HUNGARY 2006

FOLLOWING a year in which Hungary increasingly lived on borrowed money, 2006 was time for a reality check. The country experienced political turmoil, with a general election in the spring and in autumn the worst street violence in Budapest since the failed uprising of 1956 against Soviet rule.

Borzasztó politikusok

Economic growth slowed to 3.8 per cent, while inflation jumped to 6.4 per cent as austerity measures were introduced to reduce ballooning budget and current account deficits. Unemployment also continued to grow, reaching 7.4 per cent. Political instability and the worsening economic climate seemed to confirm views of Hungary’s status as the “laggard” of the new EU countries.

The year was dominated by Hungary’s “dreadful politicians”, a term coined by The Economist. General and local elections were held, the fifth since the end of communism in 1989. Despite a budget deficit of around 10 per cent of GDP - the highest in the EU -and relatively sluggish growth compared with other European emerging markets, both government and opposition downplayed the problems and contested the election promising higher public spending and further tax cuts. The volatility of the forint signalled the market’s view on such election manifestos.

Nem fog fájni

The European Commission tactfully gave the government until September to submit a revised economic programme on how to join the eurozone. On 9 and 23 April, Hungarians re-elected the incumbent government, for the first time since the fall of communism. In Hungary’s 386-seat unicameral legislature, the National Assembly, the governing coalition secured a 54 per cent majority.

The Hungarian Socialist party (MSzP), led by Prime Minister Ferenc Gyurcsany, took 190 seats; its coalition partner, the Alliance of Free Democrats (SzDSz), 20 seats. The opposition Fidesz-Hungarian Civic Alliance, led by former Prime Minister Viktor Orban, secured 164 seats, together with its ally, the Christian Democrats (KDNP). The Hungarian Democratic Forum (MDF) won 11 seats.

By June, the government was forced to acknowledge the need for austerity measures and said, with a whiff of post-victory nonchalance, that measures to restore the budgetary balance “won’t hurt” ordinary Hungarians. By the autumn, however, the government had announced tuition fees in higher education; redundancies in the public sector; VAT, income tax, and utility price increases; and the introduction of contributory healthcare payments.

Elkúrtuk

In what many saw as adding insult to injury, on a taped admission leaked to the press on 17 September the prime minister told a closed meeting of fellow party delegates that the government had “screwed up” and “lied morning, noon and night” about the state of the economy in order to hold onto power. He added that their only achievement in the last four years was to be re-elected. Despite this revelation, Gyurcsany refused to resign saying that he meant to break with the “policy of half-truths and lies of the last 16 years”.

The leaked tape led to more than a month of demonstrations, mainly by extreme right-wing groups, with more moderate Fidesz supporters joining crowds of around 10,000 protesters. Rioting started on 18 September when a fringe group, including football hooligans, stormed the state television headquarters when their petition was not read out on air, throwing bottles and cobblestones, setting fire to cars, and damaging the building. There were 150 people injured, 102 of whom were police officers. Police clashed with rioters during the following nights at other locations, using teargas and water cannons.

Erkölcsi fori

The protesters claimed to be taking part in a “moral revolution” and compared the rioting to the 1956 uprising. Calm returned temporarily ahead of the municipal elections on 1 October, when Fidesz won a majority in all but one of 19 county councils, but failed again to take the capital, Budapest, and to replace the city’s high profile mayor of 16 years, Gabor Demszky of the SzDSz. Fidesz and around 50,000 protesters claimed that the government had lost its legitimacy and should resign. Gyurcsany, however, strengthened his position after winning a vote of confidence in the National Assembly on 6 October.

Instead of a sombre, uplifting commemoration, with dignitaries from at least 47 countries in attendance, the 50th anniversary of the 1956 uprising on 23 October saw some of the worst street violence in Budapest. At one point rioters drove a T-34 tank from an open-air exhibition into a police cordon. The police response, according to critics, was heavy-handed with reports of officers beating up handcuffed rioters and bystanders. Rioting and demonstrations ceased as Fidesz initiated a referendum about government policies to be held in spring 2007.

Hideg polgárháború

The political crisis – increasingly a duel between Gyurcsany and Orban, who had lost two consecutive elections and was frequently accused of using populist and nationalist rhetoric – showed no signs of abating, despite growing public demand for at least a basic level of co-operation and dialogue. Political commentators described the situation as a “cold civil war”.

Ironically, the only good-spirited commemoration of 1956 was held four months early by the US president, George W. Bush, in Budapest, because he was unable to attend in October. In his open-air speech on 22 June, with the Hungarian capital and an approaching summer storm providing dramatic background, Bush said that Hungary represented “the triumph of liberty over tyranny”. Iraqis, he said, would take inspiration and “draw hope” from Hungary’s success. However, Hungary’s president, Laszlo Solyom, nudged Bush by reminding him that “every step and measure” should be “in line with international law” when fighting terrorism.

Szotyi

Relations with Russia continued to improve. With two summits (28 February in Budapest and 18 September in Sochi, Russia) high on symbolism, Prime Minister Gyurcsany and Russia’s president, Vladimir Putin, announced plans to develop an energy hub in Hungary with Russian involvement.

Once EU enthusiasts, Hungarians joined the ranks of the most eurosceptic countries: in a Eurobarometer (EU public opinion) poll only 41 per cent said that membership “benefited” Hungary, a dramatic drop of 11 per cent from 2005. Despite widespread pessimism and a rather disappointing year, Hungarians retained some confidence in their purchasing power as they turned to their credit cards for comfort: all national retail records were broken during the pre-Christmas period.