Hungarian Spectrum

The end of political chaos or just a brief respite?

I stopped writing about daily events in Hungary because it was impossible to construct a coherent story. I think I left off at the point that György Surányi, the leading candidate for prime minister, withdrew his name from consideration and SZDSZ suggested Lajos Bokros for the post. In fact, they more than suggested; they announced that it was Bokros or nobody. Bokros appeared eager enough and he apparently confirmed his interest to the SZDSZ politicians who suggested his name. By that time MSZP was desperate enough to accept Bokros as long as SZDSZ would be a willing partner in the new government. But as soon as MSZP announced that Bokros was fine as a candidate, Bokros suddenly announced that he no longer wished to be prime minister. I'm not going to go into the accusations hurled at Bokros from the SZDSZ side or Bokros's rather murky attempts to explain away his change of heart. But he was the second candidate acceptable to both MSZP and SZDSZ who decided he didn't want the job. By that time, even friends of SZDSZ and MSZP thought that what was going on was a joke.

At this point MSZP proposed Gordon Bajnai, the minister of economic development in charge of the large amounts of money Hungary received from the European Union. Bajnai's economic/austerity plans, outlined in the media, are very close to the ideas of the Reform Alliance that SZDSZ wholeheartedly supported. So one would have thought that Bajnai would be acceptable to the liberal party. But no, the SZDSZ presidium was evenly split between those who supported Bajnai and those who opposed him. The presidium has thirteen members including the president, Gábor Fodor, but Gábor Demszky wasn't present. Therefore the result was 6:6. At this point pandemonium must have broken out within the SZDSZ leadership, especially among members of the parliamentary caucus where the followers of János Kóka, head of the caucus, are in the majority. I heard of members of parliament who threatened to leave the party if the presidium didn't accept Bajnai. I could foresee a situation where those who disagreed with the hotheads in the presidium would simply leave the caucus and sit with the independents and support a Bajnai government from there. The SZDSZ presidium and the caucus negotiated all day long.

Sometime during the afternoon Gordon Bajnai decided to put an end to this squabbling one way or the other. He told SZDSZ that he would wait until midnight. If SZDSZ's top brass didn't come up with an answer by then he would no longer be a candidate. However, he was ready to join them and explain the details of his austerity program. A few minutes after midnight the smoke went up: 7 to 5 in favor of Bajnai. This time Mátyás Eörsi was absent. The five who voted against an agreement were Gabriella Béki, László Csőzik, József Gulyás, Péter Gusztos, and András Léderer. The last two are, it seems, part-time college students in their mid-twenties. Out of the nineteen parliamentary members seventeen were present and only four voted against Bajnai: Gabriella Béki, Péter Gusztos, József Gulyás, and Gábor Velkey. Three of these (Béki, Gusztos, Gulyás) are also members of the presidium. Out of these four, Gusztos said that he would abide by the majority's opinion, Béki and Velkey will think about their future attitudes, and Gulyás refused to budge. Today Gulyás explained why he won't support Bajnai: because MSZP will sabotage his program. Obviously Gulyás is blessed with supernatural powers; he can see into the future. The two absent members, Gábor Kuncze and Mátyás Eörsi, most likely would have voted with the majority.

And a few words about Bajnai. He is forty-one years old, seven years younger than Gyurcsány, and therefore he had no paid KISZ (Kommunista Ifjúsági Szövetség) position. In fact, at college (Karl Marx University) he was the first democratically elected president of the student body and as such organized a student boycott of the cafeteria where apparently the food was both bad and expensive. At the time of the change of regime he tried his hand at establishing a new democratic student movement, without much success. At one point he and István Stumpf, in charge of the prime minister's office between 1998 and 2002, organized a youth organization called MISZOT (Magyar Ifjúsági Szervezetek Országos Tanácsa), a kind of umbrella organization of the different youth groups. Because Bajnai spoke English and German well, he was the "foreign secretary" of the organization. In fact, his good relations with Stumpf didn't stop in later years: he gave a lecture series at the Századvég Politikai Iskola, a Fidesz creation.

After this brief sojourn into political life he settled for the business world after graduation in 1991. First he joined Creditum, a financial consulting company, where he stayed until 1993. In that year he received a scholarship to continue his "professional training" in London at the EBRD. In 1994, after returning from England, he joined Eurocorp International Finance Plc as a consultant. In 1995 he became a managing director and then vice CEO and Director of the Corporate Finance and Equity Capital Market Division of CA-IB Securities Plc. Between 2000 and 2005 he was CEO of Wallis Plc. In 2006 Prime Minister Gyurcsány, who knew him from his Creditum days, invited him to enter government service. First he was Government Commissioner for Development Policy, a year later he became Minister of Local Government and Regional Development in charge of the European Union subsidies. In 2008 he moved up and came to occupy perhaps the most important ministerial position: Minister for National Development and Economy.

Gyurcsány, Bajnai, and Kóka are old friends who came to know each other in the burgeoning Hungarian business world. Gyurcsány had previously called on Bajnai to join the government but he suggested János Kóka instead of himself. So, it's no wonder that Viktor Orbán already announced that even if Bajnai becomes prime minister the country will remain the captive of the same business circle as before. Such an accusation resonates well with the basically anti-business, anti-capitalist electorate. In addition, Tibor Navracsics announced that Fidesz doesn't consider a future Bajnai government legitimate because after all "nobody elected Gordon Bajnai" to be prime minister of Hungary. Of course, this is constitutional nonsense and an old Fidesz mantra. They said the same thing when MSZP named Ferenc Gyurcsány to be Péter Medgyessy's successor.

The "civil" organizations are planning a huge demonstration on Heroes' Square for April 5. Jobbik's EP candidate, the inimitable Krisztina Morvai, warned Bajnai that he will be shaking with fear if Jobbik moves into action against his so-called government. The couple of trade union leaders I heard today were not enthusiastic about the Bajnai package that wants to save about 600 billion forints this year. The few details sound pretty tough and even Bajnai predicted that the measures "will hurt." I wouldn't be at all surprised if the trade unions took their people to the streets soon enough. After all, they found the much milder Gyurcsány package unacceptable. It's a good thing that Bajnai apparently has no long-term political ambitions.

