Voters give ‘revolutionary’ victory to Hungary’s centre-right

Hungary's next prime minister, Viktor Orban, said on 25 April that voters had carried out a "revolution" by giving his party two thirds of the seats in parliament to rebuild Hungary after a near financial collapse.

With nearly all second round votes counted, centre-right Fidesz had won 263 seats, above the 258 needed for the two-thirds majority, ousting the Socialists after eight years and securing a mandate to enact reforms and revive the economy.

"Revolution happened today in the polling booths," Orban told some 4,000 cheering supporters in downtown Budapest.

"Hungarian people today have ousted the regime of oligarchs who misused their power, and the people have established a new regime, the regime of national unity."

Fidesz was last in power between 1998 and 2002 and Orban can now form the first non-coalition government with a two-thirds mandate in Hungary's 20-year post-communist history.

The prospect of a strong government is seen by analysts as positive for the forint currency and financial markets in the short term, but Fidesz will not enjoy a long honeymoon period.

Investors will want to see clear plans on how it wants to lower taxes and also keep the budget deficit in check.

Hungary, which has a track record of deficit overshoots, stabilised its finances with painful spending cuts last year. With its public debt still at around 80% of GDP, the new government will not have much fiscal room for manoeuvre and will have to set the debt on a declining path.

"If implemented, changes like the reform of the municipal system or a profound tax and labour market reform would shift the nature of the fiscal adjustment from expenditure freezes […] towards structural changes that would support long-term fiscal sustainability," analysts at Goldman Sachs said.

"A failure to implement the promised reforms would quickly erode the confidence in the new government and the course of the economic policy."

Expectation

Government bonds and the forint have rallied in the two weeks since Fidesz secured a majority in the first round.

The central bank is seen cutting interest rates further by 25 basis points to a new all-time low of 5.25% on Monday.

The Socialists will have 59 seats in the next parliament while far-right Jobbik will have 47 seats. Green liberal LMP has won 16 seats based on preliminary results.

Its mandate would enable Fidesz to enact reforms such as streamlining local government and changing electoral law or even the constitution.

It can also make dual citizenship easier to get for millions of ethnic Hungarians in neighbouring states, which may lead to tension with Slovakia and also some other neighbours.

Fidesz has pledged to create jobs, lower taxes and cut bureaucracy to revive the economy.

It has also said it wants a new deal with international lenders – the IMF and the EU – who saved Hungary from financial collapse in October 2008.

The deal will expire by October and Fidesz will likely want to negotiate a higher budget deficit for this year, which analysts said the IMF would probably accept only if it saw a clear plan for structural reform.

Hungarians, weary of a deep recession and unemployment running at a 16-year high, will want to see an improvement in their lives quickly, and with municipal elections due in October, Fidesz will need to make some symbolic changes.

It has promised to halve the size of parliament and the number of representatives in councils and curb corruption.

"Public safety, holding corrupt leaders accountable, and most of all, jobs. That's what most Hungarians want," said Janos Fristaczki, 60, a bus driver.

Fidesz will face pressure from Jobbik to keep its promises.

"A million people expect the tax cut, a million expect that the threat of being evicted from their homes will be averted, that crime will be liquidated," Jobbik chairman Gabor Vona told supporters on Sunday.

"If the new government, breaching its election pledges, wants to water down these urgent issues, Jobbik will be ready to force its will – which in our view is the will of the whole of society – on the cabinet to be formed, using all tools in parliament and all democratic tools outside parliament."

(EURACTIV with Reuters.)

Viktor Orban, chairman of Fidesz and prime minister elect, said in his victory speech: ''Such a change among the democratic frameworks that we did today was only done by revolutions before. […] Hungarians today have proved that there is a reason for democracy. […] Hungarians today overthrew a system of oligarchs who used to abuse their power.''

Orban added that Hungary ''has only received pity in recent years, and was only quoted among the bad news in the world [press].''

Pál Schmitt MEP (EPP, Fidesz), vice-president of the European Parliament, said that no other party across the EU’s 27 member states could gain such a result. He said that he will definitely return home from Brussels, along with Enik? Gy?ri MEP (EPP, Fidesz), who will be responsible for the preparations of the Hungarian EU Presidency from January to June 2011.

The entire leadership of the former governing Hungarian Socialist Party has resigned. Attila Mesterházy, the Socialists’ candidate for prime minister, said the party’s goal is now to have an open debate about its future, with an opportunity for all alternatives. Ildikó Lendvai, the party president, said: ''We owe it to the country to face our mistakes.''

