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Books on Hungary
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Update No: 116 - (30/01/07)
Hungary is a land of failed revolutions - one for
liberty and democracy in 1848 was crushed by Tsarist Russia, another in 1919 for
communism, led by Bela Kun, was crushed by the Romanians and the Entente powers,
while yet another in 1956 for whatever, but certainly not for Soviet communism,
initiated by Imre Nagy, was crushed by the tanks of the USSR.
In October last year, exactly fifty years afterwards, another revolution seemed
imminent, as thousands protested in Budapest against the government, whose
premier, Ferenc Gyurcsany, was revealed as having admitted to his socialist
party caucus that: "We have lied morning, noon and night." It petered
out.
Protests calmed down near the end of the year, but in mid-January demonstrators
partially blocked roads at more than 110 locations around the county and several
hundred people marched to Gyurcsany's home calling for his ouster.
Protesters block roads, blaming politicians for country's ills
Protesters used more than 2,000 cars on January 20th to block roads in some 113
locations around Hungary, blaming politicians for their hardships and the
country's troubled economy. "There is an increasing number of people who
have had enough of how politicians are running the country," said Bela
Szots, a protest organizer. "The political parties are good only for
dividing the country, but aren't doing anything to solve the problems."
Szots said an average of 18 cars at each location were blocking one side of the
roads, leaving the other free for traffic. He added that the protest was as much
against the opposition parties as against the ruling Socialist-led coalition.
"This is a much deeper issue than just the current government," Szots
said.
Protests - including a few violent riots - have been held regularly since last
September, when Prime Minister Gyurcsany could be heard admitting on a leaked
recording that the government lied to win re-election in April.
Also on the same day, several hundred protesters attended an anti-government
march in downtown Budapest. Police kept the crowds on the sidewalk to avoid
disturbing traffic. "I want the country to be led with a Hungarian
spirit," said protester Zsolt Nagy, 38, carrying a large Hungarian flag.
"Ferenc Gyurcsany is not serving the Hungarian cause."
The crowd marched across a bridge over the Danube River to Gyurcsany's home in
the expensive Rozsadomb district. Police in riot gear behind metallic barriers
prevented them from going nearer than 50 meters (yards) from the house, so
people stood on the street, chanting "Gyurcsany get out" and
"Mafia government."
Some demonstrators waved the "Arpad-Striped" flag, a historical
Hungarian flag now associated with a pro-Nazi group briefly in power at the end
of World War II, the Arrow Cross.
The extreme cold in the depth of winter kept the protesters in their cars and
most people in their homes. Larger protests are expected as the weather improves
in the spring, with their starting point likely around the March 15 national
holiday commemorating the 1848-49 revolution against the Habsburgs.
An economic crisis hits the nation
In recent months, the coalition has raised taxes, cut subsidies and dismissed
thousands of public employees in an effort to cut what is the European Union's
largest deficit in terms of gross domestic product.
Wages are expected to fall in real terms in 2007 and inflation could exceed an
annual rate of 10 percent in the first months of the year, the National Bank of
Hungary said. This year will see around 1,000 billion forints cut from
government spending to bring down Hungary's budget deficit as part of its euro
convergence plan required by Brussels.
In addition, the government is in the midst of painful reforms to hospitals and
schools among other areas of social spending.
Opposition does not gain
Fidesz, the main centre-right opposition group, has been staging a boycott
against Gyurcsany, walking out whenever he speaks in parliament and refusing to
attend meetings with him.
Opinions have been divided about the methods being used by the centre-right
party led by former Prime Minister Viktor Orban. While recent polls have showed
falling support for Gyurcsany's Socialists, himself being on only a 22% approval
rating, Fidesz has also lost some backing from voters.
Fidesz invites foreign human rights monitors to March 15 national event -
paper
Hungarian political parties, the police and other organisations are gearing
up for the next potential flashpoint for mass demonstrations and possible
violence, when the country marks the outbreak of the 1848-9 revolution on March
15, said national daily Nepszabadsag on January 25.
Fidesz has announced that the Swiss Christian People's Party has agreed to send
observers to the event to monitor the Hungarian authorities. The right-wing
party's Zoltan Balog said that Fidesz's invitation to the Swiss party aimed to
guarantee that no repeat of violence involving rioters and police seen on
October 23 again takes place. Hungary witnessed riots on two occasions in the
autumn last year during drawn-out anti-government demonstrations.
Balog said that a large number of demonstrations were being planned for March 15
and Fidesz, which led a campaign against Hungarian police "brutality"
in the aftermath of the October 23 riots, would need as many observers as
possible to see that basic human rights were being upheld.