Political chaos in Hungary

I wasn't sure whether I should write anything today because I can't make heads or tails out of what's going on in Hungary. Surányi says he doesn't want the job. So more scrambling. One wakes up to the name of János Takács as the newest MSZP suggestion for prime minister. I had never heard of him. He turned out to be the CEO of Electrolux Hungary. His name surfaced only to be dropped within a couple of hours: SZDSZ wants no part of János Takács. SZDSZ, although earlier its leaders emphasized that MSZP should nominate while they would simply nod or not nod, decided to come out with its own candidate, earlier the MDF candidate: Lajos Bokros.

Bokros at the beginning seemed eager enough and expressed his willingness to serve. At least that is what the Hungarian media reported. However, today the situation seems to have changed. Now Bokros says that he is not going to be part of the political machinations of MSZP. That can mean only one thing: he wants the support of the "opposition" parties: Fidesz, SZDSZ, and MDF. Well, if this is true Bokros will not be prime minister because in Orbán's opinion Hungary's future prime minister can  only be Viktor Orbán, preferably after early elections. The new spokesman of MDF, Szabolcs Kerék-Bárczy, behaved rather oddly today when Olga Kálmán inquired whether if MSZP supported Bokros's candidacy MDF would lend its name to a three-party political alliance behind its own favorite candidate, Lajos Bokros. Kerék-Bárczy refused to answer, saying that the very supposition is totally absurd. I guess that MDF is so afraid that anyone might associate the party with the left that its spokesman refuses to answer even a hypothetical question.

At the moment SZDSZ is sticking with Bokros although there are some voices (currently a minority) in the SZDSZ caucus who would be willing to support one of the MSZP suggestions. According to the latest rumors half of the MSZP nominating committee is ready to accept Bokros but the other half is dead set against him. They will meet again tomorrow morning. However, it might be irrelevant how Gyurcsány, Lendvai, and some of the others decide. The party's left wing is gathering strength: they have had enough of the "circus" of the whole nominating process and are planning to overthrow Ferenc Gyurcsány. According to Tamás Suchman, one of the heavyweights in this group, because Gyurcsány already announced his intention to resign he shouldn't be conducting the negotiations about his successor. Instead his deputy, the minister in charge of the prime minister's office, Péter Kiss, should assume his place at the negotiating table. Moreover, Suchman continued, he is going to make a motion to convene an extraordinary congress to elect a new party chairman. A left-wing putsch against Gyurcsány is brewing. Katalin Szili, Gyurcsány's rival in the party and the head of its left wing, somewhat more obliquely spoke of the party's duty to stop the "drift of the country" and urged that the party should take "political responsibility." I guess that means that Szili, Suchman, and others are ready to get rid of Gyurcsány both as prime minister and party chief and alone shoulder the responsibility of governing. But how?

Given the intra-party revolt, MSZP and SZDSZ should move quickly to decide on a mutually satisfactory  candidate. A rational human being would think that the survival instinct of these two parties would kick in and dictate cooperation. However, we are in Eastern Europe. In fact, very close to an area called the Balkans. In that area rational political thinking doesn't always have the upper hand. Cooperation? They don't know the meaning of the word. Western businessmen often complain that Hungarians are not good at team work. They are not joking! These two parties should have learned a lesson from the fiasco four years ago; because of their refusal to cooperate, although they had a majority in parliament, the country ended up with László Sólyom as president. The same left wing of MSZP was certain that their candidate, Katalin Szili, would win despite SZDSZ's refusal to support her. Well, it didn't work out that way. Both parties were at fault then and both are behaving the same way now.

I consider Gyurcsány a talented politician, but at the moment he is in a very difficult situation. The candidate both parties supported wouldn't accept the job. So now names come, names go, and tempers flare. His party's left wing wants to unseat him and undermine him at every turn. Meanwhile Viktor Orbán calls any prospective candidate a "clown" (paprikajancsi in Hungarian) because a "serious" candidate simply wouldn't take the job. Meanwhile the Hungarian Guard is planning to blockade roads to force early elections.

I'm downbeat today and I recall "Gloomy Sunday," the Hungarian "suicide anthem." Why would political parties in effect commit suicide? According to the Hungarian psychiatrist Bela Buda, Hungarians regard suicide differently from most other people. "In the unconscious popular mind suicide is a positive pattern of problem solution, it's a formula which is actualised in times of crisis because everybody has experiences with other persons who committed suicide and who were regarded not as failures but as brave people daring to restore their self-esteem and dignity by this desperate and heroic act." Is it heroic to turn over the reins of government to Fidesz?  I think not. So MSZP and SZDSZ had best come up with another solution to the problem of national governance.

The day after: total confusion in Hungarian political life

Ferenc Gyurcsány's announcement that in two weeks he is going to initiate a constructive vote of no confidence was a bolt of lightning from a clear blue sky. No one expected it. Of course, there are "clever people" who claim that they had suspected something like it for quite a while, but the truth is that although there were rumors that people on the left within MSZP were unhappy with the prime minister there was nothing new in that. These people have been unhappy for the last five years or so. Yes, it is true that the popularity of the party was at an all-time low, but the opponents of Gyurcsány within the party weren't strong enough to dethrone him. No one thought that the prime minister himself would come up with such an ingenious solution: calling a constructive vote of no confidence against himself. The only case where such a solution was invoked was Willy Brandt's resignation in May 1974 when a close associate of the chancellor and SPD president, Günter Gauillaume, turned out to be an agent of the East German Stasi. At that time Brandt and Herbert Wehner, a key man in the socialist party, figured out a way to have a new head of government without new elections: to initiate a constructive vote of no confidence in favor of Helmut Schmidt, minister of finance in the SPD-FDP coalition government.

