Analysis: Hungary referendum signals end of reforms

Elections

Hungarian voters have warned the Socialist-led government to curtail its economic reforms by heavily backing a referendum, that demanded an end to health and university fees.

Almost 1 million Socialist supporters on Sunday backed the opposition Fidesz party’s move to end the fees, a small but symbolic part of the government’s plan to try to modernize the sclerotic economy and state sector. It was no surprise the vote passed because few people were willing to pay even a small sum Ft 300, (about $1.70) to visit the doctor, but the scale of the defeat showed the Socialists have plenty to worry about ahead of elections in 2010.

The government’s policy choices are limited. With opinion poll support of just 15%, it cannot push ahead with more reforms and there is no viable alternative Socialist leader in the party to replace Prime Minister Ferenc Gyurcsány. Neither can it start spending freely to woo voters due to the fragile state of financial markets, which would punish a return to free-spending ways, which produced the EU’s biggest budget deficit of 9.2% of GDP in 2006. Instead it must hope its communication improves and Fidesz leader Viktor Orbán slips back into his abrasive populist manner from the newly found emollience, which allowed Socialists to back him on Sunday. “I don’t believe these voters have become Fidesz supporters ... but if Fidesz is smart it will at least be able to persuade them not to turn up and support the Socialists and Gyurcsány in the way they did in 2006 (elections)," said a senior Socialist campaign adviser.

 
AFTER 2010?

Fidesz will have another chance to inflict a defeat on government in the autumn, if it decides to back a referendum to stop private health insurers entering the state healthcare system, another unpopular measure. If it sticks to the same strategy, it can keep the government on the run through to the 2009 European Parliament elections and then to the 2010 general elections. It can also seek to exploit differences between the Socialists and their more liberal Alliance of Free Democrat coalition partners, although the coalition is more likely to cleave together than fall under external pressure. “Fidesz has now oriented itself not to the far right but the center,” said Zoltán Kiszelly at the Hungarian Academy of Sciences.

Fidesz initially embraced anti-government protests in 2006, which turned violent, and refused to condemn the emergence of a uniformed far-right anti-Jewish and anti-Roma group last year, leaving it open to attack by the government. It has now backed away from both and stressed recently, that Sunday’s vote would not lead to the ousting of the government, thus allowing Socialists to side with the opposition. Ironically, if the Socialists halt reforms to try and claw back support, it will then be up to Fidesz in 2010 to implement many of the same measures to revive the EU’s slowest growing economy which expanded just 1.3% in 2007. That level of growth pales beside neighboring Slovakia, which grew 10.4% last year on the back of liberal economic policies, which have put the small country on the verge of euro membership this year. (Reuters)

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