154. Hungary's Upcoming Elections; Political Prospects & The Economic Dimension

By
Tamas Reti

In May 1998, Hungary's third, free, parliamentary election will be held. Hungary's first free election in 1990 changed the political system, and the former Communists lost. In 1994, Hungarians voted for a change in the government, and the post-Communists won. This year, the major question facing voters is the composition of the next government coalition. To understand the present political situation, it is helpful to analyze the results of the recent public surveys.

The current party in power, the Hungarian Socialist Party (MSzP), has led in public opinion polls since the second half of 1997. It continues to gain in strength, and its popular support stands at 35-40 percent of the electorate that has already decided its vote. In second place is the Federation of Young Democrats/Hungarian Civic Party (Fidesz), third is the Smallholders' Party (FKgP), and fourth is the Alliance of Free Democrats (SzDSz). Election chances for Fidesz and the Smallholders look much brighter than four years ago, but the Free Democrats are lagging behind the level of support that they held before the 1994 elections. Public opinion polls clearly show that the Socialists may gain more support, but the size of their victory and whether they are willing to or will need to form a coalition remain to be seen. The question also remains whether they can form a government.

If the MSzP wins a majority, then there is no pressure to negotiate another coalition, a situation quite different from 1994. A majority of those polled favor maintaining the current coalition between the Socialists and the Free Democrats, and only a small minority wants the Socialists to establish a one-party government. Even a majority of the supporters of the MszP and the SzDSz would like the present coalition to continue. It is clear that the present center-left coalition enjoys the most backing in the Hungarian society.

Nevertheless, the coalition became an election issue when Prime Minister Gjulya Horn began strongly criticizing the Free Democrats as coalition partners, saying that their liberal values were too different from those of the MszP and that they lacked the necessary governing rigor. Horn even asserted that the elections would determine who would serve as the MszP's coalition partner, if it even needed one. This was a complete turnaround in the Socialists' policy, as only a few months ago, they evidently wanted to preserve the coalition.

What has caused this change in the posture of the MszP toward its coalition partner? First, the Socialists had implemented the economic program of the Free Democrats, and when it became a success, they appropriated it. Second, NATO membership and admission to the European Union were chiefly part of the SzDSz platform, but because they were accomplished under the Socialists, the MSzP took the credit. The economic upswing and the invitations to start accession negotiations with the EU and NATO have helped the Socialist party to stabilize its leadership. In short, many of the Socialists who have long opposed the coalition with the Free Democrats are now working against it. For its part, the SzDSz faces the dilemma of having to remain in the coalition and at the same time show voters that it is different from the MszP. It is not achieving results. Many of its supporters have switched over to the Socialists or the Young Democrats.

Prospects vary for the currrent opposition parties. The popularity of the Smallholder Party is decreasing. The strongest opposition party, Fidesz, is the most popular among young voters, and oit has more support from unskilled workers than the MszP. An unknown factor is the party preference of skilled workers. Over the last few years, they have changed their political orientation several times. In 1994, skilled workers mostly backed the Socialists, but recently they have turned more to Fidesz; they may be divided between these two.

Presently, it seems that the opposition parties, even if they manage to cooperate, have less support over all than the Socialist-Free Democrat coalition. It is known that Socialist party voters have kept their party preferences the most stable since 1994, and they are more active and determined to participate in the election than other parties' voters. Fidesz may represent the party of change, but the public mood may not be determined enough for that change.

Recent economic growth appears to be helping the Socialists's position. In 1997, the Hungarian economy shifted from a pattern of stabilization to one of accelerating growth without any deterioration in the external balance. The balance of foreign trade and the current account have improved dramatically. Overall, Hungary seems to have regained the status of having one of the leading reformist economies in the region.

The unsustainable fiscal and external deficits in 1993-94 forced the Socialist-Free Democrat government to introduce a tough adjustment program in March 1995. The austerity package was combined with radical privatization measures and a massive sale of public utilities, commercial banks, and big enterprises. Resources were shifted from labor to capital, which meant that household consumption declined significantly. Since the economic recovery has been based on export growth and rising investment, the purchasing power of the population has also dropped considerably.

Despite a painful adjustment for most Hungarians, the harsh austerity measures and the liberal and open-minded foreign investment policy have born fruit. In 1997, exports grew in dollar prices by 21.4 percent, while imports increased by 16.3 percent. In the last four years, export performance has doubled (reaching $19 billion), while the value of imports has reached $21 billion. The major vehicle behind the export-led growth was the machine-building industry (cars, automobile parts,components for computers, and telecommunication equipment), whose production rose by more than 50 percent. Furthermore, $2.2 billion of foreign direct investment arrived in the country last year, producing $17 billion.

The improving macroeconomic indicators, however, are not having a recognizable impact on ordinary people. Social conditions are not getting better, and there are signs of growing tension among the lower-paid public sector employees (education, health care, police, and military). The annual rate of inflation, at more than 18 percent, does not help.

The opposition parties are attempting to counter the argument that Hungary's economic boom is due to Socialists policies. The center-right coalition asserts that recent growth is not due to better performance, but is rather an outcome of the big privatization sales, restricted domestic consumption, better functioning market institutions, higher growth in the EU's markets, the end of the Yugoslav war, and the advent of economic recovery in the CEFTA-countries.

The government has announced that Hungary has the economic foundations for long-term growth, claiming that the transition to a market economy has been completed and the stabilization process is a success (as evidenced by Hungary's invitations to join NATO and the EU). The opposition denies this evaluation, claiming that Hungary's economy is in very bad shape, pointing to the population's decreased buying power, continued high inflation, and social polarization.

A fairly high voter turnout is predicted for the upcoming election. The economy has been liberated from governmental intervention, which means that economic development is self-propelling, and the government's room to maneouvre is more limited. On the other hand, several serious economic structural problems have still not been dealt with. It is questionable if any government will be able achieve real changes in reducing corruption and curbing the black market economy. Nor is it likely to restructure the failing health care system, make headway against environmental pollution, ensure better public safety, or counter social polarization. Accession to NATO and to the EU will require a better integrated society, otherwise the costs will be unevenly distributed.

If one believes the public surveys, the Socialists have the greatest chance of winning the May election, but will there be a coalition? If the SzDSz fares better than expected, and the MSzP cannot form a one-party bloc, then Hungary may experience a continuity of government in a booming economic environment. On the other hand, it is clear that the MSzP wants to weaken the position of the Free Democrats in the coalition and change the balance of power to their detriment. One cannot ignore the possibility of a different partner for the Socialists. The probability that the MSzP will win the election but not be able to form a government is low. Regardless, the Socialists should be less arrogant and more open-minded, since the economic and political improvements are due not just to them but to the work and sacrifices of Hungarian society.

Tamas Reti spoke at an EES Noon Discussion on February 25, 1998.

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