Fidesz was obviously caught by surprise. The top brass, after spending hours pondering the situation, came up with the same old plan: new elections. On Monday they will initiate a motion to discuss the dissolution of parliament. As we know, such attempts have been made several times and they all failed for the simple reason that the opposition parties can't agree on such a plan of action. I'm almost certain that they themselves know that their motion will fail again, but since they have no intention of sitting down and talking to MSZP, Gyurcsány or no Gyurcsány, they have to come up with a plan of their own. As for the other parties, SZDSZ is considered to be the most willing to come up with a "government of experts." If one can believe Gábor Fodor, the head of the party, they are not thinking in terms of a coalition; in my opinion this might change. This morning Károly Herényi was fairly negative when asked whether MDF would negotiate with MSZP and SZDSZ. Instead he kept emphasizing that they would support the politicians of Fidesz in their quest for early elections. However, by this afternoon MDF changed its mind. They are willing to negotiate. Everything can turn on a dime these days in Hungary.

This morning the "presidium" of MSZP (president, vice presidents, and head of the parliamentary caucus) held a meeting after which Gyurcsány gave a press conference. According to him, MSZP would like to see an "open, national government whose aim is to make decisisions that would help the recovery of the country's economy." What does "national government" mean? I don't think that it means a grand coalition because Fidesz would never take part in such a coalition. Moreover, the way Gyurcsány formulated the presidium's position, it was clear to me that  a "national government" for the MSZP presidium simply means a government with a "comfortable majority." He added that they would like to see "wide support"--presumably, a common platform of the three parties: MSZP, SZDSZ, and MDF. Of course, Gyurcsány spoke as if they were also counting on negotiations with Fidesz, but surely he knows as well as almost everybody in the country that such negotiations will not take place. Not even if Tibor Szanyi, the self-appointed leader of the left within MSZP, announced today that a grand coalition should be formed "without Gyurcsány and without Orbán." Orbán would have to promise that he wouldn't seek the position of prime minister for at least a year! I can already see how eagerly Orbán would accept Szanyi's more than naive proposal. Gyurcsány in his speech yesterday clearly had Szanyi and some of his friends in the party in mind when he warned against "left-wing populism" that is no better than its right-wing variety.

As for the time table, according to plans MSZP (and whoever joins them, I guess) would put forth the motion of constructive no confidence on April 6 and parliament could vote on the motion on April 14. Gyurcsány stated that the new government should have a more far-reaching economic program than the one he and his government originally contemplated. The current government will do everything necessary to prepare the foundation of such a program, but it will be the duty of the new prime minister to decide to what extent he wants to follow the recommendations. Gyurcsány will try to be helpful. He said that the new prime minister should decide the composition of his cabinet, which led me to believe that the cabinet might include people from the other parties. He was also optimistic that the parties (without Fidesz in my opinion) will be able to agree on a suitable person for the job.

So who might the next prime minister be? It is almost certain that it will not be one of the MSZP bigwigs or members of the current government. Therefore we can discard some names currently circulating: Gordon Bajnai, József Gráf, Péter Kiss. It will most likely be an outsider whose background is in economics and/or finance. Lajos Bokros is unlikely because MSZP would not support his nomination and I doubt that SZDSZ would either. After all, SZDSZ thought that Bokros was their man and now he is heading MDF's European Parliamentary list. László Békesi says such awful things both about MSZP and Ferenc Gyurcsány that I very much doubt that MSZP would pick him. I wouldn't either, because I find his utterances undiplomatic if not outright rude. Like a bull in the china shop. Then there is András Simor, the current head of the Hungarian National Bank. His decisions in the last few months have not exactly shown him to be a capable future leader of a country in the middle of an economic crisis. Moreover, I found his constant blabbing outright injurious to the country's interests. That leaves György Surányi, central bank president between 1990-91 and 1995-2001. He was a very good bank president and during one of the years in office he was chosen as bank president of the year in Europe. The problem with Surányi is that he hasn't said much until now about how he would try to solve the current economic problems. But perhaps that might be his strength! In any case, my feeling is that among the experts he would be the most acceptable to the three parties that might be called upon to decide on the person of the prime minister. Here is a "family portrait" of those whose names are circulating as possibilities:   

Meanwhile, I'm just hoping that those people, followers of Fidesz, who are bent on having early elections will not cause any disturbances. The trade unions promised a huge demonstration for April 4 and one can only hope that those who see this whole constructive motion of no confidence as no more than a trick to keep MSZP in power will not join in. Or perhaps the leaders of the trade unions will have enough sense to scrap their march under the circumstances. That's all the country would need. Meanwhile, one newspaper is sure that because of Gyurcsány's resignation the forint will be even weaker on Monday while others predict that the market will soar upon hearing the good news. Rumors are floating every which way and it is difficult to keep up with the flow of information. One can write this blog in the morning and by evening the situation is entirely different. If everything works out well, I am hopeful that the political situation will be better than it is now. If Gyurcsány can concentrate on party matters and the coming EP elections, perhaps the outcome will not be an MSZP rout. With a comfortable majority the work of parliament will be smoother and more predictable. And finally an "expert" prime minister three parties can support will be able to make bolder moves in economic matters.

A bombshell: Gyurcsány offers his resignation but not yet

This must have been the best kept secret in Hungarian politics of the last twenty years! Ferenc Gyurcsány in his keynote address to the delegates of the MSZP Congress, after outlining the accomplishments of his government, said: “I hear that I am the obstacle to the cooperation required for changes, for a stable governing majority and the responsible behavior of the opposition. If so, then I am removing this obstacle now. I propose that we form a new government under a new prime minister.” What does this mean exactly? In order to understand the exact constitutional situation I must say a few words about the "constructive vote of no confidence." This parliamentary rule originated in Germany during the period of the Weimar Republic when one chancellor after the other was voted out of office as a result of a "motion of no confidence." It was therefore decided that parliament can vote the chancellor out of office only if there is a positive majority for a prospective successor. Today besides Germany such a "constructive vote of no confidence" exists in Spain and in Hungary.

According to Article 39A(1) of the Hungarian Constitution: "A motion of no-confidence in the Prime Minister may be initiated by a written petition, which includes the nomination of a candidate for the office of Prime Minister, by no less than one-fifth of the Members of the National Assembly. A motion of no-confidence in the Prime Minister is considered a motion of no-confidence in the Government as well. Should, on the basis of this motion, the majority of the Members of the National Assembly withdraw their confidence, then the candidate nominated for Prime Minister in the motion shall be considered to have been elected." Gyurcsány gave two weeks for the parties to come up with a common candidate.

