Of Programs and Popularity

Prognosis

 

Fidesz: In Search of a Program

• The coming weeks will reveal more details of Fidesz’s plans and promises as the election campaign intensifies. Fidesz, which is all but certain to win the April vote, remains the only party without a published election program.  
• Fidesz will launch a “road show” of more than a 1,000 small rallies ahead of its official campaign kickoff on March 15. Up to now, such direct campaign events were a hallmark of the ultra-right wing Jobbik party, whereas Fidesz focused on advertisements and billboards. Fidesz’s rallies represent a challenge to Jobbik on its home turf.
• Fidesz is attacking outgoing Prime Minister Gordon Bajnai over his business dealings in an effort to discredit his image as a successful crisis manager. The accusations against Mr. Bajnai include questionable transactions with offshore companies and tax evasion.
• The IMF delegation spoke with Fidesz on possibly of loosening the budget goals for 2010 to 5.5% of GDP instead of 3.8%, according to information from the Eurasia Group. If the IMF is indeed willing to let Hungary’s deficit rise, the “price” may be promises of deep and extensive economic reforms.

 

Socialist Party: Leftward Tack

• The governing Hungarian Socialist Party (MSZP)’s candidate for prime minister, Attila Mesterházy, opened the election campaign by presenting the party’s program February 20. The Socialists new left-wing agenda contrasts sharply with many elements of the crisis-management program they supported in Parliament over the past year.
• The party is moving toward more populist policies in order to mobilize its traditional voters (e.g. pensioners). While it may seem slightly schizophrenic, the MSZP is also touting the fiscal austerity measures they backed last year.
• PM Bajnai is on a personal campaign to position himself as a successful head of government. Once he leaves office, this will afford him the credibility he needs to criticize both Fidesz and the MSZP should they abandon fiscal prudence. In his February 22 State of the Nation speech, Mr. Bajnai praised both Fidesz and the MSZP for their democratic principles and urged them to stand together against Jobbik.

 

Jobbik: Taking on the Secret “Grand Coalition”

• As Jobbik seems to be the party that most threatens Fidesz’s chances of gaining a two-thirds majority and there are real fears that Jobbik will poach even more votes from the right, the media close to Fidesz are waging an intense attack on Jobbik and its politicians.
• Jobbik party’s main strategy is to distance itself from the political forces presently in Parliament. It will seek to position Fidesz and the MSZP on the same platform and attack them with equal vehemence.
• Jobbik president Gábor Vona recently confirmed this strategy by alluding to a secret plot to create a “grand coalition” between Fidesz and the MSZP. Vona claimed the two main parties cooperate intimately behind the scenes.
• Jobbik will probably also attack Fidesz and the MSZP for their pro-European Union platforms, thereby emphasizing its own Euroskepticism.

 

Ongoing corruption scandals

• New political corruption scandals pop up in the media almost every day. Officers in companies owned by the Defense Ministry may be charged with corruption. Authorities have also started an investigation at the public company that operates Budapest’s thermal baths.
• Regardless of the outcome, the scandals will damage the Socialists, who are in government and therefore cannot distance themselves from the controversy. Fidesz is promising a “call to account” of corrupt politicians in the overwhelmingly likely event that it wins the April elections.

 

Calendar for the weeks ahead

 

Economic events

 

 

 

Political events

 

 

 

Leading trends

 

Gas Bomb: EMFESZ Case Threatens to Roil Hungarian Election

The scandal surrounding Hungarian gas company EMFESZ, which controls a quarter of Hungary’s natural gas market, is threatening to blow up right before the April parliamentary vote. The controversy began in April 2009 when EMFESZ CEO István Góczi sold the company to a Swiss offshore firm called RosGas AG without permission from the company’s owner, Cyprus-based Mabofi Holdings. Mabofi immediately filed charges in several countries claiming that Góczi lacked the authorization to sell EMFESZ.