The group of radical right-wing protesters, who sparked the violent storming of
the television headquarters in September, have already laid plans to mount
demonstrations in front of the party headquarters of the ruling Socialists and
Free Democrats.
Fidesz politicians, whose rhetoric embraces such phrases as "subsistence
crisis", have repeatedly stressed that nothing can be excluded in the
spring in relation to political protests.
State Secretary Ferenc Kondorosi of the Justice and Law Enforcement Ministry
told the paper that the police were fully prepared to deal with any disturbances
and would use all legal means at their disposal to keep the peace.
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CREDIT RATINGS
Moody's downgrades Hungary's credit rating to A2
The already distressed Hungarian premier suffered a fresh blow on December 22nd
when Moody's Investors Service announced it was downgrading for Hungary's local
and foreign currency government bonds and foreign currency bank deposit ceiling
to A2 from A1. Apart from stressing the economic scenario of this European
nation, the announcement provided fresh impetus for the opposition who has
already locked horns over the government's fiscal austerity package, New Europe
reported.
However a stable outlook somewhat thawed the market concern. "While the
rating action reflects our view that Hungary's sovereign creditworthiness has
deteriorated at the margins, the country remains highly rated within the
emerging market universe," said Moody's vice president Jonathan Schiffer in
a statement. "However, the fiscal austerity program of the current
government, while admirable and long overdue, will likely fall short of its
professed targets," he cautioned.
Unchanged by this action was Hungary's Aa1 foreign currency country ceiling for
debt, which is based on the government's bond ratings and Moody's assessment of
a very low likelihood of a payments moratorium in the event of a government
default. Also unchanged were the Aaa local currency country ceiling, the highest
rating that can be assigned to any issuer domiciled in Hungary, and the
country's local currency deposit ceiling, also Aaa. Hungary's short-term ratings
for foreign and local currency government instruments remain unchanged at P-1.
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ENERGY
First commercial windmill farm completed
Hungary's first electricity-producing windmill "farm" had recently
been completed, rtlklub.hu reported.
The cluster of 12 windmills is located next to the M1 motorway close to the
Austrian border, and would begin producing electricity for use as of January
2007. Each of the 12 windmills is 122 metres high, and features turbines
spanning 90 metres and generators weighing 30 tons. "This is the cleanest
energy," said Laszlo Hoffmann, the chief executive of the farm. "Once
installed, there is basically no work. And after initial costs are recouped, it
is also very cheap." According to Hoffmann, "once the equipment is
paid for, the cost of one kilowatt hour of electricity produced using wind power
is only two forints," far less than electricity produced from carbon-based
fuels. But Hungarian households are unlikely to see meaningful reductions in
their electricity bills due to the adoption of wind power, as the amount
produced is likely to remain a small fraction of the country's overall energy
needs. Currently, the country's monopoly national energy distributor is required
to "take up" a certain amount of energy produced using alternative
methods at prices higher than those paid to traditional power plants.
Hungary may need a second nuclear power plant
Hungary's energy demand may require the establishment of a second nuclear power
plant after Paks, said ex-government commissioner, Attila Aszódi, who is also
the director of the Nuclear Technology Institute at Budapest's Technical
University.
In a report by business daily, Napi Gazdaság, Aszódi stressed the most
important thing would be to alter Hungary's energy strategy and put more
emphasis on nuclear energy. He added the weight of gas must be cut, as well.
Hungary imports 80% of its gas consumption each year - solely from Russia. The
country's dependency on Russian crude is also a danger in the long run, Aszódi
noted.
Aszódi urged the construction of a new nuclear power plant. He said building a
1,600-1,700 MW facility would cost 3 billion Euro and would take six years to
finish it.
He said it would be an obvious solution to set up the new nuclear power plant in
Paks for a number of reasons. Firstly, he said, they had already planned in the
late 1980s to build two 1,000 MW blocks here and residents are already used to
living next to a nuclear power plant. The technology and expertise are already
present in the town, he explained.
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FOREIGN INVESTMENTS
New investments boost economic prospects
Two major investments announced on January 12th boosted Hungary's prospects of
continued foreign investment, despite fears of a bad year caused by higher taxes
and social unrest, Deutsche Presse-Agentur (dpa) reported.
In total this year, the Hungarian Ministry of Economy and Transport is expecting
about 3.7 billion Euros in FDI, slightly down from over four billion Euro last
year. The ministry is supposedly in talks with around 50 separate investors. If
every project comes to fruition, then over 12,000 jobs could be created.