Gábor Vona, president of the far-right Jobbik party, said the Hungarian Guard was a civil organisation that was directed into the political sphere by the previous government. He expressed his hope that Viktor Orban will not finish this job. He also stated his wish to reorganise the Hungarian Guard into a “National Guard” that would have legal authorisation and issue defence tasks, as in the United States.

The Hungarian political party LMP (Politics Can Be Different) has gained 16 of the 386 seats in the National Assembly. LMP member Tímea Szabó, said the party could have some serious political success outside the parliament, so even if there is a party with a two-thirds majority, the LMP will be able to show political force despite having only 16 MPs.

LMP has asked for membership in the Green Party of the European Parliament. Greens spokesperson Philippe Lamberts said that the new Hungarian party has every chance of joining and that it is a “positive surprise” that the LMP was able to pass the 5% threshold and become a party in the Hungarian parliament.

The Wiener Institute, an Austrian think-tank, published an analysis pondering the consequences of an expected victory by Fidesz with a two-thirds majority:

"The first and foremost concern of the new government will be the budget for the current year. The outgoing government's budget law reckons with a 3.8% deficit relative to GDP, a target approved by the IMF. This target, however, cannot be reached without further ad hoc expenditure cuts, since the ailing state railways and the Budapest public transport company, as well as some hospitals and local governments will need a bailout. A decision of the Constitutional Court abolished the recently introduced tax on real estate, leaving a gap in the projected revenues." 

"All that means that the new government should start its tenure either with expenditure cuts in order to observe the official deficit target or with a decision to drop the previous government's deficit target. Most probably the new government will choose the second option. A somewhat higher deficit target (about 5% relative to the GDP) than originally projected may possibly be agreed upon with the IMF and the European Commission. This would match the prevailing general pattern of budget deficits in Central Europe," it continued. 

The Wiener Institute also foresees risks related to the raise of the extreme-right Jobbik party.

"Continuing the stability-oriented economic policy may be persuasive for external observers but less so for the voters of Fidesz (52.5% of the electorate) waiting for rapid improvements in the country's economic performance and the population's standard of living. With prudent economic policy, current winner Fidesz may easily fall hostage to its own past rhetoric, exposing itself to the demagogy of the extreme right-wing 'Jobbik' party (along the track beaten by Fidesz in the past eight years)."

"Prudent economic policy thus bears the risk of defeat in the [...] elections. The absence of it would, however, mean a prolongation of the country's current economic and social crisis," the think-tank warns.

"This election's result is a landmark in Hungary's history," said MEP Joseph Daul, Chairman of the EPP Group in the European Parliament. "Fidesz' landslide victory will bring the country into an era of success", he added.

Welcoming Fidesz' impressive victory, Daul expressed his belief that, with the leadership of Fidesz, Hungary will once again become a successful and prosperous country.

"The 8 year-long governance of Socialists caused significant damage in Hungary both in economic, social and moral terms," he said. "This era of lies, corruption and failure had to come to an end. This result is a clear manifestation that Hungarian citizens want to reckon with this period and want a fair, successful and strong government", highlighted the Chairman of the biggest political group in the European Parliament.

The European elections in June 2009 had given an early indication of the subsequent national poll outcome.

The Fidesz party, affiliated at European level to the centre-right European People's Party (EPP), obtained 56.36% of the vote and claimed 14 MEP seats out of a total of 22.

The Hungarian Socialist Party MSZP obtained 17.37% of the vote and four MEP seats.

Far-right party Jobbik, known for its anti-Semitic and anti-Roma statements and for its resemblance to former Fascist movements in Hungary, obtained 14.77% and three MEP seats.

The remaining MEP seat went to the Hungarian Democratic Forum - affiliated to the eurosceptic European Conservatives and Reformists (ECR) - which got 5.31% of the vote.

Some analysts warned that the success of Fidesz, combined with the rise of Jobbik, could spell "real danger" for the country, as extremists could influence the more mainstream Fidesz party and push it towards nationalism (EURACTIV 04/03/10).

Fidesz will bar foreigners from buying arable land indefinitely if it wins the election, party leader Viktor Orban said on 31 March (EURACTIV 01/04/10).

On the first round of vote on 11 April, Fidesz won 52.76% of the vote, winning 206 of 386 seats in the Hungarian parliament (EURACTIV 12/04/10). The second round took place to distribute the remaining 111 seats in run-offs for 57 constituencies where no candidate was able to win a sufficient majority.

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