A shift to the right as Hungary goes to polls

By bne IntelliNews April 9, 2010

Kester Eddy in Budapest -

A huge, full-colour, fabric banner of Viktor Orban, the leader of Hungary's opposition Fidesz party, hangs from the blank wall on a 1970s-built, pre-fabricated tower block in Budapest's district XIII. Hungarians are preparing for the first of a two-round election fight on Sunday, April 11. And while opposition hopes are high, here in the quaintly named Angyalfold - or Angel-land - the shipyards and factories may have largely given way to shared-service centres in terms of jobs, but such are local left-wing traditions that Orban's candidates are unlikely to win.

"In our analyses, Angyalfold is likely, though not certain, to vote Socialist again, but it is one of only four places where this might occur," says Csaba Toth, strategic director of Republikon Intezet, a political think-tank.

Nonetheless, the image of the one-time anti-communist student activist so prominently displayed in a former red heartland bears testimony to a huge decline in Socialist support. Never mind that the ruling Socialist government has stabilised the economy in the past 12 months, scoring well with international institutions such as the International Monetary Fund (IMF) in the process. With the economy shrinking by 6.3% last year and unemployment at 11.4%, a 14-year high, Magyar voters are disillusioned after eight years of Socialist leadership: and following a flurry of serious corruption scandals, they are set to reject the left en masse.


The surge is such that Fidesz, generally dubbed a centre-right party (though tinged with populist rhetoric) has 62% of decided voters in a recent poll, meaning it could win a two-thirds majority in the 386-seat parliament. This would potentially allow Orban to change the constitution if he so wishes.

Meanwhile, Jobbik - a radical right-wing grouping that advocates a strong nationalist and "anti-big finance" economic policy while urging tough measures on what it terms "gypsy crime" - has emerged to challenge the Socialists for second slot.

Fidesz leaders have firmly ruled out any cooperation with Jobbik - which analysts say would in any case be counter-productive for both parties. But the prospect of a huge Fidesz governing majority has inevitably provoked concerns that the recent hard-earned economic stability, achieved under the watchful eye of the IMF, could be under threat, particularly if a Fidesz government both cuts taxes and begins to spend state funds to create "one million jobs in the next ten years," as per campaign promises.

Peter Szijjarto, Fidesz chief of staff, insisted in early April that while economic policy had to be "changed from the base to the top," such job creation would "not need a miracle," arguing that tax cuts and simplified procedures would whiten the grey economy. "With tax reforms, we could pull in 80-90% of the grey economy, so we could create 300,000-400,000 jobs fairly quickly [this way]," Szijjarto told a press briefing.

He also denounced the 2010 budget deficit target of 3.8% of GDP, agreed with the IMF, as "a lie," arguing that debts from certain state-owned operations, such as the railways, are not included in the calculations. The final deficit, according to Fidesz, could be as high as 7%.

Lajos Bokros, former finance minister and prime ministerial candidate for the MDF, the smaller right-of-centre party, accuses Fidesz of duplicity on this point. "Fidesz wants to make a 7% deficit by restarting overspending. They hide their intention by saying that they do not know the situation and they need a fact-finding commission first," he says.

Most analysts, however, believe that there is little room for greater state spending. "There is no room for a tangible fiscal loosening, although the 3.8% target will definitely be missed, which may deteriorate investor sentiment somewhat," says Zoltan Torok, head of research at Raiffeisen Bank Hungary.

Perhaps more worrying is the fact that while proclaiming itself as a conservative party, Fidesz made several legally-contested moves against foreign-owned companies whilst in power from 1998-2002, most particularly utilities, for seemingly populist reasons in the past. "There is no question that we need multinational companies and their capital to recover from the recession. But some contracts with utilities were made 10-15 years ago. The situation is different today - we are in a crisis. The average family spends 80-85% of its income on utility bills - this is not normal. Some of these contracts need to be changed," Szijjarto said in response to questions on this issue.

But according to Raiffeisen's Torok, this is erroneous. "The average Hungarian family spends 80-85% of income on basic living, such as bills, food, medicine," he says.

Populist rhetoric indeed - it must be election time.

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