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Coalition breakup in Hungary [UPDATED]

by DoDo Thu Apr 3rd, 2008 at 04:59:33 AM EST

After the success of the referendum to abolish the 'reforms' that made healthcare and higher education not free of charge, the governing Socialist-Free Democrat coalition was in turmoil.

Yesterday, this peaked in the break-up of the coalition: after PM Ferenc Gyurcsány declared that he fires their healthcare minister with effect from 30 April, the liberals declared Gyurcsány abandoned the reforms, and that the rest of their ministers will step down on the same date, too.

In practice, this won't mean much: the liberals declared they don't want Orbán (former PM and leader of the right-populist opposition party Fidesz) back, and they surely don't want new elections with their sub-5% poll numbers, so I guess we'll have a Socialist minority government with outside support.


I was preparing a diary on said turmoil, but events overtook me. Now I edited that draft into the "background" text below.


The Right reacts to the referendum victory

Fidesz could play its usual games: celebration, going into rhetorical hyperboles, and treating the government and PM as if they were illegal. But calls for new elections were muted - initially.

The idiots'-revolution wing of the local far-right delayed their next riot by one weekend, they staged it on 15 March (commemoration day of the 1848 Revolution). They again beat up two journalists, too, and in a funny moment, ignited two of their own with a badly aimed Molotov cocktail.


The PM and Socialists react to the referendum defeat

Immediately after polls closed, the PM went on television screens with a declaration. (A technical blunder some saw as symbolic cut off his voice for public TV viewers halfway in.) What Gyurcsány cooked up was as much tactially brilliant as it was an apparent strategic suicide.

The referendum called for an end of the doctor/hospital/tuition fees from next year. That wording ensured that the government lost its "this is a budget issue" [and thus barred from referendum] case before the consitutional court. But Gyurcsány declared on referendum night that he'll bring forward the restoration of the pre-fees status quo ante immediately -- without replacing the missing income from the fees.

Can the voter perceive any other message than "eat this, suckers!"? Such reformist arrogance will only alienate voters, a loss not balanced by outplaying the political opponent. The latter because no way Fidesz would have called for keeping the fees until the end of the year. Indeed Fidesz could respond only with a laundry list of waste spending (like new ministerial luxury cars), only (1) the sum of those was insufficient, (2) too many people remembered their own waste spending.

However, despite all the reformist talk from Gyurcsány, he and his party are more opportunist than dogmatic. And true enough, rhetoric began to change a week later.


Healthcare un-reform

The real big 'reform' issue was not the now abolished fees, but moving to a multi-insurer, partially privatised healthcare. The law prepared by the liberal-held healthcare ministry foresees 22 regional healthcare insurers to be offered to private buyers. The public purse would still be tapped: to finance provisions for basic services. Also, it was increasingly clear that some of the 22 regional units would not find a buyer, thus the state would have to run them...

The reform law was adopted by the parliamentary majority earlier this year, but is held up by a legal review, and it would be killed by another referendum later this year. So what to do?

The idea blurted out by Socialist faction leader Ildikó Lendvai was to maintain the reform law, but keep all 22 insurers in public hand!... The worst of both worlds for patients (you get the extra bureaucracy but no capital), but the best of both worlds for politics (you have your "reform" and referendums can't kill it).

This was enough for SzDSz leader János Kóka to threaten the end of the coalition. But, at a meeting ten days ago, the Socialist leadership calculated that their liberal partners won't risk new elections when polling well below 5%, and can thus be stepped over. What's more: they got the idea to save the boss by making unpopular SzDSz healthcare minister Ágnes Horváth the "fall guy". A bit funny when you look at the last polls:

The latest Szonda-Ipsos popularity poll from Népszabadság. The scale runs from 0 to 100 (thus overall opinion is positive only about the figurehead President). Healthcare minister Horváth is last -- directly preceded by the bosses, SzDSz chairman Kóka and PM Gyurcsány...


Liberals react to losses

Some liberal reactions to the referendum verged on insanity. Some pointed at the 15% vote against abolishing the fees as SzDSz's potential to grow much bigger (now they poll well below 5%). Some reminded of Fidesz's past libertarianism, and to the fact that the next referendum, a citizen's initiative, is not explicitely endorsed by Fidesz - from which they concluded that Fidesz will let it fail on low participation...

