Hungary makes its bid for membership of the EU
by Kester Eddy, Stefan Wagstyl and Robert Wright
When Hungarians go to the polls for general elections next spring, they will face a starker choice than in any of the three previous post-communist elections. For the first time, they will have to choose between two large parties which have previously had turns in government.
The main contenders will be divided by ideology and personal style. The winner will also know that he is likely during his four-year term to lead Hungary into the European Union. Hungary plans to join the EU at the earliest possible date, which the latter has indicated could be 2004.
Economically and politically, 12 years after the end of communism, the elections could prove a turning point for the country.
Support for membership of the European Union, for which Hungary is a front-runner candidate, is the most important common ground between the two main parties. On November 13, the European Commission gave it a positive report in its annual review of candidate countries.
On the centre-right in the elections will be Fidesz, head of a three-party coalition which under Viktor Orban, prime minister, has led Hungarians since 1998 through four years of increasing prosperity but, some complain, increasing social division.
The party intends to fight the elections trumpeting support for education, for building motorways and support for ethnic Hungarians in neighbouring countries. "There is national agreement around these issues," says Istvan Stumpf, minister in charge of the prime minister's office. "That's why... we have a great chance of being re-elected."
On the centre-left meanwhile will be the Socialist Party, whose challenge will be headed by Peter Medgyessy, a former finance minister. The Socialists led Hungary from 1994 to 1998 through years when the country attracted high levels of foreign investment. Hungarians grew unhappy with the government's harsh economic austerity measures, however.
Mr Medgyessy plans to argue that his party is more competent than Fidesz and less extreme. "In addition to traditional social democratic values like fairness and social justice, we will also stand by certain values and principles that are probably best described as mildly conservative," he says, mentioning patriotism and support for churches as examples. "On the other hand, we will also represent values that can be described as liberal, like respect for diversity or freedom and respect for the market."
The differences in the two men's personal styles will add another dimension. Mr Orban is a flamboyant populist and gifted communicator. Mr Medgyessy takes a more measured approach. "(Fidesz's style) is not our genre," he says. Opinion polls suggest the parties are locked in a dead heat, both supported by around 44 per cent of the electorate. The centrist parties which once played an important part in Hungarian politics are likely to be reduced to a supporting role, to some people's dismay.
"We think that a two-party system in Hungary would be very dangerous because Hungary has not had 200 years of democracy, but only ten years," says Gyorgy Rasko of the Hungarian Democratic People's Party, a small centre-right party not represented in parliament. "If there are only two parties, they will divide Hungarian society."
That drift away from the centre is also demonstrated by the Socialists' readiness to back a controversial law on Hungarian minorities in neighbouring countries, the so-called Status Law.
Offering cash benefits and employment rights to Hungarians in neighbouring states, the measure has been criticised by affected countries, especially Romania and Slovakia.
Pointing to a study adopted last month by the Council of Europe, the intergovernmental human rights organisation, the European Union's progress report last week backed some of their criticisms. It said some of the new law's provisions conflicted with prevailing European standards on minority protection.
Neither the government nor the Socialists, however, look likely to budge. "We have a moral obligation to help those people who are outside Hungary but in their hearts very much feel that they belong to the nation of Hungary," says Mr Stumpf of the prime minister's office. "We are not responsible for...the situation that there are several million Hungarian people living outside Hungary."
The renewed appeal of rhetoric about such sensitive issues may, some believe, reflect the problems of the past ten years. The unexpected difficulties of Hungary's economic transition have left many disillusioned with the moderate politics which, it had been hoped, would develop after the first free elections in 1990.
At its worst, that tendency might increase the vote of the Hungarian Justice and Life Party (MIE P), an openly chauvinistic party which entered parliament at the 1998 elections and is likely to campaign hard against government concessions on sales of agricultural land to foreigners.
Such concerns will make the election debate over economic issues particularly important. In contrast to Mr Medgyessy's record of supporting the free market, Mr Orban and Fidesz have increasingly tended in government towards criticism of big business and state intervention.
"We have a total philosophy of how to support the economy and how the state should participate in a market economy," says Mr Stumpf, of the prime minister's office. "We think that the state and the government must participate at a much higher level in this process, especially infrastructure development."
That philosophy has been evident in some striking interventions against big business. Last year, the chief executive of Mol, the oil company, resigned after the government rejected his requests for increases in regulated domestic gas prices. Mol was - and still is - losing money on these supplies.
The government has also sought to hold down prices charged by pharmaceutical groups. It has dropped plans to privatise Postabank, a state-owned bank, in favour of transferring ownership to the Hungarian post office. "The government is conducting an anti-capital policy," says Laszlo Csaba, a professor at the Central European University in Budapest.
The government retorts that it wants to spread prosperity from big companies to others, including small businesses and entrepreneurs. They are actively supporting economic development through the Szechenyi Plan, an economic programme which extends financial aid to sectors including high-technology, tourism and infrastructure development.
Critics say the excessive intervention could undermine markets and Hungary's reputation as a dynamic economy. They warn of anti-foreigner sentiments in some of the ministerial rhetoric.
Yet, so far, the economy as a whole has not been affected by these arguments. Growth is slowing, partly in response to a deceleration in domestic investment and partly in response to the global slow down. But Hungary seems better placed to meet the latest shocks than some other ex-communist states with more serious domestic economic difficulties, including the Czech Republic and Poland.
Gross Domestic Product is likely to grow by 4 per cent this year, down from 5.2 per cent in 2000, with a further decline in 2002. Export growth, for long the motor of the Hungarian economy, has fallen sharply from 22 per cent last year to under 10 per cent.
The government's efforts to stimulate domestic demand through its investment programme and tax cuts will ease the pain, but cannot compensate for the reduced external demand for any length of time.
Multinational groups, nevertheless, remain committed to Hungary. A survey by the Economist Intelligence Unit, the UK research group, published after the US terrorist outrages forecasts that direct investment in Hungary will continue at about Dollars 2bn a year.
This is similar to the high level achieved in the 1990s, despite the fact there are few big privatisations left. Hungarian officials say existing companies are reinvesting with little sign of any rush to repatriate profits.
by Kester Eddy, Stefan Wagstyl and Robert Wright
Source: Financial Times.com
/HUNSOR Monitoring/ © HUNSOR