The continued investment comes despite fears that the higher taxes brought in by
the government last year as part of its austerity package would dent investor
confidence.
Electronics giant Samsung announced a major expansion of its investments that
will see the creation of 1,000 new jobs. The company said that along with
investments begun in 2006, the total money being pumped into an LCD-television
production plant in the town of Jaszfenyszaru, near Budapest, would reach 20
billion forints (US$102 million).
Lee June Young, the head of Samsung Hungary, said that the investment would
consolidate Samsung's position as the leading LCD-television producer in Europe.
Currently, around 2,000 people work at the company's Jaszfenyszaru facility,
where 3.2 million TV sets were built last year. The new plant is expected to
reach full capacity by 2010.
Slovakia had also been in the running. Austrian construction firm Strabag is
also set to begin construction of a 33-billion-forint cement plant in
Kiralyegyhaza, South Hungary, in September this year, MTI news agency reported.
The plant, which is expected to produce 830,000 tonnes of cement per year with
100 employees, is due to be completed by 2009.
Moreover, cash-machine giant NCR said that it was moving some production from
its plant in Scotland to Hungary, and German model train maker Marklin announced
it would shut down its plant in Sonneberg, Germany, and transfer some production
to Gyor, northwest Hungary.
The Hungarian government had to act to placate car manufacturer Audi last year,
after the company threatened to cease all further investment over the
introduction of a four per cent "solidarity tax."
Audi and other firms were subsequently allowed to offset the new tax against
research and development costs. The austerity package was introduced to finally
tackle Hungary's monstrous budget deficit, which has delayed the country's
prospects of adopting the Euro to well beyond 2010.
Hungarian Economy and Transport Minister, Janos Koka, had also claimed that
social unrest had scared off some investors. Budapest was blighted by rioting
last September and October after Hungarian Prime Minister, Ferenc Gyurcsany, was
caught admitting to lying about the economy prior to last April's general
elections. Hungary has long been the regional leader in terms of FDI per capita,
but is now watching its back as Romania and Bulgaria join the EU. However,
Hungary is attempting to sell itself as a high-skill, high-value added
destination, rather than attempt to compete in the cheap-labour stakes, it was
reported.
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TELECOMMUNICATIONS
TDC's subsidiary HTCC to take on 470m Euro deal
Danish telecommunications group TDC announced on January 9th that its
Hungary-based subsidiary HTCC planned to acquire Hungary's second largest fixed
telecommunications service provider in a deal worth 470 million Euro, Deutsche
Presse-Agentur (dpa) reported.
TDC said its majority-owned subsidiary HTCC, Hungarian Telephone & Cable
Corp, has signed an agreement with Invitel.
"With the acquisition, HTCC is expected to hold a 20 per cent market share
of the Hungarian fixed line market. The combination of the two companies is
expected to create significant synergies," HTCC Chairman and TDC Mobile
International President, Jesper Theill Eriksen, was quoted by dpa as saying. The
deal would be financed by cash raised by HTCC and new shares issued by HTCC to
Invitel executives, the statement said.
The deal was subject to approval by competition authorities in Hungary and
Romania. The news was announced shortly after TDC said that Kim Frimer, chief
executive of TDC's largest subsidiary TDC Solutions, had left the company
"due to difference of opinion about the future strategy." The
subsidiary handles fixed lines and Internet connections via ADSL, and offers
fibre optic lines.
In the meantime, TDC Chief Executive Jens Alder is due to take over Frimer's
post. Alder, formerly of Swisscom, joined TDC last year.
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TRANSPORT
Government to privatise motorway company
Hungary's state controlled motorway operating company might be privatised
over the coming months, it was revealed recently, New Europe reported.
The intention of the Hungarian Ministry of Economic and Transportation was
divulged in a report by a local broadsheet, Nepszabadsag, which also claimed
that the preparations and organisational changes necessary for the privatisation
already started a few months back, and the decision on the issue was kept
pending for early 2007. According to estimations of the industry experts, the
privatisation of the motorway operating company Allami Autopalya Kezelo Rt would
earn around 300-500 billion forints for the state coffer. According to recent
reports the government was mulling plans for selling the whole company, via
initial public offering, not only a minority stake as it planned earlier. This
way the whole operation of the Hungarian motorway system could happen, including
collecting the fees. The industry is expecting that the privatisation might push
forward the introduction of EU conformed electronic fee collecting system in
Hungary. It will be the new owner, who invests in implementing the electronic
system. If the plan goes forward the privatisation might happen in the second
half of 2007, because some steps still have to be made before the privatisation.
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