Hungary faces rude awakening from welfare state dreams

The release of a recent poll showing that most Hungarians preferred life under communism caused a mild shock in the foreign community, but provoked little more than a characteristic shrug from Hungarians. After all, under János Kádár Hungary was one of the least repressive regimes in the Soviet bloc, the “Goulash Communism” of the 1980s allowed a certain amount of private business, inflation was unheard of, while the state was able to borrow on Western markets to fund a generous health and welfare system. As the number of Hungarians feeling nostalgic for those simpler times has risen from 53% in the last such survey in 2001 to 61% today, it’s clear that Hungarians are having trouble adjusting to modern-day reality.

Economically, the country has been living in a dreamland since Fidesz got elected in 1998 by running against economic reform. Until recently, no politician dared touch the idea again, until current PM Ferenc Gyurcsány made his now infamous speech to party MPs in which he said “we have lied morning, noon and night” about the economy. That came shortly after winning re-election in 2006 following a campaign in which the growing state and current account deficits remained the “elephant in the room” about which neither leading party said anything.

It was the leak of that speech in September – weeks after Ferenc Gyurcsány announced austerity measures and higher taxes – that ignited the now famous riots of autumn 2006.

The irony was rich, then, when similarly candid remarks made by opposition leader Viktor Orbán at a closed meeting were leaked to the media. Declaring that his party would win the next elections in 2010 – a nearly universally held assumption – Viktor Orbán told the gathering of political science students that there would be no conventional governing for the first two years, and that “many things will hurt many people”. He said austerity measures will be introduced, and that pensions will be frozen. There were no riots, but coming from an often populist former PM who has resisted any cuts in social spending, this was quite a shock. His image was further damaged by reports that he called Gyurcsány “a fool, an idiot, let’s face it,” largely because of his candidness in his leaked speech of two years ago.

Speaking with what informants described as at times overweening self-confidence, Viktor Orbán said he expects to win the next three elections. Rather less plausibly, Orbán claimed that he had not really wanted to win the election in 2006, because of the poor state of the economy.

Viktor Orbán chose the tabloid Blikk – Hungary’s most popular daily – through which to apologise for his comments about Ferenc Gyurcsány and to deny that he would cut pensions or spending on infrastructure, but his image can only suffer from this.

If Orbán was indeed exuding confidence at that private meeting, it was not without reason: His party has a 40-point lead in the polls ahead of their arch-rival Socialists. Moreover, he was basking in the success of the March 9 referendum against daily fees for visits to doctors and hospitals. This stopped the government’s health care reform plans – its most sustained effort at structural economic reform – and created the general sense that Fidesz was running the country even though not in power.

More than that, it may have brought them markedly closer to actual power, as it prompted avid reformists the Free Democrats to quit the governing coalition, leaving the country with its first ever minority government. Much of the political class is agog at this novel twist in Hungary’s young democracy. Many assume that early elections are inevitable and necessary, not least because Fidesz has been demanding early elections and calling the cabinet illegitimate since the leak of Gyurcsány’s speech two years ago. Such speculation was further fuelled by Gyurcsány’s remark to foreign journalists on May 7 that the government would have no choice but to step down if it lost a vote on the budget or taxes. Though he added that this was “normal” and only a “theoretical possibility,” it has excited many opposition MPs who see a chance to get rid of a very unpopular PM.

The mathematics and chemistry of Parliament are against this. Fidesz and the smaller conservative opposition party the Democratic Forum do not have more MPs than the Socialists, so the government cannot be overthrown without the active support of the Free Democrats (SZDSZ).

The small, liberal party is not about to bring the government down, though, as their enthusiasm for structural economic reform, along with some rather unseemly infighting in recent weeks has sent their popularity to a barely perceptible 1-2% (and that among those expressing a party preference).

The other possibility that has Budapest chins wagging is the ousting of Prime Minister Gyurcsány by his own Socialist party. Given the low popularity of both party and prime minister, this would make sense, and would nicely echo events of summer 2004, when the party panicked about poll ratings, allowing Gyurcsány to engineer the ousting of and then to succeed prime minister Péter Medgyessy.