Less extreme rationalisations sought to see a high turnout of anti-government, or anti-Gyurcsány voters. During Gyurcsány's immediate-repeal-of-fees declaration, one SzDSz leader was caught on camera commenting that the voters "said you to fuck yourself!".

However, in the meantime, SzDSz had to be pre-occupied with itself.

Neoliberal yuppie János Kóka, until recently economy minister, won party chairmanship in a narrow election last year (I reported), defeating alternative-liberal Gábor Fodor, who is now environment minister. But via right-wing media, evidence for vote fraud emerged: "phantom delegates" voted in place of absent ones (I reported). A few days after the referendum, the internal party investigation report came out. It concluded there was fraud, one neither candidate knew about, but with a clincher.

While the right-wing media claimed that the phantom voters benefitted Kóka, the investigator concluded the opposite. This is more logical: the regional party leader accused as mastermind was openly pro-Fodor. But it emerged that both of the opposed claims are based on the testimonies of the very same people; while the alleged instigator wasn't asked. The investigator seemed a bit hasty in his conclusions.

János Kóka (left) and Gábor Fodor (right)
on a photo from [origo]

But Kóka moved in for the kill, proclaimed that he was the wronged party, and thus no re-vote is needed. In the 12-member top party organ (known by the acronym üt), Kóka's supporters resorted to a nice trick. On 21 March, they brought in the following motion: "Should we deal with the question of whether to renew the party officers?" The vote was 7:4 against.

In response, the 4 Yes-voters declared the suspension of their üt membership. The four were Fodor and two supporters, plus respected MEP István Szent-Iványi, who argued that the party base and voters must be reassured. But the replacement voter exposures weren't over. First center-left daily Népszabadság received a photo showing Fodor's campaign manager, who was not a delegate, voting (he admitted voting for a resolution in place of his - absent delegate - father, and resigned from the party immediately). But at the same time, the SzDSz investigator uncovered further phantom voter cases from his own (pro-Kóka) region.

So, next week, the party leadership agreed to an exceptional gathering of the delegates, and Fodor et al re-joined the üt.


Breaking up coalitions

There is some history to this coalition break-up.

Until now, the left and right-wing in Hungary was rather different in how breakups played out. Both right-wing governing coalitions since 1990 broke up, but the main parties managed to stay in power by also breaking up the deserting party itself, too.

During the thre terms of the 'left' (1994-8, 2002-6, 2006-present), the liberals constantly discussed at what point they should leave the coalition, but in the end, SzDSz stepped across every line drawn by its leaders, bowing to Socialist blackmail. It is a real shame that they didn't manage it back in 1997 or 1998, when the Socialists grew too cocksure in future election victory and arrogant to revive an unpopular Danube river dam project. (Back then, SzDSz wasn't a 5% neolib party.) But there were several further occasions.

With this history, maybe the Socialists didn't even take Kóka's first threats seriously. But instead of being immobilised by the legitimacy crisis, the two wings of the liberals pulled together for a show of unity.

Display:
Also see Fran in the Salon this morning.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Apr 1st, 2008 at 03:24:38 AM EST
The broken-apart sides are grumpier than I expected.

While the liberals don't want new elections, they refuse to promise even outside support. (The confidence vote will be used more frequently, I guess.)

At the first government meeting after the announced break (which is supposedly active from the end of this month), the SzDSz ministers first didn't got seats, a transparent calculated snub.

Yet, Fodor seemed to veer off by claiming that the break-up is not yet certain.

The Socialists for their part speak about their healthcare un-reform plan as if it is a done deal.

According to speculation by Index.hu based on prior break-up mind-games, the coalition break-up was prepared in advance -- by both sides, as a step strengthening both Gyurcsány and Kóka within their parties.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Wed Apr 2nd, 2008 at 10:54:59 AM EST
[ Parent ]
There were reports that the Socialists may try to woo the support of a small Fidesz-independent center-left party also in parliament. Something its party leader tried to fend off with unusually sharp comments about MSzP-SzDSz scheming.

The previous PM, Péter Medgyessy (whom Gyurcsány replaced after an internal coup) said publicly that Gyurcsány causes more problems than he solves, and suggested he should resign. He also said the government is too far from a leftist programme (Re askod).

