New PM candidate plans serious austerity measures in Hungary

The no-confidence vote is scheduled on the 14th April, and if it’s successful, the new government can be established in a month’s time.

According to his former announcements and the recently revealed plans, Gordon Bajnai is planning an austerity package ‘never seen before in Hungary’.

The possible measures that Mr. Bajnai will take are as follows:

• Taking away the 13th month-wage in the public administration
• Taking away the 13th month pension
• Cutting social benefits
• Abolishing gas subsidies
• Decreasing taxes on labour

The program of the new candidate can meet the demands of the markets. With giving some definite answers to the economic crisis (e.g. cutting public expenditures) the new government can make steps toward restoring the confidence in the Hungarian economy.

Besides, there are a lot of risks that the new candidate for Prime Minister will face:

1) Harsh conflicts with the MSZP and SZDSZ factions. Mr. Bajnai is a political „outsider” for MSZP, and his choice is rather a necessity (he was the last chance to avoid early elections), and doesn’t reflect a strong support for himself and his program. The measures that Mr. Bajnai is planning will seriously hurt the main voting groups of the Socialists, thus the party will put a pressure on him to choose the ‘soft’ route of crisis management. SZDSZ can also try to blackmail politically the new PM to maintain its support. Mr. Bajnai wants a written guarantee from the MPs to get the support for his unpopular measures.

2) The revenge of ex-government members. The expected changes in the government can hurt the interests of the most influential politicians in MSZP, who can treat Mr. Bajnai as a political enemy and put obstacles in the way of his governance. Thus keeping strong politicians in the government and maintain a level of continuity is in Bajnai’s interest at the moment. On the other hand, the overt continuity can weaken the message of change and take away the momentum for starting a new period in governance.

3) The short period of time. One year in power is not enough for a government to implement structural reforms: the changes in the administration and the summer period (when the state bureaucracy is traditionally paralyzed) will also shorten the time for effective governance. Furthermore, the next 12 months will be a permanent campaign period (with European Parliamentary elections in June 2009 and parliamentary elections in spring 2010), which can also make the governance and maintaining political balance more difficult for the new PM.