 

In February, a Swiss appellate court ruled that RosGas is entitled to resell EMFESZ. Hungary responded by immediately freezing EMFESZ’s assets, effectively blocking any sale. A Budapest court then annulled the Hungarian Energy Office’s decision to authorize the original sale to RosGas.

 

EMFESZ is also engaging in financial shenanigans. At the end of January 2010, EMFESZ said it wanted to alter its 2008 earnings report, effectively transforming a HUF 6 billion (€22.3 million) profit into a HUF 45 billion loss. The firm’s auditor terminated its contract with EMFESZ over the company’s failure to fully disclose its numbers.

 

Hungary is now handling the EMFESZ case at the highest levels. Hungarian daily Népszabadság reported that a compromise may be in the offing: Under the proposal, the current owners of EMFESZ would simply abandon the company. EMFESZ’s clients would have their gas service taken over by a new company in which Russian gas giant Gazprom would own 75% stake and Hungarian state would control the rest.

 

It is not surprising that Hungary’s Socialist government wants to resolve this affair ahead of the parliamentary elections. Hungarians depend overwhelmingly on gas for heating. Any disturbance in supply would add one more grievance to the prevailing anti-Socialist mood.

 

 

IMF Gives Positive Review of Hungarian Economy

Hungary’s 2010 budget deficit goal of 3.8% of GDP is attainable, but the government must be stringent with its budget reserves and must be prepared to impose new cost-cutting measures, delegates from the International Monetary Fund (IMF) and the European Commission said at a February 15 press conference. The IMF called the conference to discuss its periodic review of Hungary’s economy. The IMF, the EU and the World Bank saved Hungary from bankruptcy with a credit facility of up to €20 billion at the outset of the global downturn in October 2008. Hungary managed to meet its budget-deficit target of 3.9% of GDP in 2009.

 

Finance Minister Péter Oszkó, who also took part in the press conference, addressed the IMF’s concerns by announcing that the government would freeze all budgetary reserves. Hungary will once again forego the next tranches of the stand-by loan because the country can finance itself from the markets, Oszkó said. Due to the better-than-expected economic trends, Hungary’s government is revising its 2010 GDP growth forecast upwards from - 0.3% to - 0.2%, he added.

 

Hungarian National Bank Governor András Simor said the country had achieved its financial regulatory goals as well. As examples, he highlighted the establishment of the Financial Stability Council and the fact that the Hungarian Financial Supervisory Authority’s powers had been strengthened.

 

IMF delegation head James Morsink said the IMF had also held talks with Fidesz. While Mr. Morsink did not divulge details, he said Fidesz’s leaders signaled a willingness mato work with the IMF and to follow a tight fiscal policy. This is quite peculiar in light of recent policy statements by Mihály Varga, Fidesz’s point man on economic policy and possible candidate for finance minister (see below).

 

The Hungarian National Bank cut Hungary’s benchmark interest rate to a record low of 5.75%. As this decision was in line with the analyst expectations, the Hungarian currency did not weaken following the bank’s decision.

 

 

 

 

 

Bajnai and the MSZP: No divorce, just “decoupling”

When Gordon Bajnai became Hungary’s premier in April 2009, he explicitly promised to quit politics once his term of office ended a year later. The Socialists’ candidate to replace Mr. Bajnai, Attila Mesterházy, is campaigning as an outsider: His slogans include “New candidate, new program,” even though he served as head of the MSZP’s parliamentary caucus throughout Mr. Bajnai’s administration. The idea is for the Socialists to “decouple” from Mr. Bajnai and present a new, left-wing vision for Hungary’s now that the “crisis management” period is over.

