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Hungary's govt urged to back off health reform

Parliament

Hungary's Socialist-led government should back off plans to privatize health insurance, as political turmoil will scare off investors, a party leader said.

Earlier this month, the government lost an opposition-backed referendum to strike down unpopular health and education fees and there is the threat of a second referendum on private health insurance.

“It is sure that in the current political environment ... we cannot expect private investors to enter this market with proper offers,” Ildikó Lendvai, head of the socialists' (MSZP) parliamentary group said.

“It is very much possible we will need to keep the (new health) funds fully state owned,” Lendvai told news portal stop.hu.

The coalition government of the socialists and the smaller liberal party (SZDSZ) made health its top reform priority.

Hungary has sought to generate at least Ft 120 billion ($733 million) worth of fresh capital for healthcare through selling 49% stakes in new funds and expected 7 to 10 new investors to enter the market from 2009.

With an election due in 2010 and the opposition Fidesz party, which opposes health privatization and says it will reverse any moves, well ahead in opinion polls, few insurers would be willing to enter the market.

“The risks are enormous. There is not an investor who would invest money here in this environment,” said Marianna Lukács, Chairman of the association of voluntary health funds, who also runs Patikapénztár, a private health fund.

The popularity of the socialists plunged after they hiked taxes and cut subsidies in 2006 to rein in the budget deficit. Support for the party now hovers around 13%-15%.

Analysts said backtracking on health would be a blow for Prime Minister Ferenc Gyurcsány but it is the only option even if it does signal the end of attempts to reform Hungary's bureaucratic and expensive state system.

“This is a tremendous failure for the government but only with this failure could they avert an even bigger disaster,” said political analyst András Giro-Szász at the Századvég institute.

The liberals, who run the Health Ministry, have insisted on bringing in private capital.

Gábor Horn, the senior SZDSZ MP in charge of managing coalition relations said on Tuesday the parties were in talks but keeping private capital out of the system would invalidate the intention of the legislation.

Analysts said the coalition was unlikely to fall over the issue. Its unpopularity would mean defeat in any early election. (Reuters)

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