And there's the rub. It is unlikely that any of the MSZP party leaders is suitable for the job: one is more colorless than the next. Moreover, if Gyurcsány's idea is to save his party by having someone else take the odium of the severe austerity package that must be introduced, the new prime minister shouldn't be from MSZP. That would not help the sagging MSZP popularity. In fact, it would only make it worse. One person who is eager to accept the position is Lajos Bokros. As you may remember, his name was already floated as a possible candidate for a constructive vote of no confidence by Ibolya Dávid, president of MDF. Neither MSZP nor Fidesz would support him. Out of the question, we were told. Bokros's skin must be quite thick because just this afternoon he announced that he is ready to join the socialists at their congress and, I guess, talk things over with the party heavyweights. However, Ildikó Lendvai, head of the MSZP caucus, announced in advance of his appearance that Bokros was unacceptable.

Fidesz and the party's hangers-on, the Christian Democrats, don't want to hear about any constructive vote of no confidence. They want early elections. Perhaps in June in conjunction with the European Union parliamentary elections. But outside of Fidesz and the Christian Democrats (who surely would not enter the fray as a separate party) no one wants to have early elections. To tell you the truth, I don't think that even Fidesz wants them. If I were Viktor Orbán, I wouldn't. Sure, he would win easily, but then what? All his empty promises would be exposed. Instead of a horn of plenty, he would have to introduce severe budgetary cuts, and I'll bet that his party's popularity would soon be no better than that of Gyurcsány's. He might have to take away the extra money pensioners currently receive, he most likely would have to cut back on child support except in cases of extreme need, and he would have to expand the number of people paying income tax, reaching down to a previously untaxed bracket. What would happen then? As it is, trade unions are planning to demonstrate to oppose any constraints although Gyurcsány up to now hasn't dared to take drastic but most likely necessary steps. Local elections will take place in October and, if Fidesz introduced its own, more draconian austerity program--the one that Orbán outlined in a talk to a gathering of young political scientists and subsequently drowned in a flood of empty rhetoric, the country's cities and towns that are now practically completely orange might be red again. Surely, that is not a good prospect from the point of view of Fidesz. The best scenario for Orbán would be for Gyurcsány to stay and for his government to do all the dirty work. Then a year later when the current government's popularity is even lower than it is right now (hard to imagine but anything is possible) he will arrive as the Messiah.

So if Bokros is out of the question, who else could fill Gyurcsány's shoes? Names are circulating everywhere, but I can't quite imagine that any one of them would receive the votes of the majority of parliament. One of the names I heard mentioned is György Surányi, twice president of the Hungarian National Bank--first in 1990-1991 and again between 1995 and 2001. Viktor Orbán could hardly wait until Surányi's term came to an end, and for three solid years he did everything in his power to make the bank president's life miserable. Therefore I can't see Fidesz voting for him, but a more or less solid bloc of MSZP-SZDSZ-MDF votes would be enough. Besides Surányi, other economists were mentioned. For example, László Békesi's name came up. He is abrasive, lacking in political skills, and unpredictable. I don't think that he would be a good choice even if the three parties could agree on him, which I doubt. At a minimum, MSZP and SZDSZ would have to support a common candidate.  So there is a lot of talk about the resurrection of the MSZP-SZDSZ coalition. I wouldn't discount a three-party coalition either. That, in my opinion, would be the best solution if the socialist-liberal-moderate conservative parties want to stem the tide of right-wing populism. That, of course, assumes that Gyurcsány's offer is genuine and that the parties could rally around another candidate.

The "political scientists" are in a tizzy. Suddenly, they don't know what to make of the situation. Nézőpont Intézet (Prospective Institute), a think-tank close to Fidesz, thinks that Gyurcsány's announcement of his intention to resign is nothing but a ploy. He wants to strengthen his position within the party and to show to the world that he is the only possible candidate for the premiership. Others feel that Gyurcsány simply wants to prove that it is not his person that is the obstacle to cooperation. My own position is close to that of Kornélia Magyar of the Progressive Institute who said to The Wall Street Journal today: "The socialists are probably not going to be able to find a new prime minister." It is possible that the party will propose a caretaker government of experts before the 2010 elections, but "I give a bigger chance that Gyurcsány is going to come back." In any case, not only did Gyurcsány receive a standing ovation from those present, but he also got 85% of the votes to remain the leader of his party.

Viktor Orbán is moving farther to the right

Or at least this is the impression his appearances and messages of late indicate. It was in his March 15 speech that I noticed a fairly sharp turn to the right but since then the signs of a profound change in tactics are visible. Or at least I noticed a change.

Although most papers and politicians were happy that the national holiday passed in relative calm, Orbán and Fidesz decided that they could not miss an opportunity to criticize the government and the police for their alleged wrongdoings. First, it seems to me, they laid some traps for the police. The most glaring was the following provocation. Two men held up a banner reading: "Responsible government to Budapest." The police, who most likely received instructions that no banner can be displayed during certain events, asked the two men to put away the white sheet with the slogan. The slogan wasn't the same but very similar to one of the twelve demands of the revolutionaries in 1848. The original demanded a "responsible ministry," presumably a ministry dealing with Hungarian affairs, in Pest-Buda. Surely, the policemen in charge didn't have the foggiest idea about the connection between the banner and the events of 1848. I happened to see the encounter between the two men and the police and I must say that it was most civilized. The policeman politely asked and the two guys politely obliged. However, they were arrested. A huge outcry followed on the right. Surely, this is dictatorship when two peaceful men cannot display a famous slogan from 1848. Not only that. After they were arrested they were strip searched and left for hours without food or drink.