The previous chairman of SzDSz, Gábor Kuncze, threatened to release his notes from coalition talks should the Socialists continue to blame reforms on the liberals only.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Thu Apr 3rd, 2008 at 04:53:53 AM EST
[ Parent ]
Forgot one thing. Budget deficits and ratings.

portfolio | Possible budget and credit rating implications of Hungary's government agony

In mid-March [right after the refenrendum -DoDo], S&P revised its outlook on Hungary to `Negative' from `Stable' over the "weakening perspective for sustained consolidation of public finances", after the government suffered a heavy defeat in an opposition-initiated referendum that had charges on doctor's visits and hospital stays and the tuition fee in higher education scrapped (effective 1 April).

At the same time S&P affirmed the country's 'BBB+' long-term and 'A-2' short-term sovereign credit ratings.

The downratings are more connected to expectations on further 'reforms' than real data. The data:

The Central Statistics Office (KSH) announced on Tuesday that the 2007 public sector deficit totalled 5.5% of GDP, considerably smaller than the original plan for a 6.8% gap. The falling out of one-off items means the government could easily achieve its 4.0% of GDP target this year.

...Hungary's economy expanded by a mere 1.3% yr/yr in 2007, and the cabinet expects growth to pick up to 2.4% this year, down from an original forecast of 2.8%.

The expectations:

David Heslam, ratings director at Fitch Ratings in London, told MTI Econews that should the Prime Minister resign, that would be a clear sign that support for his fiscal consolidation programme "had waned sufficiently" within the party and that means the possibility of a fiscal loosening ahead of the elections "becomes material". That would have a negative pressure on Hungary's ratings, Heslam said.



*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Thu Apr 3rd, 2008 at 04:24:51 AM EST
[ Parent ]
I hope redstar notices this, because here is an illustration of my specifically leftist problem with the standard (French) leftist argument against the (typically German-Dutch) dogma of reducing budget deficits.

What I see is that deficits, via foreign credit dependence, enable foreign private capital to have a say in economic policy. I.e., advocate 'reforms' and use the threat or actual execution of downratings to 'vote' on government policy.

That is, I see a reduction of budget deficits as a prerequisite for a government to be able to pursue a socialist economic policy (yes, a purely theoretical situation at the moment).

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Thu Apr 3rd, 2008 at 04:32:10 AM EST
[ Parent ]
That's because we only allow ourselves to fund public spending through debt. In addition, if I may quote myself quoting Keynes:

European Tribune: Keen on Keynes

When involuntary unemployment exists, the marginal disutility of labour is necessarily less than the marginal product. Indeed it may be much less. For a man who has been long unemployed some measure of labour, instead of involving disutility, may have a positive utility. If this is accepted, the above reasoning shows how 'wasteful' loan expenditure[1]may nevertheless enrich the community on balance. Pyramid-building, earthquakes, even wars may serve to increase wealth, if the education of our statesmen on the principles of the classical economics stands in the way of anything better.

It is curious how common sense, wriggling for an escape from absurd conclusions, has been apt to reach a preference for wholly 'wasteful' forms of loan expenditure rather than for partly wasteful forms, which, because they are not wholly wasteful, tend to be judged on strict 'business' principles. For example, unemployment relief financed by loans is more readily accepted than the fiinancing of improvements at a charge below the current rate of interest; whilst the form of digging holes in the ground known as gold-mining, which not only adds nothing whatever to the real wealth of  the world but involved the disutility of labour, is the most acceptable of all solutions.

(My emphasis)

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Carrie (migeru at eurotrib dot com) on Thu Apr 3rd, 2008 at 04:46:30 AM EST
[ Parent ]
One of the problems is that European governments have taken the 3% deficit limit from the Growth and Stability Pact as a target in good times, which will prevent them from running anti-cyclical deficit spending in bad times.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Carrie (migeru at eurotrib dot com) on Thu Apr 3rd, 2008 at 04:48:31 AM EST
[ Parent ]
the pear in two, I suppose. Without going into a long post which deserves a diary, not all budget deficits are bad; ones which are expressly to invest in future propserity are certainly good deficits: education, reduction of collective carbon footprint by putting money into noncarbon fuelled parts of the energy grid, mass transit infrastructure, public safety and security, quality accessible and affordable housing to facilitate greater labor marke flexbility (and note, when i say flexible, i don't mean it the same way as a neo-lib).