 

While Mr. Bajnai has not said anything to suggest he will break his promise to leave politics, his actions hint that he plans to make comeback at some point. Mr. Bajnai appears to be creating a platform from which he will be able to criticize Fidesz in the future. He touted his record as a fiscal disciplinarian in an interview with left-wing periodical Mozgó Világ and in a long article in pro-MSZP daily Népszabadság. The premier’s State of the Nation speech served the same purpose: Mr. Bajnai said his cabinet had laid the foundations for economic growth and brought investor confidence back to the country. He cautioned that the next government will not have much room for fiscal maneuver. Mr. Bajnai also warned all political players of the danger posed by the radical right, whose increasing strength is directly linked to the frosty relations between the MSZP and Fidesz. He hailed both Orbán and Mesterházy as democrats and patriots and urged them to stand united against the threat of the radical right.

 

Mr. Bajnai’s vision overlaps with Orbán’s to a considerable degree. For example, both men are concerned that Hungary’s excessive state redistribution will saddle the country with debt. Still, neither politician wants to appear to be backing the other. The past 10 months show numerous differences between the two politicians, but these get ignored since Mr. Bajnai is not a candidate in 2010.

 

 

More Fidesz plans surface

Fidesz has offered the Socialists a tiny tactical victory in its failure to publish an election policy program. It is in Fidesz’s interest is to be as murky as possible about its plans, since the party’s enjoys a commanding opinion-poll lead even in the absence of a political platform.

 

Fidesz now faces a dilemma: Should the party divulge more of its plans, and risk alienating voters before Election Day, or keep silent, and risk massive voter disaffection after assuming power? It is a fine line to walk. At present, Fidesz appears paranoid about losing any support. When Mihály Varga divulged some potentially unpopular pension-reform proposals at the beginning of the campaign, the party aggressively (and sometimes comically) refuted them. When László Mádi proposed reinstating an unpopular tax on residential real estate, Fidesz swiftly expelled him from the party’s candidate list.

 

Recently, bits and pieces of Fidesz’s initiatives have been coming to light. Fidesz appears to be putting less emphasis on its earlier promises of financial largesse, saying the party first needs to become more familiar with the country’s precise economic situation.

 

Mr. Orbán’s February 5 “State of the Nation” speech contained few concrete facts. However, he shed some light on his plans in the post-speech media blitz and in an address to the Budapest Chamber of Commerce and Industry:

 

Orbán

• Putting more policemen on the streets
• Raising health care employees’ salaries
• The “calling to account” of Socialist officials will be based solely on the law
• State-owned enterprises should be able pay suppliers 30 days in arrears instead the current 90 to 120 days. The lag time should eventually be reduced to eight days
• Settling debts of state-owned enterprises
• Farmland and water resources will remain “protected” from foreign ownership
• Creating 1 million jobs over the next 10 years
• The new government’s economic policy will be formulated in cooperation with the Hungarian Chamber of Commerce and Industry
• Monetary policy in the interest of Hungarian businesses
  • Low interest rates
  • Shoring up banks in order to boost lending activity

Varga

• The budget deficit this year will be higher than forecast due to the need to shore up local governments, hospitals and state-owned enterprises. The exact rate depends on consultations with the IMF and the EU, but full consolidation could push the deficit up as high as 7.5% of GDP
• Euro adoption in 2015
• Tax cuts and simplification of the tax system
  • Reduction of the corporate taxes and contribution levels
  • Spurring investment by offering bigger breaks in local-business taxes (iparűzési adó)

 

More heads roll at BKV

The last two weeks added new weight to the growing avalanche of financial-misconduct accusations at the Budapest Transport Company (BKV). Law enforcement agencies have clearly stepped up their activity, presumably because they would like to score points with Fidesz after the April elections.

 

Police have now taken into custody Ernő Mesterházy, perhaps the most influential advisor to Budapest Mayor Gábor Demszky. Mesterházy (no relation to the Socialists’ prime ministerial candidate) oversaw some of the biggest projects in the city and was held to be one of the most powerful men in City Hall. Authorities also arrested former BKV deputy managing director Miklős Regőczy.

