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HUNGARY


 

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 82,805 65,843 51,900 41
         
GNI per capita
 US $ 6,330 5,280 4,830 67
Ranking is given out of 208 nations - (data from the World Bank)

Books on Hungary




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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