The chief argument against such an outcome is that no-one in the party appears strong enough to do it or capable of taking over. Others say that the Socialists will wait on dumping their unpopular leader until they receive a presumed thrashing in the 2009 European parliamentary elections.

Amidst all this political instability the forint has been defying gravity, as well as the forecasts of most analysts, by rising against all major currencies. Despite inflation of near 7% and economic growth barely above 1%, someone keeps buying the forint.

Export growth is part of the story, but a bigger factor is the highest interest rates in the EU. The bond market keeps the currency afloat, while the central bank’s high rates strive to bring inflation down.

It all seems oddly familiar. There’s a wildly unpopular prime minister, a government widely seen as power-hungry and corrupt, an economic regime that no-one believes in while the state borrows heavily from abroad rather than trying to get the people to face up to the financial facts of life. In important ways, Hungary has not moved on from the Kádár era at all. The leak of Orbán’s more pragmatic thoughts might mean that Hungary finally has that debate on practical issues that it’s been putting off since 1990.

6 thoughts on “Hungary faces rude awakening from welfare state dreams

  1. Wow! Desmond, welcome to AFOE and what a start. If all your contributions are anywhere near the standard of your first one then we’re in for a treat.

    Thanks and good luck!

    FP

  2. The release of a recent poll showing that most Hungarians preferred life under communism caused a mild shock in the foreign community, but provoked little more than a characteristic shrug from Hungarians.

    The +200,000 or so Hungarians that fled in ’56, plus the countless that trickled out later, might be to differ.

    After all, under János Kádár Hungary was one of the least repressive regimes in the Soviet bloc, the “Goulash Communism” of the 1980s allowed a certain amount of private business, inflation was unheard of, while the state was able to borrow on Western markets to fund a generous health and welfare system.

    Will someone please, please stop the soft-peddling of Hungarian communism?

  3. Thanks for the report. Hungry rarely shows up on my radar here in Frankfurt. A current local topic may tie in though. The Hessian state legislature voted yesterday to strike down a 3-year-old law that allowed universities to charge a modest tuition fee, about 1000 Euros/yr. Starting soon university education in Hessen will again be virtually free.

    As an academic I am disappointed because the income from tuition was used to fund my job. Others are disappointed for less selfish reasons. In the opinion of many members of the teaching staff, the modest fees truly improved the quality of education. Removing them means going back to insufficient administrative support, hoards of students demanding to be added to course lists, professors intensifying their efforts to exploit their priviliges to the max because in many cases the alternative is simply withering.

    The students are claiming victory, and it is indeed a victory. They organized and struggled against the CDU government that introduced the tuition fees, going into the streets on many occasions, disrupting traffic, facing down the police. As a result their education will likely suffer.

    I ask myself if the students are really that selfless and the answer seems in some cases to be yes. Recent elections undermined the CDU majority and the new law is the fruit of a block on the left composed of Social Dems, Greens and Leftists, a block that doesn’t have the majority to name a prime minister but enough votes on this issue. The university trains the manager/professional class. SPD, Greens and LInke represent the workers the way that no party in the USA does, and these workers are self-confident. They argue that better education for managers and professionals, their bosses, means harder times for workers. Weak universities are therefore a necessary evil if the commonweal is to be optimized.

    Why not? The USA, home of the greatest universities in the world, has the worst social insurance system of any advanced country. Maybe the Hungarians are right to long for the good old days?

  4. Pingback: By The Fault » Blog Archive » Linking Up with the World

  5. In 1971, when I was in Budapest, I drove the Hungarian-born wife of a friend to a theater where she was going to see some satirical skits (I didn’t go in since I didn’t speak Hungarian) but she told me there were many political jokes being told in those theaters. So there was already quite a bit of leeeway before 1980

  6. Pingback: Global Voices Online » Hungary: Attitudes, Politics, Economy

Comments are closed.