The first paper to report the news was Magyar Nemzet. The paper referred to one of the men as a lawyer, but as it turned out he was actually a former employee of the paper. He was also one of the publishers of another right-wing paper, Heti Válasz. In addition, he currently serves as a member, nominated by Fidesz, of the committee dealing with complaints, mostly political in nature, of ORTT (Országos Rádió és Televízió Testület). ORTT is the body overseeing the affairs of radio and television stations. But this journalist-lawyer-politician wasn't the only one who decided to entrap the police. Another one who appeared with a huge book on the life of Stalin was once the press secretary of the ministry dealing with family questions under the Orbán government. So much for political mischief. On the first picture one can see the lawyer-journalist-politician while on the second one the former press secretary in the Orbán government.  And  if that weren't enough Zoltán Balog, Fidesz chairman of the parliamentary committee on human rights, initiated an immediate investigation of the wrongdoings of the police on March 15. Máté Szabó, ombudsman in charge of complaints concerning such wrongdoings, also decided to move into action. Perhaps it is not immaterial that Szabó is a Sólyom appointee. He has been superactive ever since he received his appointment and this superactivity seems to be coupled with paranoia. The other day he was investigating a death that occurred in the Kaposvár prison and his parked car was involved in a traffic accident. He indicated his strong suspicion that the local police out of vengeance ruined his car!

Now I don't know why these men were arrested. But obviously they were in violation of some Hungarian law that both Fidesz and the police knew well. The law, I assume, is petty enough to make the police seem heavy-handed and the arrestees innocent victims. In brief, Fidesz criticizes the government for weakening the police, they keep demanding a strong and disciplined police force, but at the same time they do everything in their power to make the Hungarian police as impotent as possible. After a while, the police will not dare to do anything because of the consequences they might suffer. And, of course, it will be the fault of the government.

All these provoked incidents provided Viktor Orbán with an opportunity to repeat time and again that he was perfectly right when he talked about the restoration of socialist dictatorship. While after his relatively moderate speech on March 6 he made his rounds on respectable, run-of-the-mill television stations, this time he decided to visit EchoTV and the extreme right paper Magyar Hírlap. Both are owned by Gábor Széles, a billionaire of extreme views. Until now Orbán was careful about not associating himself with Széles's media empire. But for one reason or other he now thinks that it's necessary. My guess is that Fidesz must have some polls for internal use only that indicate that Jobbik and other right-wing groups are gaining ground at the expense of Fidesz. This news must be behind the rather sharp turn to the right. At Echo TV he again repeated that Fidesz is keeping tabs on the illegal moves of the government and when they are in charge "these people will be punished." The policemen ought to be the most afraid: they are gathering information on them. They know who was where and did what! In plain language Orbán is quite openly intimidating the police!

Orbán in the same interview at Echo TV made a couple of other "interesting" observations. He tried to explain better what he meant by "socialist restoration." Of course, he wasn't speaking of the restoration of a "socialist society" because then "there would be work for everybody and there would be public safety." The current government doesn't want to restore the socialist order but rather a dictatorial form of exercising power. It wants to create a regime very similar to or the same as one-party rule. He had the temerity to say that it is the other side that intimidates people. Especially since only a few minutes later he threatened the whole police force. He continued that he is certain that "even people of socialist persuasion" will reject this "socialist restoration." He is sure that the Hungarian people are witnessing the end of that restoration attempt. Over 50% of the public wants change and there will be change soon.

The next day Orbán visited Magyar Hírlap, the newspaper that employs Zsolt Bayer, the notorious antisemite whose so-called journalistic activities are a disgrace. By the way, Bayer was one of the founders of Fidesz and a close friend of Viktor Orbán. Here he emphasized the necessity of a united right. He more or less repeated his thoughts uttered earlier at Echo TV about the police, the government, the socialist restoration, punishment of the guilty, and the happy days that await the nation after the change of government. In addition, he decided to say a few nasty things about MDF and its chairman, Ibolya Dávid. He called Dávid's move to promote Lajos Bokros "jokes of a clown." MDF didn't leave Orbán's remarks unanswered. It considers what Orbán has been doing for years the "acts of a clown." He loudly demands change but when there was an opportunity to change prime ministers, he ran away.

There are people who wouldn't agree with me about Orbán's move to the far right. They think he has been there for some time by now. They point out, rightly, that in Hungary there has never been a moderate right as there were no liberals either. That's why Ibolya Dávid and SZDSZ have such troubles gathering strength. Some people would go so far as to say that one cannot build a democracy without democrats. Historically, I agree with the above assessments. Indeed, there has never been a moderate conservative base in Hungary and with the exception of Budapest between the two world wars there were no liberals either. The only thing I can't decide is who Viktor Orbán actually is. An irresponsible demagogue who says what his audience wants to hear? Was he ever a liberal? Was he ever a conservative? Is he now a representative of the far right? I honestly do not know.

The Bokros package: pro and con

Today Figyelonet.hu (Figyelő = Observer) published two opinions on the austerity program introduced by Lajos Bokros on March 12, 1995, fourteen years ago. They interviewed economists László Gazdag, associate professor of economics at the University of Pécs, and Mária Zita Petschnig, senior researcher of the Financial Research Institute in Budapest. Gazdag is not widely known from his appearances in the Hungarian media unlike Petschnig who seems to be a favorite of television stations. But Gazdag and Petschnig are the foremost representatives of the two schools: those who think that Bokros did more harm than good and those who think that without Bokros Hungary would have faced bankruptcy.

According to Gazdag in 1994 there was no economic crisis in Hungary but because of Bokros's austerity program by 1996 there was one. It is true, says Gazdag, that between 1989 and 1993 the Hungarian economy had drastically contracted, but by 1993 the country had reached "the bottom of the barrel." In 1994 there were signs of economic recovery: the GDP grew by 2.9% and exports by 16.6%. The benefits of foreign capital investment began to show. It seemed that the painful transition from a planned to a market economy was more or less over. But then came Lajos Bokros's austerity program. In 1995 economic growth stopped, inflation increased from 18 to 28%, and exports decreased by 50%. Domestic business activities slowed and many businesses went bankrupt. Because of the high inflation rate the Hungarian National Bank had to raise interest rates and because of the higher rates the economy lost about 160 billion forints. The unemployment rate went up. All in all, this was a situation economists normally call an "economic crisis." But, Gazdag continues, "in Hungary it was called 'side effects.' The only thing I don't know is what was the main effect." Gazdag claims that the real effect of the austerity program was widespread misery, with 1.5 million people beginning their journey toward poverty. As the result of Bokros's remedy real wages were only 75% of those in 1989 and pensions 79%. All in all, according to Gazdag, the Bokros package created a genuine economic crisis in 1995 and 1996 at a time when there was no longer any need for a drastic austerity program because in 1994 there were already hopeful signs of a recovery.

