Growing optimism

Despite the skeptical and in some cases hostile reaction by most of the international media toward the recent political changes in Hungary, most Hungarians are optimistic and content. After years of the "doing nothing" policy of the Socialist party - during which the country sank into deep economic and moral morass - it is finally over.

Following the landslide victory of the conservative Fidesz party, which now holds more than two-thirds of seats in Parliament, expectations are high that the new government under the leadership of Viktor Orbán will bring economic prosperity and social revival.

There is, of course, a looming danger: With such a sweeping mandate, anything but quick and spectacular improvements can quickly convert hope into disappointment and, in turn, a quick loss of support for the ruling party.

Orbán, who formerly served as prime minister from 1998 to 2002, has introduced the members of his Cabinet, and all eight ministers are experts in their respective fields. It is a government of technocrats. Orbán has delegated the day-to-day matters to his No. 1 deputy, Tibor Navracsics, an expert in public administration. Analysts conclude the new government will be inclusive and moderate. The first signs indicate a constructive and inclusive approach by the second Orbán government: more respect to the opposition and to the rules of democracy, quelling fears that such a dominant position would be open to an abuse of power. During the preliminary meeting of parliamentary parties, Fidesz was open to discuss suggestions of the opposition concerning the House Rules.

Most of the country's leadership structure now appears stable, with the possible exception of the head of the National Bank, András Simor, who was exposed by the weekly HVG of secretly maintaining an offshore bank account in Cyprus. While his position seems shaky, György Surányi, a liberal, internationally esteemed banker, seems a likely successor. Surányi has cultivated good relations with Orbán.

What will be the first measures of the new government? According to its own itinerary, it will first submit a new law regulating hand-over rules that require the outgoing government to prove item by item that, during their term, all laws and regulations have been strictly respected. If this should prove not to be the case, a criminal investigation can be launched against responsible officials.

The government will also quickly bring new measures to restore law and order. Corruption has become widespread in the country in recent years, and almost every day another high official is arrested on embezzlement charges. In rural areas, public security has disappeared, and people fear for their lives. Criminal gangs terrorize whole villages, especially in the poorer east, which became a support base for the extremist Jobbik party, a group that unfortunately dominated the headlines in much of the international press. Sandor Pintér, the new interior minister, is expected to crack down on crime. Repeat offenders will receive strict jail sentences.

Next on the agenda comes a promised reduction of taxes. However, any movement in this area depends on the outcome of expected negotiations with the International Monetary Fund (IMF) , which loaned Hungary $25.8 billion in October 2008. A review of the terms of the loan was expected in September, but news May 2 indicated the new government has already begun work in an attempt to allow a larger budget deficit in the coming year. For now, the IMF still insists on a 3.8 percent budget deficit, but the government calculates a deficit between 5 percent and 6 percent this year. Orbán has already made it clear Hungary expects the IMF and other international creditors to treat Hungary as an equal and not as a subordinate. He wants to form a new partnership and renegotiate the IMF's conditions.  

Assuming an agreement can be reached with a slightly higher deficit number, a moderate tax cut is plausible. The first step would be to reduce business taxes this year, and then Fidesz would introduce a new system, based on family taxation starting from Jan. 1, 2011. According to György Matolcsy, the incoming economy minister, taxation will be radically transformed and simplified, reducing the number of taxes and the level at which they are set, while broadening the tax base.

Measures relating to changes in the Constitution - which, with a two-thirds majority, Fidesz has the power to amend - mainly deal with public administration matters. The new administration will clearly need to be more efficient and less costly to keep Hungary's budget on a sustainable path. The government is ready to halve the number of parliamentarians to around 200 and also trim the bloated local administration, leaving the 3,200 local government officials in place but also planning to cut the number of local representatives by half. As to dual citizenship for ethnic Hungarians in neighboring countries, the government wants to grant voting rights to any foreign residents who also have a second residence in Hungary.

Tax reduction and the trimming of bureaucracy will kick-start the economy and improve the employment situation. Right now, unemployment reaches nearly 12 percent. This is a huge problem. Hungary has the second-lowest employment rate in Europe at 54 percent of the active population; only Malta is in worse shape. Generous pension schemes from the past have created a significant number of Hungarians who are neither working nor looking for a job. Fidesz promises to create 1 million new jobs over the next decade, and economists believe this can be done.

Much of Hungary's future success and change depends, of course, on whether Fidesz will be smart enough to carry out unpopular reforms - which include streamlining the near-bankrupt health service, overhauling the crippled educational system, laying off public servants and dealing with pensions - while compensating the public with long-overdue measures such as the war against corruption, the restoration of the rule of law and the credibility of politicians. Most importantly, it must create the feeling the country is progressing toward feasible targets.

For the first time in a long time, things are looking up - not that the international press seems to have noticed.

- The author is the online editor for the Hungarian weekly magazine HVG. He was formerly editor of the World Bank's Transitions newsletter and a John S. Knight Fellow at Stanford University. 

Richard Hirschler can be reached at
features@praguepost.com