 

Demszky took political responsibility for the BKV scandal, but insisted that he had made every effort to ensure transparency at the company. He cited the dismissal of former BKV chief Attila Antal, who is now under arrest, and the decision to take control of public transport from the disgraced former Socialist Deputy Mayor Miklós Hagyó. Demszky said he believes both Hagyó and Mesterházy are innocent.

 

Meanwhile, current BKV head István Kocsis sent police more contracts that he considers suspicious, burnishing his image as a “truth-seeker”. One contract was for an electronic notice-board system on the Budapest-Szentendre suburban railway line. The system has been in test mode for the past three years and one third of the signs do not work. The contractor who did the work is now under liquidation.

 

Another questionable deal was the BKV’s 2007 consultancy contract with Central European Management Intelligence (CEMI), which poured HUF 287 million into CEMI’s coffers over 10 months. One of CEMI’s managing partners was Krisztián Orbán, whose wife was an MP candidate for Fidesz. Mrs. Orbán withdrew from the race after the CEMI contract came to light, citing health reasons. Mr. Orbán then put out a statement that his ties to CEMI had been severed before the BKV contract was signed.

 

Mrs. Orbán’s decision to stand down may be the result of an overabundance of caution within Fidesz’s. The party also demonstrated this in its reaction to László Mádi’s faux pas (see above).

 

 

 

The Bajnai administration’s final bow

The Bajnai administration’s activity in 2010 has been intentionally subdued. This serves two purposes: (1) To keep the prime minister and his cabinet “decoupled” from the Socialists’ election campaign and (2) To limit opportunities for the opposition to attack the prime minister. Mr. Bajnai’s frequent travel helps him stay out of domestic politicking. His recent trips to Croatia and Egypt focused on energy policy: He discussed liquefied natural gas (LNG) in Croatia and tried to get the Egyptians to get involved in the Nabucco project, the European Union’s plan to pipe in natural gas from non-Russian suppliers.

 

The Bajnai cabinet enacted a “decision moratorium” to keep political attacks at bay. The government has pledged not to make decisions on any major issues such as the state-asset sales, subsidy contracts or high-level political appointments. State bodies can only initiate public tenders if they conclude during after the new government takes office. Additionally, ministries can only assume new obligations that are deemed essential for serving the public. (Some decisions clearly contradict this goal: The Education Ministry has hired contractors whose terms will expire after the new government takes office, and the Hungarian Army has also made significant personnel changes.)

 

An example of the Socialists “decoupling” is their decision to revoke their pledge to support Bajnai’s nominee to head the National Radio and Television Commission (ORTT), Hungary’s broadcasting regulator. The MSZP – with Fidesz’s blessing – took the confirmation vote off the parliamentary agenda, saying they had not had enough time to make an informed decision. The MSZP’s real motivation was probably a desire to avoid defeat in Parliament. It will now be up to the new legislature to elect an ORTT chairman.

 

The Socialists scored some political points by voting for PM candidate Attila Mesterházy’s motion to criminalize Holocaust denial. This new addition to the criminal code may be short-lived, as similar motions have been rejected by the Constitutional Court on grounds that they limited free speech.

 

The Bajnai administration also created a fund to provide legal and financial help to ethnic Hungarians in Slovakia who break the country’s new language law. Hungary’s government lobbied against the law, to no avail. Bajnai’s 50 million-forint fund is an implicit admission that their efforts were in vain.

 

Mr. Bajnai also offered to hand over state financial data to any “democratic” political parties who request it before the election (meaning all parties except Jobbik, which he does not consider democratic). This helps Mr. Bajnai preempt future criticism that his government intentionally hid data about the economy, a transgression that led to the downfall of his predecessor, Ferenc Gyurcsány.

