Fidesz plans for the future?

Yesterday, Péter Szijjártó, the chief spokesman of Fidesz, announced that the party is officially beginning preparation for the upcoming elections. László Kövér today sent a message to SZDSZ in which he urged its politicians to do their best to bring about the fall of the government. After all, said Kövér, everything depends on them. This kind of talk on one side usually brings the expected reaction from the other: the spokesman of MSZP announced that the next election in Hungary will be in 2009 when the people will have to vote on whom they want to send to Brussels to represent Hungary in the European Parliament. Otherwise, he added, national elections will be in 2010. Gábor Horn, representing the SZDSZ’s point of view, told Kövér and Fidesz not to get too excited.

To tell you the truth, despite repeated calls for early elections, I’m not at all sure that Fidesz really wants to govern again so soon. Or at least it would behoove them to wait two more years for the economy to be in better shape. Then the situation would be very similar to the state of affairs in 1998 when after the austerity program of the Horn government (the Bokros austerity program) the Orbán cabinet inherited a flourishing economy. There are already signs that the worst is over economically in spite of stresses in the global economy. Inflation is decreasing despite a sharp rise in commodity and energy prices, and there are predictions that the Hungarian economy might actually grow a healthy four percent this year thanks to higher food prices and a very promising harvest. But the government still has a lot of heavy lifting to do. So who would want to take over the challenge?

Yet the whole country is talking about nothing else but the internal strife in MSZP and the alleged impossibility of a minority government in a country like Hungary. Daily there are rumors about the intentions of SZDSZ. In brief, there is great instability. At least on the surface. This instability is fueled by some rather irresponsible utterances coming from both MSZP and SZDSZ politicians. For example, for the life of me I can’t imagine why they feel compelled to discuss the budget in May when the vote comes only in December. I understand that journalists ask politicians what will happen to the budget if there is no solid majority to pass it. But why engage in "what ifs"? One could simply say that the budget vote is too far in the future and a lot can happen before then. For example, Kóka might lose to Fodor, who is eager to renegotiate the coalition.

To add to the uncertainties, MDF’s old dream of introducing a flat tax is receiving some help from Fidesz. Moreover, since SZDSZ favors tax reduction, MDF hopes that SZDSZ will support their plan. This way perhaps a united opposition could achieve a very important victory. I am against a flat tax for several reasons and so is János Veres, the minister of finance. Ibolya Dávid yesterday made another attempt at airing her great hopes in this direction.

As I said, there are an awful lot of rumors floating, and the latest concern the plans of Fidesz if they win the elections either in 2010 or before. According to these rumors, Orbán outlined his economic plans in the company of his closest associates: if they win, their very first act will be to halt all large government infrastructure projects. Zsigmond Járai, former Fidesz minister of finance who subsequently headed the Central Bank, fairly openly talked about saving at least 1,000 billion forints by stopping road and metro construction. Right now there are at least five separate road construction projects to the tune of 1,390 billion forints. However, the Hungarian government’s share is only 103 billion forints; the rest comes from the European Union and from private sources. That’s real leveraging for success. For Hungary to be competitive in a global economy, infrastructure is essential; it can perhaps be marginalized in a Hungaro-centric, "sinkhole" economy.

Another Fidesz plan is to have some kind of "social contract" embracing civil and professional organizations, business leaders, and labor. István Stumpf, the so-called political scientist and former Fidesz politician, talked about this "social contract," which would be based on wide social support and among other things would include an agreement about changing the current practice of taxation. It seems that Orbán and his friends are thinking of a Hungarian Moncloa Pact (1977). The Spanish political and economic elite signed an agreement that ensured cooperation among parties, business, and labor in order to introduce a stable economic and political situation after the fall of Franco. It’s incongruous that Fidesz comes up with such a warm and fuzzy suggestion. After all, it is this party that is mostly responsible for the current political strife.

And as a coda: it doesn’t matter what kind of tax system Hungary has if its citizens are chronic cheaters. And here the solution lies in law enforcement. The risk of incarceration has to be a whole lot bigger than the reward of skimming the government.

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John Hunyadi
“it doesn’t matter what kind of tax system Hungary has if its citizens are chronic cheaters. And here the solution lies in law enforcement.” I agree that law enforcement is part of the solution, but that you are wrong to state that the tax system has no impact on tax evasion. It impacts in two ways. Firstly, people only cheat on their taxes because it saves them money. The more they save, the greater the incentive to cheat. The introduction of lower rates of income tax in Russia and Slovakia led to an increase in the amount of money collected, presumably because it reduced the incentive to evade paying tax. Secondly, the more complex a tax system is, the easier it is to avoid tax legally and the more difficult it is for the tax authorities to discover tax evasion. Maybe a flat tax is not the best solution for Hungary, but I challenge you to argue the case that it is not better than the current system. Points in favour of a flat tax are: it reduces the incentive for tax evasion (by those who should be paying tax at the highest rate), it would make it easier to… Read more »