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Books on Hungary
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Update No: 117 - (22/02/07)
The maverick Magyar
Hungary has a curious leader in Prime Minister Ferenc Gyurcsany. He defies all
the rules and yet survives.
He lies and admits in public he lies. Indeed he says that in the run-up to last
year's parliamentary elections in April he was lying 'morning, noon and night.'
His candour in his own eyes more than makes up for his mendacity. He has the
brazenness of the true aristocrat - total shamelessness.
Actually, he is no nobleman, but a former communist, who, as head of the Young
Communist League, was ideally placed to sell its assets, hotels on Lake Balaton
and the like, to himself for a song. He became a mogul in Hungary's tourist
industry and one of its richest men.
There you have the fellow - a self-confessed liar and self-serving turncoat and
crook. Yet he remains the prime minister and is standing unopposed for the
leadership of his party on February 24-25. Why?
Nobody else wants the job right now. Hungary is in a mess which his
Social-democratic administration largely created. Let him and them clear it up,
think the opposition, or appear to. Yet public pressure may make them change
their minds.
The most unpopular premier ever
Gyurcsany has been premier since September 2004 and led the party to a second
consecutive election victory last year, unprecedented since the country shed
communism 18 years ago. He has raised taxes and cut subsidies to reduce
Hungary's budget deficit, driving the party's popularity to the lowest on
record.
Support for the Socialist Party fell to 18 per cent in December, matching the
rate at the time of Gyurcsany's ascension to the premiership, Budapest-based
pollster Gallup said on Jan. 16. Backing for former premier Viktor Orban's
opposition Fidesz party rose to 36 per cent last month.
Gyurcsany, who won elections in April with 43 per cent of the vote, is
struggling to cut the shortfall after running up the European Union's widest
budget gap last year. Thousands of people protested in September and October to
demand his ouster after Gyurcsany was caught on tape admitting he lied about the
state of the economy to win the elections.
Gyurcsany's personal approval rating was at 22 per cent, the lowest ever, down
from 30 per cent in November and as much as 52 per cent in May. The number of
those who said he was doing a bad job rose to 63 per cent, the highest ever,
according to Gallup.
The 'most difficult period' since 1990
Gyurcsany said Hungary was going through "probably its most difficult
period" since the 1990 end of communism.
While protests have diminished since the end-of-year holidays, they are expected
to start anew in the coming weeks. "We don't need political warfare, but
calm reforms," Gyurcsany said.
Deputies from Fidesz, the main centre-right opposition group, on February 12th
decided to continue their boycott of Gyurcsany, and left the chamber before his
speech. Fidesz has called for Gyurcsany's dismissal and also refuses to attend
meetings with him.
The street protests, the Fidesz boycott and personal attacks against him
"will not make me waver," Gyurcsany said, drawing applause from
government lawmakers.
Ibolya David, chairwoman of the Hungarian Democratic Forum, a smaller opposition
group, said that Gyurcsany was building "rhetorical castles in the air.
Anyone could have made this speech, but Hungary's prime minister should have
presented many more concrete proposals after the kind of fall and winter we
had," David said.
No new austerity measures needed to reach budget target, says premier
No new austerity measures are needed for Hungary to reach its budget deficit
targets, the prime minister said on February 12th. During his annual speech in
parliament about Hungary's state of affairs, Ferenc Gyurcsany also reiterated
his government's commitment to reforms, especially in health and education.
Hungary had the largest relative budget deficit in the European Union in 2006 -
close to 10 per cent of gross domestic product - and has targeted a deficit of
6.8 per cent of GDP this year. "With several months' experience behind us,
we can say that the adjustments were successful in terms of the budget,"
Gyurcsany said. "The monthly budget balances are regularly better than
expected."
"Unless something extraordinary happens in the world economy ... there is
no need for further adjustments," Gyurcsany told lawmakers.
Other policy priorities announced by the prime minister included lowering child
poverty and extra support for Hungary's poorer regions.
In the past few months, the Socialist-led coalition has introduced higher taxes,
direct payments for some health care services and tuition fees for most
university students. Subsidies for household energy use also have been cut and
thousands of public employees dismissed.
The next few months could see interesting political developments.
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AUTOMOBILES
Japanese auto-manufacture Suzuki to invest US$ millions
Japanese auto-manufacturer Suzuki said on January 25th that it was planning
a multi-million-dollar investment in its Hungary plant to dramatically boost
production, Deutsche Presse-Agentur (dpa) reported.
The company's Hungarian subsidiary told MTI news agency that it would invest 50
billion forints (US$255 million) to boost production by 38 per cent in 2007.
Suzuki plans to boost the current workforce of 4,800 at the plant in Esztergom,
north of Budapest, by 1000 in order to bring annual production up to 300,000
cars by 2008.
The last quarter of 2007 should see the Suzuki Splash, the successor to the
Wagon R, roll off the Hungarian production line. The automotive industry is
strong in Hungary, with Audi and tyre manufacturers Hankook and Bridgestone also
maintaining a significant presence.
