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Hungarians despair of political class | Hungarians despair of political class |
(about 14 hours later) | |
By Laurence Knight Business reporter, BBC News | By Laurence Knight Business reporter, BBC News |
Until recently, Hungary was deeply divided. | Until recently, Hungary was deeply divided. |
Half of the population believed that only the socialists could be trusted to run the country's affairs competently. They despised the current Prime Minister, Viktor Orban, as a populist demagogue. | Half of the population believed that only the socialists could be trusted to run the country's affairs competently. They despised the current Prime Minister, Viktor Orban, as a populist demagogue. |
Meanwhile, the other half saw Mr Orban as a saviour from the corruption of the socialists, who were seen as a bunch of detestable self-serving ex-communist apparatchiks in new suits. | Meanwhile, the other half saw Mr Orban as a saviour from the corruption of the socialists, who were seen as a bunch of detestable self-serving ex-communist apparatchiks in new suits. |
But now the country is becoming more united again - united in despair at the entire political class. | But now the country is becoming more united again - united in despair at the entire political class. |
Political divide | Political divide |
A socialist-led coalition ran Hungary for eight years, until they were booted out of office at elections in 2010. | A socialist-led coalition ran Hungary for eight years, until they were booted out of office at elections in 2010. |
Their record during that period left much to be desired. | Their record during that period left much to be desired. |
The first Prime Minister, Peter Medgyessy, was accused by the outgoing Mr Orban of having won the 2002 elections with the help of ballot-rigging. The ballots were destroyed without being recounted. | The first Prime Minister, Peter Medgyessy, was accused by the outgoing Mr Orban of having won the 2002 elections with the help of ballot-rigging. The ballots were destroyed without being recounted. |
The confrontation, which spilled into the street, echoed the stand-off between George W Bush and Al Gore of 2000, and left many Hungarian friends and family, who found themselves on opposite sides of the political divide, no longer on speaking terms. | The confrontation, which spilled into the street, echoed the stand-off between George W Bush and Al Gore of 2000, and left many Hungarian friends and family, who found themselves on opposite sides of the political divide, no longer on speaking terms. |
Shortly afterwards, Mr Medgyessy was exposed as having been a spy under the old communist regime. Eventually - after a string of gaffes and petty scandals - he was forced out mid-term by his own colleagues. | Shortly afterwards, Mr Medgyessy was exposed as having been a spy under the old communist regime. Eventually - after a string of gaffes and petty scandals - he was forced out mid-term by his own colleagues. |
His successor, Ferenc Gyurcsany - a wealthy businessman - went on to win a second term for the socialists in 2006. | His successor, Ferenc Gyurcsany - a wealthy businessman - went on to win a second term for the socialists in 2006. |
Except that, shortly after the elections, a tape was leaked to the press in which Mr Gyurcsany told party loyalists the government had "lied for the last year-and-a-half" to retain power. | Except that, shortly after the elections, a tape was leaked to the press in which Mr Gyurcsany told party loyalists the government had "lied for the last year-and-a-half" to retain power. |
More protests - and riots - ensued. | More protests - and riots - ensued. |
Debt | Debt |
The main "lie" concerned the state of the government's finances. | The main "lie" concerned the state of the government's finances. |
Long before it became fashionable in Europe, Hungary's socialists had turned a fiscal mess - inherited from Mr Orban - into a nightmare. | Long before it became fashionable in Europe, Hungary's socialists had turned a fiscal mess - inherited from Mr Orban - into a nightmare. |
Chronic tax evasion combined with rising and often wasteful spending to inflate the government's borrowing to 9.3% of the country's entire economic output by the 2006 election year. | Chronic tax evasion combined with rising and often wasteful spending to inflate the government's borrowing to 9.3% of the country's entire economic output by the 2006 election year. |
Meanwhile, just like Greece, the government tried to play games with its borrowing statistics. | Meanwhile, just like Greece, the government tried to play games with its borrowing statistics. |
For example it tried, and failed, to convince Eurostat, the European statistics agency, that the cost of building motorways - which was puzzlingly high for a country that is mostly rural and flat as a pancake - should not be included in its borrowing statistics. | For example it tried, and failed, to convince Eurostat, the European statistics agency, that the cost of building motorways - which was puzzlingly high for a country that is mostly rural and flat as a pancake - should not be included in its borrowing statistics. |
And the scandals didn't stop - politicians and their friends were accused of siphoning off public funds left, right and centre. | And the scandals didn't stop - politicians and their friends were accused of siphoning off public funds left, right and centre. |
But the biggest damage done during this period was the failure to spot the problems building up in the banking system. | But the biggest damage done during this period was the failure to spot the problems building up in the banking system. |
Hungarian homebuyers had been increasingly taking out loans in foreign currency - particularly Swiss francs - because the interest rate was so much lower than in their own currency. | Hungarian homebuyers had been increasingly taking out loans in foreign currency - particularly Swiss francs - because the interest rate was so much lower than in their own currency. |
The banks - most of them Austrian- or Italian-owned - were happy for this growing business line. | The banks - most of them Austrian- or Italian-owned - were happy for this growing business line. |
They thought they had hedged the currency risk. But they forgot about the credit risk. | They thought they had hedged the currency risk. But they forgot about the credit risk. |
Following the 2008 global financial crisis, the Hungarian forint fell and fell. | Following the 2008 global financial crisis, the Hungarian forint fell and fell. |
