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Common Misunderstandings About Hungary

Over the past few weeks I have been meeting with leading analysts from banks, funds and other financial institutions from all over the world. Everybody is interested in what’s going to happen to Hungary after the elections and what risks the future may hold. I have come to realize that there are two common misunderstandings about Hungary.

The first is about the euro. Accession to the euro zone is not the focus of the election campaign at all. Except for the far-right Jobbik party, all mainstream political parties agree that Hungary needs to adopt the euro as soon as possible. This is actually the only political issue that enjoys widespread political consensus. Parties don’t campaign for or against the euro and don’t expect any political benefits from doing so. Financial analysts tend to see the euro as essential for political success, but that’s not the case. The issue is simply not on the table. Of course, should Jobbik perform surprisingly well in the elections (which is exactly what I anticipate), the euro may get into the spotlight. This scenario is unlikely, since Jobbik will not have any real power unless it becomes Fidesz’s coalition partner or wins the elections. Neither scenario can be excluded, but at this stage neither has much chance.

Certainly Fidesz has not helped foreign analysts better understand its stance on euro. Fidesz’s economic- and fiscal-policy talking heads have declared several times that boosting the economy (even at the price of boosting the deficit) is a priority, while introduction of the euro is not. There is a persistent conflict within Fidesz between the desire for short-term economic growth and quick Eurozone accession.

The second misunderstanding stems from Western political experience. In old democracies, voters usually reward or punish the incumbent government based on the country’s economic situation. If the economy is doing fine, voters tend to support the incumbent party; if not, they vote for the opposition. This is not valid for Hungary. The country’s economic performance has never had any effect on the outcome of the elections. There is no correlation between support for the government and GDP growth.

At the same time, Political Capital’s research has found a strong correlation between support for governing parties and the perceived state of the economy and the perceived outlook for living standards. Hungarian voters are strongly influenced by perception — and there is frequently a disconnect between the popular perception of economic growth and reality. This is why many of the analysts I met were surprised that Hungarians don’t appreciate the caretaker government’s performance.

Krisztian Szabados

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Categories: Hungary, populism Tags: , ,
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