Hungary to see four more years of Fidesz and its polices

By bne IntelliNews April 3, 2014

bne -

The ruling Fidesz party is expected to win big again in the Hungarian parliamentary election on April 6, which will mean little change in key policies for the next four years, including populist ones like attacking the banks, utilities and other perceived enemies of the people.

According to the latest polls, Fidesz support stands at around 50% among decided voters, followed by a centre-left coalition led by the Hungarian Socialist Party (MSZP) at 26%. The far-right Jobbik party is polling at 16%. The green party, Politics Can Be Different (LMP), will struggle to cross the 5% parliament entry threshold. "Overall, Fidesz seems well positioned to repeat the success of the 2010 general elections and gain a supermajority in the new parliament," predicts Teneo Intelligence.

As bne has reported, the election will be free but hardly fair. The laws and regulations governing campaigning have been continually revised by Prime Minister Viktor Orban's government, which the opposition claims has severely restricted political parties from getting their message out. For example, the latest rules limited campaign advertising on public television to a little under eight hours during the 50 days of the official campaign, and commercial channels cannot charge for political advertising. The new rules, said the government, were an attempt to "level the playing field" by limiting political campaign ads on radio and television, and thereby attempting to limit the influence of money on political campaigns. But the opposition maintains that with state channels already acting as government propaganda machines, Fidesz doesn't need the advertising.

Teneo says the new electoral system introduced in 2011 further increases Fidesz'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," Teneo explains.

Assuming a Fidesz victory, the next parliament will see the Orban government "consolidate" the policies of its previous term in office, which it claims has transformed the country. "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 as far as I'm concerned," Orban recently proclaimed to the assembled captains of Hungarian industry.

One of the key objectives will be increasing the 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. With the currency weakening in the past five years since the financial crisis, households have seen their monthly instalments skyrocket.

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 was 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. "We met up with government officials in recent days," says Commerzbank. "Our impression is that the much awaited FX loan solution is far from concrete; Parliament leader Rogans recent remark (that a comprehensive solution is coming soon) is better interpreted to mean that this will be a priority on the government's agenda right after the weekend election. Still, the government is likely to hold rounds of discussions with the Banks Association, and then wait for the EU Court and Curia ruling on the matter. The policy is unlikely to take final shape until late Q2 (earliest) or Q3. The nature of burden sharing (between borrowers, the banks, and the state budget) is obviously yet undecided: a good rule of thumb would be that the losses are 1) shared by all 3 parties: borrowers, banks, government and 2) distributed over time, as opposed to having a one-off large impact. This latter should dampen market impact on banks."

Another policy area concerns the energy sector, where the government is attempting to bring down prices for consumers by a mix of reforms and forcing out foreign investors and renationalising it. "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.



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