Hungary’s opposition on Wednesday called for an all-party government of experts to replace the “illegitimate” Socialist-led administration, as demonstrations continued in protest at the admission of Ferenc Gyurcsány, prime minister, he had lied to voters. Speaking after a second night of anti-government demonstrations and rioting in Budapest, Viktor Orbán, leader of the center-right Fidesz party, declared nationwide municipal elections set for October 1 would serve as a referendum for Gyurcsány and his reform program. His comments came as Fitch, one of three top credit rating agencies, changed the outlook for Hungary’s credit rating to negative, signalling a possible future downgrade. Fitch’s foreign currency sovereign debt rating for Hungary is BBB+. David Heslam, Fitch associate director, said events had increased the risk that the prime minister’s reforms, which he called critical to the credit outlook, could be undermined. Orbán, who has already called for Gyurcsány to step down, said a big defeat for the ruling Socialists in the municipal elections would signal the public’s complete rejection of tax increases, spending cuts and plans for painful public sector reforms. Orbán said a new government of experts should be formed with the support of all parties in parliament that could solve Hungary’s dire fiscal problems. Hungary’s budget deficit, which reached 7.5% of GDP last year, could top 10% of GDP this year. Gyurcsány has vowed to stay in office and press forward with reforms in health care, education, pensions and government administration. A former Prime Minister, Orbán has steadily opposed the government’s austerity measures and reforms. This summer his party blocked key measures that required a two-thirds majority in parliament. For weeks he has called for public protests, but has condemned the recent violence that left more than 200 injured, most of them police. The sudden eruption of popular protest followed Sunday’s extraordinary revelation that Gyurcsány – in a speech to party MPs in May – said that they had lied repeatedly to voters about state finances to win April’s elections. Financial markets, though put on edge, have reacted calmly to the events. The euro-forint exchange rate and bond yields remained steady for most of yesterday after mild sell-offs on Tuesday. The forint fell by about 0.5% on the Fitch announcement. Some investors have responded positively to the contents of the speech that outraged many Hungarians. While Gyurcsány said that his party “lied in the morning, lied in the evening” his remarks were part of a sometimes emotional plea to his colleagues to stop the deceit and to support his reforms. (ft.com)
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