Many people in Hungarian intellectual circles express their amazement at the "sheep-like" attitude of the Hungarian people. How slightly over half of those who voted in April expressed total trust in the never revealed program of Viktor Orbán. Yes, there was something called a party program, but it was so vague, consisting almost exclusively of a critique of the Bajnai-Gyurcsány era, that it was really meaningless. Here and there Orbán dropped a few promises: an immediate drastic tax cut, a salary increase for doctors and teachers, money for the Hungarian public television station, and other such goodies. None of which, by the way, is being realized.
People who know something about economic realities kept saying that these promises cannot be fulfilled and that soon enough Fidesz's popularity will drop. Yet, the unusually high support for the government is holding, I think to the surprise of most observers. There are several reasons for the popularity. One is the government's assertive approach toward international lenders. Most people don't realize that the IMF's and the European Union's insistence on a prudent financial policy is in Hungary's best interest. However, "the economic independence" Viktor Orbán is talking about appeals to those who can't quite comprehend that today there is no such thing as "economic independence." People in hard times usually blame outside forces for their troubles and for some strange reason the IMF is the latest scapegoat. The IMF that saved Hungary from bankruptcy in October 2008.
Orbán's government is being fairly uniformly criticized by commentators for its less than perfect communication with the markets, the disruption of talks with the IMF, and the feisty tone with the European Union over how debt is reported to Brussels. But none of these has any major effect on how the public sees the ruling party. In fact, Hungarians like the government because it is feisty and tough-talking.
Another reason for the delayed disappointment in the new government is that the 29-point action plan–thrown together in a great hurry after it was made clear to the prime minister in Brussels that the 3.8% budget deficit promised for this year cannot be altered–has some points that on the surface seem to benefit the average citizen. But some of these perks are illusory. For instance, since the changes introduced in the tax code haven't been implemented yet, most people don't realize that only the "upper crust" will benefit from these provisions. The vast majority's take home pay will be smaller than before.
Taxing the banks is also extremely popular in the country. First of all, banks are very profitable in Hungary, in part because of the hefty fees they charge their customers. Accordingly they pay their employees well–from the ordinary teller to upper management–and their offices smack of opulence. All in all, banks and bankers are hated. And here is a prime minister who tells them off and blames them for not wanting to take their fair share of sacrifice in times of great difficulty. The ordinary Hungarian citizen would go even further: take the money away from the rich and give it to the poor.
There is also quite a bit of talk about helping Hungarian small- and medium-size businesses at the expense of large foreign firms. I suspect that this is just talk because the competition for large foreign investment is fierce and every country gives breaks to multinational corporations. This has been the case for the last twenty years and most likely the practice will continue.
I also doubt that too many people have noticed that in the last few months Hungary's debt burden has grown. The government is clearly not taking the advice of an analyst at the Royal Bank of Scotland who wrote that "even a modest reduction in the budget deficit would help to lower the debt stock, and help facilitate heavier borrowing ahead."
In the last two weeks the forint was holding up rather nicely at about 276 forints to a euro, but it got hit two days ago when the Hungarian National Bank didn't lower the interest rate and announced that economic recovery would be slower than predicted earlier. Some people even talk about a possible low of 290 forints to the euro. Such a development would increase the strain on those who borrowed rather heavily in foreign currencies, in Swiss francs and in euros. The debt in foreign currency is not restricted to private individuals. Most local governments, especially the ones in Fidesz hands, are also heavily indebted in foreign currencies.
Finally, most economists agree that without structural reforms the budget will never be in decent shape. However, Orbán and his team know only too well what can happen if a government tries to introduce "reforms." People hate reforms because they perceive them as changes that are against their interests. To give an example. There is health care. In Hungary there are about 120 hospitals, about twice as many as are needed. But people want to have hospitals nearby and doctors who would have to move to another city to work in another facility are also antagonistic toward the idea of hospital closures. So right now there is only muddled talk about improvements without any mention of either money or reform.
All in all, Fidesz doesn't want to introduce any structural changes before the local elections that will take place on October 3. In fact, they even postponed introducing next year's budget that by law was due in September for the same reason. Thus, the country doesn't know a thing about the government's financial plans for next year and what it will mean for the Hungarian people.
P.S. Just learned (Bloomberg, August 24, 12:44 PM ET) that the Hungarian Economy Ministry announced that they will resume talks with the IMF. The decision most likely has something to do with the Hungarian forint's very weak performance in the last five days when it dropped 1.6% against the euro. The trouble is perhaps bigger than we think. Otherwise, Viktor Orbán wouldn't have changed his mind on the negotiations before the October 3 elections.