The Hungarian socialist salvo

Yesterday I wrote about the Fidesz meeting that preceded the opening of parliament next week. Today I thought that I ought to summarize Bajnai Gordon's speech before the party faithful and Party Chairman Ildikó Lendvai's press conference afterwards. Both descriptions are based on media reports that include some direct quotations.

The tone of the two meetings was very different, which is not at all surprising. After all, MSZP is a government party with responsibilities in very difficult times while the opposition can basically say anything it wants. Viktor Orbán can demand the withdrawal of the budget and the resignation of the government, but he and his party would not be the ones who would have to suffer the brunt of such a decision. An opposition party can leave the heavy lifting to the government and focus exclusively on winning the next election.

Bajnai's speech naturally centered on the budget that had already been delivered to the Speaker of the House, Katalin Szili.Bajnai It is actually surprisingly early that the government has the budget proposals ready to be presented. Normally, the budget is sent to parliament only at the end of September or early October, and the detailed discussion of the budget usually starts in November. The budget prepared by the government and passed by the majority just before an election is usually overly generous, and as a result in a couple of years the country's finances are in disarray. That was the case in 1994, in 1998, in 2002, and in 2006. Ildikó Lendvai described this very bad practice as a "financial roller-coaster." Overspending followed by austerity. For months now one has been hearing nothing else but that this practice is coming to a screeching halt starting with the budget of 2010. As Bajnai said, this is "a budget of reason and not of the heart." Yet it is not a "heartless budget" because it shows solidarity with those who live in difficult circumstances. It is, however, "implacable" when it comes to handling the crisis.

Bajnai admitted that this is not really a "left-wing budget" though it has the support of the Hungarian Socialist Party. The socialist MPs realize that sacrifices have to be made in order to hang on to some of the social networks currently available. In plain language, if this government didn't take back, for example, the thirteenth-month pensions and salaries Hungary might have collapsed financially. Or if they do not raise the retirement age, the whole system will go belly up. The prime minister's hope is that MSZP's role in handling the crisis will be rewarded at the ballot box. I assume that this is a pep talk. As things now stand the general opinion is that MSZP will orchestrate the turnaround and Fidesz will walk in and reap the benefits of the austerity program just they did in 1998 after Lajos Bokros set the country on a course of rapid economic growth.

As far as the government's achievements are concerned, Bajnai considers the strengthening of the Hungarian currency, the forint, its most important. What is even more remarkable is that the exchange rate seems to have held steady in the last couple of months at around 270 forints to a euro. However, Bajnai issued a warning, most likely directed at members of the central bank and Fidesz, that the "trust" the country managed to regain is still fragile. "A wrong move, an ill-considered statement" might change the situation, and the country "may end up in even deeper trouble than before." The prime minister then recalled the absolutely frightful situation Hungary was in during the spring. There was a real possibility of financial collapse that, thanks to this government's handling of the economy, was averted. If this program stops or slows, the catastrophe that loomed in the spring "might still become reality." Therefore the lean and mean budget must be supported. Referring to the opposition without mentioning the name of Orbán or Fidesz, Bajnai said: "Those who consider a responsible strict budget unpatriotic and a politics of promises something that serves the national interest are following the wrong path."

Bajnai is especially pleased that even in a financial and economic crisis the budget contains a fairly substantial tax cut that may assist in achieving future growth. The authorities are cutting back on administrative expenses both in the central ministries and on the local government level, but they are spending more money on the police force and on a program called "Road to Employment" aimed at raising the level of employment which is very low in Hungary. And that leads us to the Roma question which is indeed one of the most urgent tasks before the nation. As Bajnai said, "Hungary's future depends on Roma integration." He brought up the example of the United States where in fifty years the country "starting with the activities of the Ku Klux Klan ended up with Obama." He added that he very much hopes that the road to a Hungarian Obama will be shorter.

Ildikó Lendvai, the party chairman, pretty much continued where Bajnai left off. While the prime minister spent most of his time on the government's handling of the financial crisis, Lendvai emphasized the achievements of the last seven to eight years which, though considerable, have largely been forgotten in the wake of the financial crisis. She also assured the citizens that if they win the elections they will not start demolishing everything as promised by Fidesz but will build on the existing foundations. She said that Hungary was not "a country of holes," a witty reference to one of the first acts of the Orbán government. During the previous administration the decision had been made to build a national theater. The design was approved by an international jury, the site was designated, and the foundation was dug. Then came Orbán's victory. Work was immediately stopped and they scrapped the design and the site, allegedly because it was too expensive. In the end the theater cost considerably more than the original estimate and the building is hideous, designed by someone who had no experience with theaters or public buildings in general. But she was the choice of the man in charge of the project. After all, she designed his house! The hole in downtown Budapest remained for months on end, reminding everyone of the craziness of Hungarian politics.