 

Mr. Bajnai suffered a personal defeat when President László Sólyom sent his anti-corruption package back to Parliament for reconsideration. The legislature will not put it up for a re-vote before Mr. Bajnai’s term ends. The law would have created a new super-agency tasked with leading the fight against corruption. After Mr. Sólyom rejected the law, MPs tacked many of its provisions onto other bills and passed them. Such riders include protection for whistleblowers, obliging public tender bidders to disclose all contracts and the creation of “transparency commissioners” to supervise tenders.

 

 

Intensifying attacks against Gordon Bajnai

Prime Minister Bajnai is coming under fire in relation to his business dealings before he became premier. In 2005 Mr. Bajnai’s company, Wallis Zrt., acquired a small, financially unsuccessful firm called Dataplex Zrt. for HUF 2.33 billion. Wallis financed the purchase with a loan from CIB Bank. Shortly afterwards, Wallis sold Dataplex to three Cyprus-based firms. Dataplex soon received hefty contracts from Hungarian state-owned companies.

 

At the end of 2005, the three Cypriot companies sold Dataplex again, this time to Magyar Telekom Nyrt. for HUF 5.1 billion – nearly double the original sale price

 

At the time of this deal, the CEO of one of the Cypriot companies, Fleminghouse Investments Ltd., was none other than Mr. Bajnai. The three Cyprus-based companies racked up a profit of HUF 2.7 billion after paying back the original loan to CIB.

 

The Hungarian Tax and Financial Control Administration (APEH) suspects tax fraud and has asked Cypriot authorities to help in the investigation. Fidesz immediately called on Mr. Bajnai to clarify his involvement: “It is completely absurd that someone who weakens his country by his business activity wants to govern,” Fidesz MP Róbert Répássy said at a press conference. “In this instance, Mr. Bajnai is arguing with the police and authentic police documents.” Répássy also said politically connected people would not be entitled to special treatment under a Fidesz government.

 

Mr. Bajnai has denied any wrongdoing.

 

 

Nomination slip woes

More and more abuses are surfacing in connection with a peculiarity of the Hungarian election system: Candidate-nomination slips. All candidates who want to get on the ballot in single- member constituencies must collect at least of 750 nomination slips. Voters receive blank nomination slips in the mail at their official residences. They then fill in the name of the candidate they wish to support, sign the slips and hand them to party activists or drop them off at designated collection sites.

 

The procedure has been subject to increasing abuse over the past few elections. Certain groups and individuals specialize in “collecting” blank slips and selling them to political groups, as evidenced by a rising number of broken mailboxes. Additionally, Fidesz is trying to capitalize on its overwhelming popularity by collecting as many slips as possible. This makes it hard for smaller parties to get on the ballot. There have been reports of activists trying to “buy” slips in exchange for food vouchers, of people holding online auctions for slips and of faux Fidesz activists collecting them.

 

The nomination-slip process was conceived to weed out candidates who do not have sufficient backing or whose intentions are not serious. However, the institution now threatens ballot access for legitimate parites. Both the Hungarian Democratic Forum (MDF) and Politics Can Be Different (LMP) are having serious trouble collecting the requisite number of slips, even though their national support may reach the 5% threshold necessary to get into Parliament.

 

The situation is all the more dire because parties who cannot get individual candidates on the ballot also lose the right to set up party lists.

 

 

Public opinion analysis

All credible Hungarian polling institutes showed that support for Fidesz slipped in February, although the size of the decline varied from poll to poll. The average of Hungary’s four biggest agencies indicates Fidesz’s support fell almost 4% among dedicated voters; some polls showed the number of undecided voter increasing by the same amount. The MSZP has failed to benefit from Fidesz’s lapse.

 

According to the Forsense agency, the LMP has managed to capitalize on the MDF’s internal problems: LMP’s support rose to the all-important 5% level, while the MDF’s support fell to 2% among dedicated voters.

 

 

Source: Average of four polling institutes (Szonda-Ipsos, Tárki, Forsense, Medián)

* February data average of Forsense, Szonda-Ipsos