Tim Gosling in Prague -

Hungarian Prime Minister Viktor Orban's Fidesz party is on course to keep its constitutional majority as the last votes are counted following elections on April 6.

Preliminary results show Fidesz won 44.49% of the vote, giving it a projected 133 of the 199 seats in parliament. If confirmed, the victory leaves the way open for more potentially erratic and populist policy and tinkering with the constitution.

"With due humility and dignity, as becomes us, let us declare that all doubt and uncertainty have been dispelled: we have won!" Orban said late on April 6, according to MTI. Preliminary results give Fidesz 44.49% with 96.5% of the ballots counted. However, due to a couple of close races, a supermajority - for which two-thirds of seats in the lower house are needed _ is hanging in the balance at the time of writing.

The left-leaning main opposition party, the Unity alliance, did less well than expected polling only 25.91% according to the preliminary results. The nationalist Jobbik did most to dent Fidesz, muscling in on the right to surge to 20.67%. That makes the radical party the country's second largest - the Unity coalition features five left-leaning parties - and "will have perceptible implications over the longer-term as the Fidesz agenda will incorporate at least some items to retain a dialogue with Jobbik," Commerzbank commented.

Meanwhile, the liberal LMP also crossed the threshold to become the fourth party in the parliament taking 5.24%. That pushes Fidesz's margin on a supermajority to just 2 MPs. "Any mid-term resignations etc could make the configuration volatile," analysts suggest, although noting that, "Fidesz MPs have a stable track-record."

Free, but fair?

Despite the close run nature of the race for complete control of parliament, the PM was in typically triumphant mood as he spoke to supporters. "Hungary is now the most united nation in Europe," Orban declared, according to MTI. The victory may well spell bad news for the banks, utilities and other perceived, "enemies of the people".

Echoing complaints that changes pushed through by Fidesz meant the election would be "free but unfair." Socialist leader Attila Mesterhezy said the vote was run on "unfair rules and conducted without a level playing field," reports MTI. The laws and regulations governing campaigning have been continually revised by the current government, which the opposition claims severely restricted other political parties from getting their message out.

Teneo Intelligence says the new electoral system introduced by Fidesz following its landslide victory in 2010 further increased the incumbent's advantage. "The number of seats in parliament will be cut from a total of 386 to 199. Of these, 106 are single-member constituency seats (elected through a simple majority system) and 93 parliamentarians are chosen from national party lists on a proportional basis. Fidesz will likely win a strong majority of the single-member constituency seats, plus a good share of those allocated proportionally."

Consolidation

The next parliament will see Orban "consolidate" his policies, which he claims are transforming the country from an "old banger" into a "race car". "The economy is growing, the debt's been cut, energy is cheaper, credit is cheaper, inflation is lower and exports are expanding: nobody can contest these facts," Orban proclaimed to assembled captains of Hungarian industry just ahead of the vote.

One of the key objectives will be the increase of domestic ownership in the financial sector to 50% and sorting out the hanging problem of the large amount of foreign-currency loans that households took out when the forint was much stronger. The currency has weakened over the past five years following the financial crisis of 2008, sending household monthly instalments skyrocketing.

Since coming to office in 2010, Orban's government has applied a mix of large new taxes, fines, and pressure to force banks to swallow large losses on forex loans. This is also seen as a means to push foreign owners to sell at bargain prices to the government or domestic investors.

The government is preparing a new programme to sort out the problem once and for all, leaving investors worrying about its final terms. It struggled to push through a new scheme ahead of the vote as it waited for the blessing of the constitutional court, but now appears to have the opportunity to push a solution through. The legal framework for "settling the issue in line with the constitution" can be ready within a short time, deputy Andras Aradszki told journalists on April 5.

Another policy area concerns the energy sector. The government has already applied pricing cuts of 20% for household energy, helping it to push out foreign investors and re-nationalize the sector. "Following several utility price cuts in the run-up to the elections, Fidesz will likely aim to buy back of some foreign-owned utilities and increase the state's role in power production," says Teneo. "Further utility price cuts," are on the cards, notes Commerzbank. "The last round features a 6.5% gas price cut this month, a 5.7% electricity price cut to follow in September, and a 3.3% heating price cut in October. Fidesz will cut prices further with the aim of eliminating all excess profits and turning the utility sector non-profit."

Unsurprisingly, on top of a hostile attitude towards Brussels, consistent constitutional changes, and erratic economic policy conducted via a tightened grip on major levers such as the central bank, the market has indicated that a Fidesz constitutional majority would be negative.

That threatens further drops for the forint, in bank lending, and for foreign investment. "Big business does not want frequent changes of policy, particularly in terms of taxes, which were characteristic of Orban's last term," cautions Tim Ash at Standard Bank.

That hints at signs of greater optimism in some outlooks. That view suggests Fidesz will actually lighten its touch in its second term, in a bid to transform the ongoing traction in the economy into a fully fledged recovery. For the longer term, Hungary will need a better relationship with the markets and investors.