Elections' aftermath - a time for Math

After a landslide victory in the Hungarian elections, Fidesz may face the kickbacks of messianic rhetoric

TONY BLAIR once said in a TV show: “You campaign in poetry, but you govern in prose.” This (somewhat worn out) wisdom holds for the current Hungarian reality where centre-right Fidesz seeks to show its readiness for moderate, short-term changes, which however, will not satisfy most of its voters.

For many, Fidesz’s overwhelming (2/3) majority in the country’s parliament is the harbinger for Hungary’s transition to become a happier place for good. The electorate wants a cure for deep-seated syndromes (poverty, poor state services, ailing health care and pension scheme) as well as short-term remedies for rising unemployment and economic depression.

They have good reason to crave action: the country is in plight. In the backyard of the still drowsy Eurozone-economies, Hungary’s GDP fell by 6.3 pct in 2009 and is expected to stagnate this year as well. Exports contracted by 9.1 pct last year, a figure which seems even more distressing in light of the country’s growing dependence on export markets’ recovery due to overall domestic demand shrinking by 5.7 pct. Last year Hungarians saw a 150.000 loss in jobs, and unemployment hit 10.5 pct on the eve of the elections.

Against this backdrop, Fidesz seems to concentrate on the short-term re-launch of domestic demand and job creation, while keeping an eye on households’ debts denominated in foreign currency.

Although a nuanced program has not yet been published by the party (hence any speculation on the reforms seems chancy) the new government will probably undertake reasonable tax cuts in its budget law in September. More detailed plans suggest a near HUF 200 bn (EUR 0,8 bn) extra spending on health care without major structural changes. To undermine the social legitimation of the far-right’s black-booted, marching brigades in the eastern countryside, Fidesz looks at reinforcing the police’s staff and reputation at a cost of HUF 22 bn (EUR 82 million). Major changes may emerge from corporate tax decreases and the re-establishment of the former (rather generous) system of family and childcare allowances trimmed by the former cabinet. Pledges to shore up domestic housing and construction industry (which have been in the red in the 6^th consecutive year) adumbrate costly infrastructural investments like a programme to construct new council tower blocks for those in need.

On the medium-term agenda, there are many other measures lacking clear budgetary calculus: a programme to increase energy efficiency, a plan for external independence in terms of energy supply (a daunting financial and political task), as well as extended communal work schemes involving EU-funding.

On the top of ideas with hard budgetary consequences there are many regulatory ones as well, including slimmer state bureaucracy, simplified tax rules (‘tax return thin as a beer mat’) and tighter deadlines for paying to suppliers’ in everyday business. These proposals sound wise and are likely to incur popularity for Fidesz. When fixing its muscles, however, the next government may encounter objections by the European Commission when striving to put Hungarian firms on the velvet through public procurements.

In its early stage, a home-grown economic miracle will manifest in higher-than-expected budgetary shortfalls, with expenses occurring immediately and desired effects (higher demand and employment) following with a delay. Therefore, Fidesz will seek to renegotiate Hungary’s stand-by credit agreement with the IMF along softer terms. Fidesz says, the 3.8 pct deficit cap cannot be respected, as the previous government (led by Gordon Bajnai) ‘disguised’ some major state expenses including ministries’ unpaid bills earlier this year. Even if this claim held some truth, puffer sums (some HUF 70 bn) built into the current budget would offset weaker government revenues. However, Fidesz eyes a deficit nearing 6 pct this year, and will push for a renewed IMF-deal that suits this objective. Conversely, Mr Orbán has to bear in mind the consequences this stance might have on recently hectic exchange rates and the debt burdens they entail for 900 thousand indebted households.

Good poets often feel at odds with prosaic self-discipline. Mr Orbán, who is inclined to heroic visions and grand projects will hopefully rely on those ordinary, relentlessly math-minded aids around.