Lendvai is a witty speaker who continued her not so veiled criticism of Viktor Orbán when she said: "It is easy to say a few words to describe a period: "Josip, Kaya, vineyard, holes, ditches, exclusion." Here she was imitating Orbán's description of the Gyurcsány period as "Őszöd, Zuschlag, offshore, severance pay." Everybody knows what Őszöd refers to. Zuschlag was a young local socialist who was caught embezzling about 70 million forints. Offshore refers to a company owned by the head of the central bank, and severance pay is connected to the outsized compensation received by some employees of the Budapest transit system. Lendvai's examples refer to the corruption cases which with the help of the chief prosecutor, a close friend and political ally of Orbán, were swept under the rug. Viktor Orbán's and his family's incredible enrichment during his tenure as prime minister is also legendary.

As things now stand MSZP's chances for victory next year are slim, but there may be some rays of hope coming their way. One is that the tax cut will be introduced on January 1. Take home pay will be considerably higher for most people. And there is something else that may help the current government. The budget deficit will be small and inflation is lower than expected. According to analysts abroad and at home it might be possible for Hungary to get into the so-called ERM II as early as the first few months of next year. Before a state can join the eurozone, it must spend two years in the European Exchange Rate Mechanism (ERM II). If Hungary manages to achieve to get into ERM II it would give a boost to MSZP's chances in 2010.

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NWO
Guest
Eva: Honestly, I think you are being delusional. I very much like the PM. I think he has done a good job. Unlike Mark (who happens to know a lot more about Hungary than I do), I see few options for the economy other than this IMF driven internal devaluation and restructuring. I am also pleased by the recent stability of the HUF (though it will have an adverse impact on Hungarian exports going forward if it remains in the 260-270 range) and Hungary’s ability to tap the capital markets, but one must UNDERSTAND the primary reason the HUF has stabilized is not because of improving fundamentals in Hungary but just sharply increased risk tolerance on the world markets. If you are interested, look at how closely the HUF has correlated to the S&P 500. The run up in the Forint is very similar to the run up in the S&P since April. As the world markets improve, Hungary benefits. If a sensible level of caution returns to the markets, Hungary will again be vulnerable. As for the election, MSZP has virtually no chance to win in the Spring. There best hope is that Orban overreaches, as he is prone… Read more »
Mark
Guest
NWO: “Unlike Mark (who happens to know a lot more about Hungary than I do)” Many thanks for the compliment, but I’m not sure that you are right! NWO: “As for the election, MSZP has virtually no chance to win in the Spring.” I agree. To assess the MSZP’s chances one has to examine the root of their problem with the voters who supported them in 2002 and 2006 (and try and cut away overblown FIDESZ rhetoric which seeks to blame them for everything). If their problem was the condition of the economy I would think they have a higher chance than they do. It isn’t unknown for governments to be elected in recessions or before a recovery had become fully apparent – even when they are to a large degree culpable (while this is uncommon in the US, it is actually quite common in the political history of western Europe). Their real problem is the breach of trust that occurred during the summer and autumn of 2006, when the MSZP sought a manadate on the basis of improving living standards, social security and using EU money to boost growth, and did the exact opposite almost from the moment of… Read more »
Eva S. Balogh
Guest

To NWO. I don’t think that I’m delusional. I just know that we can’t look into the future and with certainty predict anything. In 2002 Fidesz was supposed to lead by 10%. They lost the elections. A few months before the next elections, Fidesz was leading by a mile. They lost the elections. I’m not saying that they will lose again; what I’m saying is that it is not a foregone conclusion that their victory is certain. Especially knowing Orbán’s overconfidence and its results in the past.

Mark
Guest
Éva: “In 2002 Fidesz was supposed to lead by 10%. They lost the elections. A few months before the next elections, Fidesz was leading by a mile.” This should remind us of dangers of taking opinion polling in Hungary too literally, without examining other pieces of underlying evidence. In no country are opinion polls precisely reliable predictors of election outcomes – they tell us something about the visceral attitudes of voters towards parties at the moment the poll was taken. I have to say that in both 2002 and 2006 I expected MSZP victories. I was deeply suspicious of the movement of the polls towards FIDESZ in 2002(less of the small movement which occurred in Autumn 2001, but very considerably in the late phases of the 2002 campaign in March), because they were not supported by any of underlying evidence. If political analysts had looked at local government by-elections during late 2001 and early 2002, they would have realized that the parliamentary election would be very close and an MSZP-SZDSZ victory by a narrow margin the most likely outcome. Likewise in the run-up to 2006, there was underlying evidence – almost from the moment Gyurcsány succeeded Medgyessy that opinion polls… Read more »
Eva S. Balogh
Guest

Mark: “Éva: “In 2002 Fidesz was supposed to lead by 10%. They lost the elections. A few months before the next elections, Fidesz was leading by a mile.” This should remind us of dangers of taking opinion polling in Hungary too literally, without examining other pieces of underlying evidence.”
Agreed! And that should apply to the current situation as well.

Odin's lost eye
Guest

As they say in cricket “the game is not over until ‘stumps are drawn’”. Whilst Fidesz have a huge lead in the public opinion polls this may not represent the final truth. I think that many are scared of what the ‘All Highest’ of Fidesz will do to punish them for daring to keep him from his appointed destiny. These people will lie low and then vote against Fidesz. The socialists may be the ‘any port in a storm’ choice but if MDF plan their campaign carefully they could give Victor Orban a rude awakening. Hungarians may be politically naïve, financially uneducated but they are not fools.

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