Mária Zita Petschnig is on the other side. According to her, the introduction of the austerity program was unavoidable. She admits that the results of the progam were painful but without it Hungary would have been unable to meet its foreign loan obligations. Petschnig goes a bit farther back in time than Gazdag. In 1993 the Hungarian national debt was 3 billion dollars. A year later it was 3.9 billion. These numbers are considered very high by any international comparison. The problem was noticed during the Boross government (1993-1994). Béla Kádár, minister responsible for foreign trade, and Iván Szabó, minister of finance, warned the government that without a drastic correction a complete meltdown might be approaching. Gyula Horn, the new socialist prime minister, also knew about the problem but was hoping to avoid the introduction of a painful austerity program. In August 1994 the government devalued the forint by 8% and quickly adopted a supplementary budget. At this point came the Mexican peso crisis that made investors even more cautious. László Békesi, Horn's minister of finance and today one of the architects of the Reform Alliance, resigned. So did the chairman of the central bank after the prime minister made his life miserable. (Péter Ákos Bod is today one of the supporters of Fidesz.) Gerhard Schröder, the German chancellor, told Gyula Horn that Germany no longer could finance the country. According to Petschnig, Bokros's program managed to pull the country from the abyss. It's true that the austerity program hurt large segments of society, but the planned devaluation of the forint over time and other changes in custom duties cushioned the economy as a whole. Yes, the GDP slowed somewhat but after the 1994 high (2.9%) in 1995 it grew by 1.5% and in 1996 by 1.3%. According to Petschnig it is an illusion to think that Hungary without Bokros's intervention could have grown out of its indebtedness, especially when the budget deficit was 8.6%.

Without making any judgment I'll let my readers decide which economist to believe.

Hungarian pessimism

It's legendary. Hungary leads the pack in all of Europe, perhaps even in the world. Especially if one considers the relative economic well being of most of the country's citizens. This pessimism is nothing new. A 1991 piece in The New York Times entitled "Hungarians Are Thriving, Gloomily" reported that "Poll after poll shows this nation to be the gloomiest in Eastern Europe--more unhappy and more fearful about the future than neighboring countries where unemployment is twice as high, inflation is about to surge back into the double digits and nationalist extremists are whipping up old hatreds." The author also quoted Jozsef Antall who in an earlier interview had said, "A Hungarian will always see the worst. It comes in part from a peasant mentality, which will never predict a good harvest." Antall continued, "Just as there is American optimism, which is the motor of American life, so Hungarians have a tendency to be pessimistic. Every renewal in our history was always born in pessimism. Even our anthem is pessimistic."

Whatever the cause, people today in countries nearby Hungary with much lower standards of living are  more optimistic than the Hungarians. Hungarians bemoan the fact that they have always been the losers of history. All those horrible happenings: the Mongol hordes, Mohács, the Turkish occupation, Habsburg rule, Trianon, two lost wars, 1956. Should I continue? Poland certainly hasn't been luckier than Hungary in modern times. In fact, Poland disappeared from the map after 1795 and yet the Poles always believed that Poland would be reborn one day.

The 1970s and 1980s was one of the few times that Hungarians felt economically superior to some of its neighbors (which, of course, is not the same as feeling optimistic). Hungary was doing well in the sense that living standards were on the rise while in Poland, for instance, eventually there were only empty shelves in the stores. Then Hungarians were self-satisfied and made ugly jokes at the expense of their Polish "brothers." Just think of the Polish saying: "Polak-Węgier dwa bratanki - i do szabli, i do szklanki!" Oh, yes, every Pole knows the saying, including the Polish guy who worked on my roof when he found out my country of origin. But in those days of relative Hungarian plenty Polish-Hungarian brotherhood was forgotten. The saying in Hungary was--and I have to quote in Hungarian because of a word play--"keresztek helyett inkább búzát kellene vetniük." In rough translation, instead of crossing themselves they should work.

Well, now Hungarians think that Poles are doing splendidly while they are the nation that is the worst off, and not just in Europe. Of course, they are wrong. There is a severe financial and economic crisis the world over. But Hungarian politicians keep harping on the theme that the economic problems Hungary is experiencing are unique to Hungary. Certainly Hungary was the first country in the region to be in trouble because of the very high government and private indebtedness and it was the first to receive IMF and World Bank assistance. But just look around the region now. It seems that sooner or later all countries will be in pretty much the same boat. Romania is now trying to get some IMF loans and Slovakia, a country always brought up as a shining example of fiscal management, may end up in a serious recession due to its heavy reliance on the auto industry.

Yesterday I was asked by József Orosz, anchorman of Kontra (KlubRádió), to comment on the Hungarian doomsday attitude toward the economic crisis. He brought up some examples. A former minister in the Medgyessy government announced a few days ago that "Hungary is already in intensive care but not yet dead." Here are some Hungarian headlines of late: "The situation is worse than in October" (Index). "The German chancellor is reminded of the second world war" (Hírszerző). "Crisis: According to Bajnai amputation is necessary" (Hírszerző). "We are sitting on a timebomb of bloody social strife" (Hírszerző). "Hope is not in sight" (Heti Válasz). As opposed to generally more optimistic headlines in English and American papers. One of my favorites (Bloomberg) cited Jeremy Grantham, known as a "perma-bear," who nonetheless in a March 4 commentary entitled "Reinvesting When Terrified" urged a "shift to stocks before 'rigor mortis' sets in." And it was not the economy he was describing as dead; it was the investor. To quote a bit more from his commentary: "Every decline will enhance the beauty of cash until . . . 'terminal paralysis' sets in. Those who were over invested will be catatonic and just sit and pray. Those few who look brilliant, oozing cash, will not want to easily give up their brilliance. So almost everyone is watching and waiting with their inertia beginning to set like concrete. Typically, those with a lot of cash will miss a very large chunk of the market recovery." In brief, a call to action.

