Kester Eddy in Budapest -
In line with the first results after the general election on April 6, Fidesz, the ruling party in Hungary for the past four years under Prime Minister Viktor Orban, has retained its two-thirds “super-majority” in parliament, winning 133 seats in the new 199-seat assembly, the National Election Office confirmed on Sunday, April 13.
With 99.9% of the votes now counted, the result leaves the left-wing alliance with 38 seats; Jobbik, the radical right party, with 23; and the green LMP with 5.
But in the first week after the vote, when it was clear that Fidesz was on the threshold of maintaining its grip on power – the super-majority allows it to change the constitution and subsequently any law if he has this level of backing – any hopes that Orban's second consecutive term might be more consensual than his first were dented by a series of controversial moves seemingly designed to show off his power.
“If you look at the first and second day [after the elections], what did you see? Fidesz [arranging a foreign ministry] visit to North Korea, the [Nazi occuptaion] memorial on Szabadsag ter [Liberty Square], an attack on the Norwegian embassy for supporting civil organisations in Hungary. I think it's clear, Fidesz is going to try to continue its confrontational policy,” argues Csaba Toth, director of the Republikon Institute, a liberal political think-tank, based in Budapest.
True, even before the election, and with the opinion polls showing strong support for the Fidesz government, Orban had promised little else but “we will continue”. Nonetheless, the unilateral decision to resume construction of the memorial to the occupation of Hungary by Nazi Germany in March 1944 – this after an earlier promise by the prime minister to discuss the issue with Hungarian Jewish leaders “after Easter” - seems particularly antagonistic. Hungarian Jews and many liberals have denounced the memorial as an attempt to exonerate Hungary's role in the Holocaust, in which up to 600,000 Jews and Roma were murdered.
But what of business and the economy? To a large extent, the financial markets welcomed the Fidesz win, according to Nicholas Spiro, managing director of London-based Spiro Sovereign Strategy. “The market reaction to Mr Orban's resounding victory is telling. Just like Mr Erdogan's big win in Turkey's local elections earlier, investors prize stability and the status quo above all else,” he says, noting that immediately after the election, the forint remained below the “psychologically important” level of 310 to the euro, “while the yield on Hungarian 10-year local bonds was just some 20 basis points above its record low of 5.4% [reached] just before the Fed let the tapering genie out of the bottle last May.”
However, while Spiro attributes the “muted market reaction” to Orban's election triumph in part to the improvement in Hungary's underlying fundamentals – most notably the controlled budget deficits – it also says “far more about the recent improvement in sentiment towards emerging markets than it does about confidence in the Orban government's economic policies,” he says.
Indeed, there is a “conspicuous disconnect” between the election result and “the persistent unease in the business community about the policy regime in Hungary,” Spiro argues.
Others agree. While a constitutional majority guarantees political stability, “Hungary's relations with foreign investors will remain mixed,” reckons Blanka Koleníkova, senior analyst with the London-based consultancy IHS.
In particular, companies in the energy and financial sectors “are bracing for another term of unpredictable policies,” she says, given Orban's declared intention of bringing at least 50% of the banking sector into Hungarian ownership, along with creating a not-for-profit utilities sector.
Further, the government's pledge to reduce the current 16% income tax to a "single-digit" level, and reduce employees' contributions to pensions and healthcare, while simultaneously trying to maintain the fiscal deficit below 3% of GDP, “raises the risk of further short-term, emergency and unsustainable measures,” Kolenkova argues.
Even if Fidesz turns to a more “investment-friendly trajectory,” any changes “will take a long time to take effect and improve investors' confidence,” she adds.
Then there are fears over the rise of Jobbik, the far-right party, which increased its share from 17% to 21% of the total vote. While this could encourage Fidesz to adopt more nationalistic policies to "defuse" power on the far right, most analysts say Jobbik has benefited from a “protest” vote. “It's clear that the anti-Orban vote was split between the left alliance and Jobbik. These [new votes] are not necessarily from people resonating with Jobbik messages,” says Csaba Toth.
It's a thesis, bne can confirm, albeit from anecdotal evidence.
Quizzed in an upmarket Budapest shopping mall just prior to the election, Peter Cseh, 45, would appear to represent exactly this trend. Asked to comment on the Hungarian economic environment, he replied: “Business-wise, I do not feel any change. There is very little cash [around], every company is limiting its spending... I started business in 2008, two years before the [last] change of government, and in those two years I felt companies were more forward-looking and optimistic than now.”
Cseh, who rents broadcasting equipment to TV stations in both the US and Hungary, did not write-off the Fidesz government – its policies “may pay off in the future,” he said – but like others approached, he expressed dissatisfaction, if not despair, with the established political elite. “I'm gonna vote Jobbik, not because I like them too much, but most people feel the two main parties are the same… it's like a big show… Mine is a protest vote,” he said.
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