But we don't tax the wealthy near enough for them to pay their fair share for what they extract from the societies in which they live. And it isn't just the wealthy at fault here, though by buying elections they get a special part of the blame; the middle class (esp the petite bourgeoisie) strivers, for their various reasons, also adopt the values and interests of their employers. The reasons for this can best be read in your native tongue, straight out of Lukacs), though I imagine in todays' "modern" Hungary he may have gone temporarily out of style.

I had a friend link this to me not too long ago, it'll give you a few ideas, in French, from a classic french lefty, how to balance a budget and go after a self-interested, self-satisfied press at the same time:

Probably worth a post and an xlation...sorry no time, but I agree with him, if you do start taxing marginal rates at 100% (and you don't have to be communist to want this, either, see Sweden's tax code from not so long ago) you'll see a lot more sustainable state revenues, and also you'll no longer have the sorts of twisted incentives which anglo-american financial capitalism is seeing unwound today.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Apr 3rd, 2008 at 09:20:09 AM EST
[ Parent ]
not all budget deficits are bad; ones which are expressly to invest in future propserity are certainly good deficits: education, reduction of collective carbon footprint by putting money into noncarbon fuelled parts of the energy grid, mass transit infrastructure, public safety and security, quality accessible and affordable housing to facilitate greater labor marke flexbility

I agree that that would be sensible deficit spending, and my gripe with the previous Hungarian PM's deficit spending was just the lack of this (no future at all beyond highways, only pay-rises, with simultaneous tax cuts to please the coalition partner too). However,

  1. How different is your (the French Left's) idea of deficit spending from Keynesian anti-cyclical spending (see Migeru)? It is my understanding it goes well beyond that.

  2. How free are governments to pursue such sensible investment into the future when foreign private lenders begin to raise interests or make other claims? (Or, do you mean this system work better if institutional lenders, f.e. the ECB or a very different World Bank, would play party to it?)


*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Apr 4th, 2008 at 03:43:52 AM EST
[ Parent ]
Actually, this is the one I meant to post up:

Go the the last 15 second, paraphrasing:

You make more than ff4 millions, 100% tax, I take it all

He then proceeds to ridicule the journalists for being disrespectful and uncooperative, as they likely will be impacted by this proposal and want to use the press organs to decredibilize him...

Good stuff, entertaining too, and if you like many other educated folks (and some less educated, like Clavier) think of him as looking somewhat foolish here, that's because you are perhaps not the target audience.

The Hun is always either at your throat or at your feet. Winston Churchill

by r------ on Thu Apr 3rd, 2008 at 09:31:26 AM EST
[ Parent ]
I cannot follow his spoken French enough to judge for my educated self whether he makes a fool of himself, or is it the MSM journalists who try to get him appear so, or (since the latter seems rather conclusive from body language) both. If you'd post this in a diary with a transscript once you have time, that'd be fun.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Apr 4th, 2008 at 03:47:07 AM EST
[ Parent ]
That's about a half-million Euros? Seems like a high enough threshold.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Carrie (migeru at eurotrib dot com) on Fri Apr 11th, 2008 at 01:54:50 AM EST
[ Parent ]
However, you have foreign capital inflows as necessarily tied to budget deficits.

Total injections = total leakages, or

EXP + G + I = IMP + T + S

(G-T) = (IMP-EXP) + (S-I)

The Saving/Investment imbalance is private wealth accumulation that is in excess to private domestic wealth creation.

The (IMP-EXP), the trade deficit:

Official Account + Capital Account + Current Acct = 0.

Break up Current Acct,

Official Account + Capital Account + Net Income Inflows (+etc.) + (EXP-IMP) = 0

(IMP-EXP) = Official Account + Capital Account + Net Income Inflows

(G-T) = Official Account + Capital Account + Net Income Inflows + (S-I)

So the private wealth created by the public debt can either end up in the Central Bank (monetized), in the pockets of foreign holders of wealth, in the pockets of the domestic holders of wealth, or be, in effect, spending a net income windfall.

It doesn't automatically create the capital inflows.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat Apr 5th, 2008 at 11:04:51 PM EST
[ Parent ]
This would probably be more readable if you reminded those of us who haven't gotten our brains in gear this early in the morning what all the algebraic symbols stand for.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Apr 6th, 2008 at 01:58:37 AM EST
[ Parent ]
Yes, I was posting it late in the evening my time, ... but very early in the morning, ET time.

