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Hungary has not been so close to a solution to its severe structural deficits for years. The Bajnai package, large parts of which agree with the previously announced proposals of the Reform Alliance, which disbanded last week, and economic reformer Lajos Bokros, is far better than the weak reform forays of the MSZP government that remains in power. A comparison with a Fidesz programme is not possible because the largest opposition party has not yet produced one.

The Bajnai package is the best reform programme that has the best chance of realisation that Hungary currently has to offer. Bearing in mind the tasks that Hungary faces it is hardly worthy of superlatives, not least because there are major gaps in it. While Bajnai has very detailed ideas concerning the painful cutbacks, he gives little away when it comes to easing burdens on contributors to society.

Says, but it isn’t so

Bajnai mentions the need to reduce burdens on employees and employers, financial support for the “actors of the Hungarian economy” and stimulating the economy with EU funds. Bajnai’s paper, however, does not go beyond merely naming these three areas, which is extremely surprising given that at least both the first two points are closely connected to the expenditure side of the budget.

Since Bajnai has taken the trouble to describe in detail the planned changes and each major cutback, it is not clear why he has not shown the same care concerning the positive sides of his programme. Does he have no idea about the extent of the possible easing of burdens? Or perhaps he did not want to waste time on going into detail on issues where there is consensus regardless. After all everyone is agreed on the need to cut wage contributions, even Fidesz which rejects structural reforms.

Where is the ‘hope’?

However, precisely because of the high potential for consensus, Bajnai should have included more details concerning the parts of the programme which are positive for citizens, if only for PR reasons. A few more sentences on tax cuts and assisting companies would have helped the brutal staccato of cutbacks and revisions to fall on more understanding ears. Surveys show that the majority of Hungarians no longer have any illusions about the need for cutbacks. If people will have to suffer, they want to know why. That also applies to shock therapies.

Bajnai’s silence concerning easing burdens is also surprising because he could easily have come up with a few promising figures, just for the sake of balance and appearance. After all, at the end of the package he raises the prospect of having to refine and make more precise all the concrete points of the programme. Nobody could hold a few slightly unrealistic figures on tax and contribution reductions against him. So why did he choose to offer nothing at all to be made more precise?

Rush job

The suspicion arises that Bajnai either does not care with what level of unpopularity he will tackle his reform programme or that the situation is so bad that immediate tax cuts are no longer possible and Bajnai does not want to raise expectations by describing these. However, let’s give him the benefit of the doubt and assume that the complete passage on easing burdens will come later. Perhaps there simply was not enough time to grapple with the tax reform issue in more depth. That is surprising, but conceivable.

The fact that a scalpel seems to have been used for revising social spending rather than a more delicate instrument also suggests that document must have been produced under immense time pressure. Admittedly it is possible to save money by making cuts here and there. Improving structures and control of the distribution of funds, however, would have been more sustainable. Although such an approach would not lead so quickly to the urgently needed savings, it would be more conducive to social peace.

In any case it is curious that last Friday the Socialists signed a package that it still unfinished containing several empty promises without kicking up too much of a fuss. What happens if nothing comes of these promises? Will the agreement to the cutbacks still be valid? The experience of recent years does not encourage particular confidence in the Socialists’ willingness to reduce taxes. But nothing is impossible: if the Socialists have managed to get their act together to finally tackle the dreaded issue of social benefits, then the possibility should not be ruled out that they will also have enough energy for tax cuts.

United in fear of Orbán

Bajnai’s decisive, tactically astute approach indicates that he at least does not intend to leave it at mere words and announcements. Since he knows from past experience that the unity of the Socialists only lasts as long as dread of Viktor Orbán and the threat of losing their positions are uppermost in their minds, Bajnai quickly had them provide signatures backing his reform programme.

Following the chaos in the first week after Gyurcsány announced his resignation, the Socialists seem to have pulled themselves back together. The surprising unity within the party indicates that they are again determined to govern through until the end of the legislative period. They seem to have found a leader in the previously unlikely figure of Bajnai, who in turn appears to have taken to his new challenge. Purely theoretically everything could now go off without a hitch until 2010 and the MSZP-SZDSZ coalition – regardless of whether it has been officially sealed or not – could experience a revival.

Whether this plan also comes off politically depends, however, on further factors, in particular the reactions of the countless losers in the Bajnai package. Will they submit to their fate uncomplainingly or will they be mobilised by their self-appointed political advocate Fidesz to demonstrate their anger? The fact that Fidesz, right after release of the austerity package, announced that it will reverse all austerity measures immediately after coming into power does not bode well. Although Orbán’s party, which has not produced any realistic alternative, should actually be pleased that Bajnai is now taking on the dirty work, a continuation of the uncompromising collision course is likely. The initial declarations of various trade union leaders radically rejecting the proposals also point in this direction.

He needs a few million good friends

For his programme to succeed Bajnai needs to gain wider social support than the current eight per cent indicated by opinion polls. He will only be able to do so if he manages progressively to create winners of the programme alongside its indisputable losers.

By tangibly reducing taxes as soon as possible he could for example gain the goodwill of small and medium-sized companies and their employees. After all around two-thirds of Hungarian jobs are in this sector. Increasing confidence of the international capital markets in Hungary could lead to the strengthening of the forint, thereby making the huge numbers of foreign currency borrowers into winners of the programme. Bajnai would also be able to gain wider support if he manages to adapt the planned social welfare cuts so that these are no longer perceived as a popular fight against “benefits scroungers” rather than a general attack on social weakness.

If Bajnai wants to turn the approaching duel between Parliament and the streets in his favour, he needs more than just a parliamentary majority as cover. The success or failure of his mission will depend to a considerable extent on his political skill and social empathy.

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