I heard an interview on Napkelte (MTV) yesterday morning. The reporter was interviewing a well known economist. Her very first sentences went something like this: "A few weeks ago you said that this recession would end by the middle of the year. What are you saying now?" The poor economist tried to explain that the situation changes from day to day and that it is difficult to predict the future. But that didn't satisfy our reporter who kept outlining the worst possible scenarios. When the economist tried to give a somewhat more nuanced picture, she contradicted him and tried to prove that the situation was dire. One could see that she was very frustrated when she didn't get an answer about the immediate economic collapse of the country.

Okay, one could say: this is just a not too bright reporter who doesn't know much about economics or finance. Or the headlines are simply sensation-seeking. But what about the chairman of the Hungarian National Bank who announced yesterday that the country is in such trouble that it can sink to the bottom of the ocean? In fact, the water is up to "our noses." András Simor, the chairman, almost daily (except during his vacation last week when the country was sinking!) makes some such horrific pronouncement and then seems to be surprised that the Hungarian forint is not doing well. The chairman of the central bank has to be very careful what he says and Simor ought to know that. So why is he saying these things? Inexperience? Ill will? Habit? Hard to say. His predecessor, a former minister in the Orbán government, certainly knew what he was doing. But Simor?

Then there are those economists. Economics the dismal science as Thomas Carlyle called it. It may be dismal, but it isn't a hard science with confirming or falsifying experiments. There are economic theories, different economic schools, different beliefs, but Hungarian economists expound their own remedies as the gospel truth. András Gerő, the historian, rightly pointed out that it would be appropriate for these economists to preface their theories with "in my opinion." However, they do not. The economists of the Reform Alliance are certain that their remedy is the only appropriate one while Lajos Bokros is convinced that his "shock therapy" will be the salvation of the country. Lately he has been making the rounds from television station to television station, proudly announcing that he has just returned from Ukraine where he was obviously invited to fix up the Ukrainian economy. Good luck! His supporters point to the splendid results he achieved in Slovakia. But what will happen if in the next quarter Slovakia will also be in recession? Then what will they say about Lajos Bokros? That his remedies didn't work in the long run? Or that the Slovak government did something that mitigated the results achieved by the Slovak Bokros package? If Lajos Bokros is the key to solving the world's economic and financial crisis then maybe he should be invited to the United States where all the problems started and everything would be okay in a jiffy.

Hungary is not unique and at the moment not even as badly off as some other countries. However, all this negativism can be destructive, creating an adverse feedback loop. A weakening economy and a pessimistic population can become mutually reinforcing. I'm neither an economist nor a medical doctor but I know that in both fields optimism is a critical component of recovery. In the United States and in Canada people who perhaps are hit harder by the financial and economic crisis than are the Hungarians remain by and large optimistic at the same time they are scared. They know that this deep recession will end, even though they don't know when. And some, following the lead of Obama, believe that the downturn provides an opportunity for fresh ideas, new beginnings, a revitalization of American business and society. Who will start a campaign in Hungary to change people's attitudes? 

The end of Magyar Demokrata Fórum?

Possibly. Put it this way. I wouldn't put too much money on its survival. I'm no fan of the so-called political scientist István Stump, who headed Viktor Orbán's huge "office of the prime minister," but he had a point the other day when he essentially buried MDF. He talked about the transformation of MDF and mentioned that by his own calculations this is about the forth time that MDF has changed colors. This time by selecting Lajos Bokros, the neo-liberal economist, to head MDF's EP (European Parliament) list. I might add that the second man on the list is György Habsburg, son of Otto Habsburg. György is the "resident" Habsburg in Budapest and chairman of the Hungarian Red Cross.

MDF, the largest party in Hungary in 1990, has suffered setback after setback over the years. First there was a split between the conservatives supporting József Antall and his government and the right radical faction headed by István Csurka. The party, already battered in the transformation of the planned economy to capitalism, was decimated. It became a small party of diverse elements. Then the moderates broke away and established a separate party that was even less successful than the party they left behind. The situation looked so bad that by 1998 the only way MDF managed to get into parliament was on the back of Fidesz. MDF and Fidesz were practically one party until Ibolya Dávid, minister of justice in the Orbán government and by that time leader of the party, decided that MDF should regain its independence and try to get into parliament on its own. On the heels of that decision the party split again: about half of the MDF parliamentary caucus left Ibolya Dávid and the party and became "independent." Six months later--the compulsory period for an independent to change parties--they all moved over to Fidesz. In fact, today these former MDF members are the most radical group within the party. The "spokesman" for this group is István Balsai who, in my opinion, is the worst representative of the Hungarian political right, full of venom and hatred.

A couple of months ago MDF almost lost its right to form a caucus in parliament. One needs ten members for a caucus but one of its ten became "independent." At that point MDF managed to enlist an "independent" member whose outrageous personal behavior was too much for his former party, Fidesz. Dávid and her deputy Károly Herényi received quite a bit of flak over that move, but it was clear that MDF was desperate. Without a caucus a party is powerless in the Hungarian parliament.

And now comes this business of Lajos Bokros, the liberal economist and former socialist minister in Gyula Horn's cabinet. That didn't sit well with several members of the MDF caucus and the membership at large. After all, they said, MDF is a conservative party. One of the founders of MDF quit, but his defection was more symbolic than real trouble. Then the current EP member of MDF left in a huff. All this before the MDF board (választmány) had even voted on Bokros's nomination. Well, over the weekend the vote took place and by a slim margin Ibolya Dávid managed to force her will on the party. The vote was 48 in favor, 44 against. But at what price? Yesterday András Csáky, MDF member of parliament, quit the party and announced his intention to become an "independent." So once again there are only nine members in the MDF caucus instead of the minimum of ten. And that may not be the end of the defections. There are two more members who are being rumored to leave the party and the caucus: Zoltán Hock and Kálmán Katona.

