get a 2 party Parliament, with their 2/3-majority. They will use that to fix the Constitution to take away the plebiscite-syndrome. It will probably not be so nice, but we must remember that now Hungary is… Read more »
New World Order

Two thngs. First, unlike Rona, Bekesi and Bokros are 100% correct in their analysis of the situation. It might not be politically expedient, but it is the only path for righting the multitude of economic wrongs in the country. I heard Bekei mention a couple of weeks ago on the radio, that “retirement costs” absorb more than 10% of GDP. This may be poltically astute in a country with such an old population, but it is also suicide.
I am sympathetic with Viking. A continued MSZP/SZDSZ Govt. that effectively runs out the clock until 2010 would be a terrible but not surprising solution. It wont happen but the Government should go down all guns firing. If it fails with with the reforms, at least they tried.
Finally, as the “Polish twins” and Fico in Slovakia have demonstrated, within the confines of the EU there is only so much actual damage a Govt. can do, and these guys are usually worse in opposition than in Govt.