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AVIATION
Malev talks to go forward with Russian-backed consortium
Hungary's state privatisation agency said on January 25th that it had chosen a
consortium backed by a major Russian airline for exclusive talks on the sale of
Hungary's troubled state airline, Malev, Deutsche Presse-Agentur (dpa) reported.
The agency decided that, in the absence of appropriate financial guarantees from
Lithuania's LAL - the only other bidder - the AirBridge consortium would remain
the last contender.
AirBridge, which is backed by Russia's fourth-largest airline KrasAir, has tried
several times in the past to buy Malev. This is now the seventh time Hungary has
put Malev up for sale, but each time the interested parties have failed to
satisfy the privatisation agency.
Malev has failed to run at a profit for several years and its debts run into
hundreds of millions of dollars.
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BANKING
FHB bank needs to be valued at 120-140 forints
The privatisation of Hungarian mortgage bank FHB could be considered successful
if it valued the firm between 120 billion and 140 billion forints, the bank's
chairman said recently, website portfolio.hu reported.
"If the state could accomplish a market capitalisation of 120-140 billion
forints in the sale, that would be a superb achievement considering that five
years ago this was a loss-making state company with minimal business
activity," Karvalits told the Banking Association's newsletter.
The pricing range described by Karvalits would mean 1,818-2,121 forints per
share. The shares of FHB, in which the government last year decided to sell its
56.9 per cent stake to an institutional investor, currently value the firm at
around 119 billion forints. Karvalits was cited as saying the considerable
synergy potential would make investors willing to pay a hefty premium to acquire
a majority stake in FHB. The credit institution could be of great value for
insurers, as well, he added.
Karvalits said the 65 per cent holding of insurance firm Allianz in the bank's
voting preference, series B shares would not be an obstacle to the successful
privatisation of FHB. He also said it was not yet sure that Allianz would win.
"Whether they win or not, it remains in Allianz's interest to see the
transaction through," Karvalits noted.
The Hungarian unit of UniCredit recently said it might also bid for FHB.
Karvalits added that FHB was the last mid-sized Hungarian bank not yet held by a
strategic, foreign owner, and, therefore, the sale was expected to attract heavy
interest.
"FHB is the last medium-sized bank on the Hungarian market that can offer a
considerable client base to the winning bidder. Getting FHB is the last chance
for all market players to take a big step ahead in the competition in this
market," he was quoted as saying.
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ENERGY
MVM electricity stands behind System Consulting Zrt
The Hungarian Electricity Works (MVM) recently put its support strongly behind
System Consulting Zrt saying that if local utility wholesalers had to buy
electricity from other sources, costs would rise by nearly 20 billion forints a
year, website portfolio.hu reported.
Electricity bought by MVM's wholesale unit from System Consulting, imported from
Ukraine, "is not making electricity more expensive for consumers," MVM
was cited by the website as saying in a statement.
System Consulting, owned by Socialist MP Laszlo Kapolyi, sells 2.1 TWh of
electricity to wholesalers a year. MVM signed a contract with System Consulting
in 1994. The deal was modified several times, but it is to remain in force until
2015 on the delivery of 250 megawatts (MW), plus an option on another 100 MW of
electricity, it was reported. "Based on this contract, the purchase price
of electricity is more favourable than the price other potential sources of
supply could offer," the MVM said. It added that other sources would boost
costs by some 20 billion forints a year, which would need to be borne by public
utility consumers.
"The contract is a valuable element in the public utility portfolio and it
is also a decisive factor besides (nuclear power plant) Paksi Atomeromu and
(power plant) Matrai Eromu in the favourably priced domestic supply," the
MVM added. The loss of any of these sources would trigger a much bigger price
increase for (retail) consumers than local price fluctuations would otherwise
justify, it added. "Current trends on the Hungarian electricity market
necessitate the continuous utilisation of the entire 350 MW contracted
electricity amount," the MVM said.
The company said it would not cancel its long-term contract with System
Consulting for several reasons, partly because it would contradict international
legal practice. "It is clear for the MVM that certain business circles are
interested in the restructuring of electricity transport from Ukraine to
Hungary," the company added.
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TRADE DEFICIT
November trade deficit up by 115.6m Euro
Hungary's trade deficit grew by 115.6 million Euro in November, revised downward
from the preliminary figure of 144.7 million Euro, the Central Statistics Office
(KSH) said on February 1st, website portfolio.hu reported.
This was the lowest figure the KSH reported for the autumn month since 2001. The
year-to-date deficit stood at 2,053.7 million Euro at the end of the eleventh
month, revised from the preliminary figure of 2,082.8 million Euro. In November
2005, the trade gap was 2,773.7 million Euro. Exports jumped by 17.4 per cent
year-on-year and by 5,791.4 million Euro in November, while imports were up by
14 per cent or 5,907 million Euro.
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