As the world was crumbling around her Ibolya Dávid decided to be really brave. Or mad. Yesterday she announced that she is going to work on putting together a so-called "vote of constructive no confidence." In Hungary if seventy-five MPs sign a petition to demand a no confidence vote and at the same time they agree on the name of a prospective prime minister the parliament by a simple majority can oust the current prime minister. Ibolya Dávid offered up the name of Lajos Bokros as the prospective prime minister! Yes, the same Bokros who is supposed to head the MDF list for the European Parliament. The same Lajos Bokros whose nomination for the EP caused such dissent within the party. I can't fathom why Bokros allowed his name to be used in such an absolutely hopeless cause. I guess sometimes ego trumps sanity. Certainly Fidesz and MSZP, the two big parties, won't vote for Lajos Bokros. SZDSZ already announced that they are not partners in this latest scheme. It is not even sure whether the whole MDF caucus (if there is such a thing in a week or two) would vote for it. As someone sarcastically said: Ibolya Dávid may get five people to sign her petition. Herself and four of her followers within the caucus.

A new Bokros "package": Not likely

Lajos Bokros is one of the leading economists in Hungary. He was minister of finance from March 1, 1995, to February 29, 1996, when he resigned. Apparently he had threatened to resign before; every time his advice was not taken his inclination was to step down. Just to give an idea of his mercurial temperament: in 1990 it took him only two months as a member of parliament to be fed up with politics. He resigned.

A brief summary of his career: He was born in Budapest in 1954. He studied at the Karl Marx University of Economics, graduating in 1978. Two years later, in 1980, he received his Ph.D. and became a research fellow at the Financial Research Institute of the Hungarian Ministry of Finance, where he served as Chief of the Public Finance Division in 1986. From 1987 he was Deputy General Manager and then from 1989, Managing Director of the Hungarian National Bank. In the first half of the 1990s his positions included Chairman and CEO of the Budapest Bank, Chairman of the Budapest Stock Exchange, and Director of the State Property Agency. After his short stint as minister of finance he worked for the International Bank of Reconstruction and Development (World Bank) and currently is a professor at the Central European University attached to the Department of Public Policy. In addition to his administrative duties he teaches one course: Macroeconomics and Public Finance.

The country's economic situation was disastrous in 1995. But Prime Minister Gyula Horn was loath to introduce an austerity program of the magnitude that seemed necessary. For eight months he did nothing while his first minister of finance, László Békesi, proclaimed the end of the world every second day. Hungary had fallen into the abyss, he said, but he couldn't convince Horn to allow him to introduce the necessary changes. He therefore resigned in January 1995, though his resignation took effect only on March 1. Meanwhile for two solid months Horn interviewed prospective candidates for the post, including Zsigmond Járai, later Viktor Orbán's minister of finance of decidedly right-wing political views. At last Lajos Bokros was named on March 1 and twelve days later came the cold shower: an unprecedentedly severe austerity program later to be known as the "Bokros package."

What was the situation at the time Lajos Bokros took over? From 1990 to 1993 the GDP had shrunk by more than 20%, industrial production by 35%, and agricultural production by 40%. Consumption that had already dropped prior to 1990 further shrank by 10%. In 1994 the value of real wages was 22-23% less than in 1989. Unemployment was 2% in 1990; by 1993 it was 13%. Between 1990 and 1994 1.4 million jobs disappeared. Inflation was more than 25%.

Bokros achieved what seemed to be a miracle: by 1997-98 the Hungarian economy was on the right track. The greatest beneficiary of this was Viktor Orbán and his government that took over the reins of government that year. Perhaps one day I will detail the remedies Bokros used, some of which turned out to be unconstitutional and had to be withdrawn. Among other things, social services were curtailed and public outcry was great.

Bokros has for some time been trying to sell a second "Bokros package," but there doesn't seem to be taker at the moment. His latest laundry list was published last Thursday in Élet és Irodalom. It is a lengthy essay of about 30 typed pages. The suggestions, perhaps economically sound, are politically unacceptable. No government can possibly follow Bokros's advice. Even if Gyurcsány and his economic team were willing to listen to Lajos Bokros, the fact is that today's political situation is in no way comparable to that in 1994-1996. Then the government had more than a 75% majority in parliament. The right-wing parties--Christian Democrats, MDF, and Smallholders--were weak and ineffectual. Fidesz was the smallest party and barely got into parliament. Orbán and his friends were not quite sure whether they were a liberal or a conservative party. Today they are very strong and their attitude has hardened. They refuse to cooperate with the government in anything, and they certainly would do their utmost to torpedo each and every one of Bokros's latest ideas.

Let's see what Bokros suggests. (1) Compulsory private insurers in healthcare. If you recall the Fidesz-initiated referendum killed that already. (2) Competition among healthcare facilities. (3) Every person over eighteen years must pay health insurance. Right now students and pensioners do not. (4) Change in pension policies that would include individual record keeping of amounts paid. (5) No more thirteenth month pension or salary. (5) Fewer but bigger schools because small village schools cannot provide high quality education. (6) Instead of 77 accredited colleges and universities, keep only 20-25 institutions. Close the rest. (7) These institutions would have governing boards. (8) Competition among high schools. (8) Four to five villages should share one local governmental structure. (9) Widen the number of taxpayers. (10) Taxes should be paid even on minimal wages. They should pay a tax rate of least 10%. (11) Exceptions should be abolished. (12) Real estate taxes based on value. (13) Abolish EVA, a simplified taxation system for freelancers with a lower rate. (14) Abolish the tax free status of small businessmen.

I'm sure that some of his suggestions would do a world of good for the Hungarian economy but I can't see how Bokros's ideas could possibly be introduced. The opposition would launch another referendum,  and hundreds of petitions would be sent to the Constitutional Court that, given its composition, would undoubtedly kill half of the proposals.

The Gyurcsány government, confronted with the country's own economic problems, compounded by the world economic crisis, will have to do something. But it can't try to shore up the budget by collecting health insurance from pensioners and students. Or, unless it wants to commit political suicide, by abolishing the thirteenth month pay of all public employees and 3.5 million pensioners. Or by introducing private health insurers when once a couple with the help of Fidesz managed to get more than 200,000 signatures to hold a referendum against the introduction of private insurers. The Constitutional Court only recently announced that real estate taxes based on property values are unconstitutional. So what are we left with? It seems to me that Bokros, whose policies were so instrumental in righting the economy in the mid 1990s, can no longer offer realistic proposals to the government under very different political circumstances.