The Swiss franc has gained more than 80% against the forint - and people's mortgage payments have risen in tandem, leaving many unable to repay their debts. | The Swiss franc has gained more than 80% against the forint - and people's mortgage payments have risen in tandem, leaving many unable to repay their debts. |
That put the banks in trouble, and with the coming of the global financial crisis in 2008, the socialists were forced to go cap-in-hand to the International Monetary Fund to beg for a rescue. | That put the banks in trouble, and with the coming of the global financial crisis in 2008, the socialists were forced to go cap-in-hand to the International Monetary Fund to beg for a rescue. |
Bank bashing | Bank bashing |
Eventually, in 2009, Mr Gyurcsany was also ousted in another socialist party coup, but to no avail. | Eventually, in 2009, Mr Gyurcsany was also ousted in another socialist party coup, but to no avail. |
The following year, Mr Orban romped back to power with a two-thirds parliamentary majority. | The following year, Mr Orban romped back to power with a two-thirds parliamentary majority. |
He has since followed the Sinatra doctrine, and sought to do things his way. | He has since followed the Sinatra doctrine, and sought to do things his way. |
He repaid the bailout loans and, free of the IMF's strictures, his government then passed a law allowing mortgage borrowers to convert their debts back into Hungarian forints at the old exchange rate, leaving the banks to eat the currency losses. | He repaid the bailout loans and, free of the IMF's strictures, his government then passed a law allowing mortgage borrowers to convert their debts back into Hungarian forints at the old exchange rate, leaving the banks to eat the currency losses. |
He also introduced a new windfall tax on the banks. | He also introduced a new windfall tax on the banks. |
The banks, or their foreign owners, have retaliated by slashing lending to the country - something they probably would have done anyway in response to the financial crisis. | The banks, or their foreign owners, have retaliated by slashing lending to the country - something they probably would have done anyway in response to the financial crisis. |
Austria has ordered its banks only to increase their foreign lending in Hungary and other countries, if it is matched by new local deposits. | Austria has ordered its banks only to increase their foreign lending in Hungary and other countries, if it is matched by new local deposits. |
That threatens to push Hungary's economy into a nasty recession. | That threatens to push Hungary's economy into a nasty recession. |
What's more, the lending drought has hurt the government itself, which has found it increasingly difficult and expensive to borrow in its own currency. | What's more, the lending drought has hurt the government itself, which has found it increasingly difficult and expensive to borrow in its own currency. |
Its 10-year cost of borrowing currently hovers around 10%. | |
In part, this reflects another policy of the government. The parliament has passed a new law that the European Central Bank, among others, claims harms the Hungarian central bank's independence. | In part, this reflects another policy of the government. The parliament has passed a new law that the European Central Bank, among others, claims harms the Hungarian central bank's independence. |
That has added further to the government's borrowing costs, as lenders fear inflation will no longer be kept in check. | That has added further to the government's borrowing costs, as lenders fear inflation will no longer be kept in check. |
The renewed financial crisis has forced Mr Orban reluctantly back into the hands of the IMF and the EU, asking for a new standby facility to bolster the economy. | The renewed financial crisis has forced Mr Orban reluctantly back into the hands of the IMF and the EU, asking for a new standby facility to bolster the economy. |
But Hungary's would-be rescuers are playing hardball, and walked out of talks in December over the new central bank law. | But Hungary's would-be rescuers are playing hardball, and walked out of talks in December over the new central bank law. |
Checks and balances | Checks and balances |
In any case, the central bank is arguably only a sideshow. | In any case, the central bank is arguably only a sideshow. |
For Mr Orban has used his two-thirds super-majority in parliament to push through an entire new constitution that has been attacked for undermining the country's democracy. | For Mr Orban has used his two-thirds super-majority in parliament to push through an entire new constitution that has been attacked for undermining the country's democracy. |
Critics say the new constitution has: | Critics say the new constitution has: |
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A storm may be brewing in Brussels, where there are mutterings about the Copenhagen criteria - the commitment to democracy, among other things, that is a prerequisite of European Union membership. | A storm may be brewing in Brussels, where there are mutterings about the Copenhagen criteria - the commitment to democracy, among other things, that is a prerequisite of European Union membership. |
Undecided | Undecided |
But most worrying is the reaction of ordinary Hungarians. | But most worrying is the reaction of ordinary Hungarians. |
Support for Mr Orban's Fidesz party has plummeted to only 20% of eligible voters as the recession has worsened and protesters are on the streets yet again. | Support for Mr Orban's Fidesz party has plummeted to only 20% of eligible voters as the recession has worsened and protesters are on the streets yet again. |
But support for the socialists has not recovered. | But support for the socialists has not recovered. |
A youth protest movement - "Politics can be different" - briefly took off last year, but has since lost momentum. | A youth protest movement - "Politics can be different" - briefly took off last year, but has since lost momentum. |
The extremist Jobbik - "Right-ists" or "Betters" (it's the same word) - have done best, overtaking the socialists in the polls to become the most popular opposition force, albeit with only 10% support. | The extremist Jobbik - "Right-ists" or "Betters" (it's the same word) - have done best, overtaking the socialists in the polls to become the most popular opposition force, albeit with only 10% support. |
The group is anti-Semitic and anti-Roma, and has its own paramilitary wing. | The group is anti-Semitic and anti-Roma, and has its own paramilitary wing. |
But the biggest beneficiary in the polls has been "don't know" and "wouldn't say". | But the biggest beneficiary in the polls has been "don't know" and "wouldn't say". |
Or should that be "none of the above"? | Or should that be "none of the above"? |