They are not algebraic symbols, but, they are Macroeconomic shorthands. I get started with the common algebraic symbols in econ, I gotta print out a cheat-sheet for my greek character html entities.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Apr 6th, 2008 at 10:27:39 AM EST
[ Parent ]
EXPorts
IMPorts
Investment (gross for GDP, net for NDP)
Saving
Government spending
Taxes

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sun Apr 6th, 2008 at 10:24:50 AM EST
[ Parent ]
Thanks.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Apr 6th, 2008 at 02:58:52 PM EST
[ Parent ]
... almost forgot to mention ...

"Investment" means Investment in productive capacity, not "financial investment" in terms of buying a financial asset.

Buying and selling stocks and bonds (debentures) is not treated as Investment in Macro because:

  • most of the transactions involve existing assets, and at the Macro level it nets out ... the purchase by the new owner is offset by the sale by the original owner, the liquid funds received by the original owner offset by the liquid funds surrendered by the new owner. It all nets out
  • that includes real (realized) capital gains from increasing financial capital valuations ... the realized capital gain exists because someone handed the money over to pay for it
  • new financial assets in the aggregate occur when new productive capacity is produced, so Macro goes straight to that and calls that "Investment".


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Sun Apr 6th, 2008 at 03:23:57 PM EST
[ Parent ]
The far-right paramilitary Hungarian Guard is developing into a scarier branch of the far-right freakshow than the rioters. (See this diary for a taxonomy of the confusing mini-bands of the Hungarian far-right and on the genesis of the Hungarian Guard.)

A judicial process to ban the formation was started recently. At the first hearing, Guard members (who are of all ages and both genders) in full regalia demonstratively occupied the audience room, and forced out journalists not of their liking.

A week or two later, the Guard held its second public swear-in of new members, again a few hundred fascists at Heroes' Square; during which far-right spectators of the ceremony hunted away ten counter-protesters, with police intervening only once they fled to the steps of a nearby museum.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Wed Apr 2nd, 2008 at 10:35:33 AM EST
Thanks for the update. I find the apparently pretty neolib Socialist party a bit funny. And not in a funny way.

Any chance of a real socialist party emerging any time soon?

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Apr 2nd, 2008 at 11:13:48 AM EST
In short: no. But once I get home from work, I'll write something about one new party.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Wed Apr 2nd, 2008 at 11:31:14 AM EST
[ Parent ]
OK, here is a longer reply.

First, the Hungarian Socialist Party on the whole is not neoliberal. To recap my Socialist taxonomy here, there are three pillars in the party: the grey technocrats, the networking entrepreneurs, and the naive socialists. The previous PM was from the first, and he implemented a classic presents-to-everyone policy that led to the gaping budget deficit. The current PM is from the second, and his famed "We lied!" speech (re-read here) was meant to browbeat his party into accepting his 'reforms'. Also, there were regular reports of internal growling among Socialists at concessions to the liberals.

However, I consider the third pillar, the naive socialists, intellectually unprepared and too indisciplined to ever take over, not to mention win elections and govern with success.

What about a leftist party beyond the Socialists? Difficult. The 5% limit and the majority pressures from the first-past-the-post element of the election system already make it difficult for newcomers. The strong polarisation of the present two camps, where most voters are motivated by preventing the Other Side, further limits even protest vote.

Now, the new party I implied is the Hungarian Social Democrat Party (MSzDP) led by one László Kapolyi.

After the failure to enter parliament in 1990 with their re-established party, the Social Democrats broke apart in internal divisions and existed as dwarfs. Kapolyi, a former top cadre of the Party and a rather rich man, rose to lead the current incarnation. From 2002, MSzDP was in local alliances with the MSzP, bringing Kapolyi into parliament. But he started to play anti-reforms rebel, and early this year, the potemkin party seemed to get new life, with a lot of Budapest Socialists deserting and joining the SocDems. They also try to ally with other sub-5% centrist parties.

The MSzDP rhetoric is nice, but I don't trust Kapolyi (we had one too many millionaire Socialists in Central Europe), the whole party leadersship seems too soft, and I don't think they stand much of a chance.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Wed Apr 2nd, 2008 at 01:26:38 PM EST
[ Parent ]


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