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Coalition suffers major poll losses

Ferenc Gyurcsány, Hungary’s prime minister, suffered a double blow on Sunday evening, one from the country’s president, who called for his removal, and one from voters in nationwide local elections, who gave his Socialist party a thumping. Neither Gyurcsány’s position nor his newly introduced austerity measures was immediately threatened as his party continued to rally behind him. However, the prime minister’s ability to press forward with longer-term plans for difficult public sector reforms may have suffered. The opposition Fidesz party, along with thousands who have called for his resignation during recent anti-government demonstrations, received a clear boost from the day’s events. The vote came two weeks after the revelation that Gyurcsány had admitted lying about state finances to win April parliamentary elections.

With more than 80% of precincts reporting, Fidesz looked headed for victory in 18 of 19 counties and in 19 of 23 cities. The Socialists’ were headed for only one significant victory, in Budapest, where they and their liberal coalition partners looked likely to retain control of the city council and the mayor’s office. Liberal Gábor Demszky, mayor of Budapest since 1990, narrowly led in his bid to win a fifth consecutive term. The biggest surprise of the evening, however, was as a stunning blow to Gyurcsány from László Sólyom, Hungary’s president. In a televised address shortly after polls closed, Sólyom called on the country’s parliament to remove Ferenc Gyurcsány, the prime minister, from office. Sólyom said Hungary was still immersed in a “moral crisis” related to Gyurcsány’s admissions to lying, which sparked a week of anti-government demonstrations and three nights of street violence.

The president condemned recent street violence in Budapest but praised those who have demonstrated peacefully and called for Gyurcsány’s removal. “The peaceful protests across the country showed the healthy moral sense of the people to me. However, the catharsis and purge have not taken place,” he said. Sólyom said public finances represented Hungary’s most pressing problem and that he would support plans for reform. But, he added, reforms would not succeed without public support. Sólyom said only parliament had the constitutional power to solve the crisis. He said: “The parliament decides on the person of the prime minister. The parliament can restore the required social confidence.” Krisztián Szabados, an analyst for consulting firm Political Capital, said Sólyom was clearly pressuring parliament to unseat the prime minister. Szabados said the pressure was likely to harden Gyurcsány’s support within his party and, thus, his hold on office. But he said, it would aggravate the deep divide in Hungarian politics.

Since Gyurcsány’s controversial words were made public, his supporters have rallied around him, stressing the speech was an appeal to his party to support reforms. His opponents have condemned him as a liar and called for his resignation. Socialist party members reacted to the speech by angrily attacking Sólyom for interfering in party politics and declaring their continued support for Gyurcsány. The news electrified an anti-government demonstration in front of the downtown parliament building that was estimated at 10,000 people. On June 17, an audio taped leaked to the press revealed that Gyurcsány, while imploring Socialist MPs to support his plans for reforms, said his party had lied repeatedly about state finances and the need to introduce austerity measures.

The resulting unrest did not significantly unsettle financial markets but caused analysts and investors to worry that Gyurcsány’s ability to pursue reforms would be damaged. Moody’s Investors Service and Fitch, two major credit rating agencies, signaled they may soon downgrade Hungary’s sovereign debt ratings. Hungary is expected to post a 10.1% budget deficit this year and is under heavy pressure to from investors and the European Union to make significant deficit cuts over the next three years. The pressure on Gyurcsány had eased last week, partly because of revulsion over street violence that some blamed on opposition politicians. However, as the furore began to fade, Viktor Orbán, Fidesz’ president, raised the stakes of the approaching local elections by casting the vote as a referendum on the prime minister and his austerity package. The strategy appeared to pay off, possibly saving Orbán’s position as leader of the opposition. (FT)