Hungarians returned Viktor Orban to power after eight years in opposition, giving the Fidesz leader a two-thirds majority in parliament, allowing him to change the recession-hit country’s Constitution.
“Hungarians brought down a regime and founded a new one,” Orban said in front of supporters in a televised speech from central Budapest late yesterday. “They founded the regime of national cooperation instead of the reign of oligarchs.”
Fidesz won 57 of 121 parliamentary seats contested yesterday for a total of 263 seats in the 386-strong parliament, according to results on the election bureau’s Web site with 98 percent of precincts reporting. The Socialist Party, ousted after eight years in power, won 59 seats, the radical nationalist Jobbik party gained 47 and Lehet Mas a Politika, a green group, got 16. One independent candidate won a seat.
Orban pledged tax cuts to jumpstart growth after the worst recession in 18 years in the first European Union member to obtain an international bailout to avert a default in 2008. Fiscal conditions attached to the loan exacerbated the recession as unemployment rose to a record. Fidesz now has enough power to overhaul state administration, analysts said.
“Initially the election results should please the markets,” Zoltan Torok, an economist at Raiffeisen International Bank-Holding AG in Budapest, wrote in a note to clients today. “The symbolic meaning of the qualified majority is that with such an authority there are no obstacles ahead of much needed structural reforms.”
The forint traded at 263.07 per euro at 10:34 a.m., having gained 19 percent against the euro since hitting its weakest level in March 2009, the second-best performer among the 25 emerging-European currencies tracked by Bloomberg after the Polish zloty. The cost to protect against a Hungarian default fell to the lowest since October 2008 and the benchmark BUX Index more than doubled over the past year, suggesting rising confidence in an economic recovery.
Fidesz plans to focus on jumpstarting growth instead of meeting an IMF-dictated budget deficit goal of 3.8 percent of GDP for this year. The commission estimates this year’s shortfall at 4.2 percent of GDP. The party has accused the government of lying about the size of the gap.
Generating growth is a pre-requisite for fiscal consolidation and may help limit the support for radicals, who posted their biggest electoral gains since communism fell in 1990, Orban said on April 12.
The next Cabinet wants to renegotiate and extend Hungary’s $27 billion emergency loan agreement with the International Monetary Fund, the European Union and the World Bank, which expires in October. The aim is to win permission to raise the budget deficit target for this year to between 4.5 percent and 6.5 percent of GDP, former Economy Minister Gyorgy Matolcsy told Hir TV last month.
“The biggest question is whether Fidesz can strike a deal with the IMF,” Gyorgy Barcza, an economist at KBC Groep NV in Budapest, said in a phone interview. “If Fidesz pledges to overhaul the economy, the IMF in exchange may allow bigger tax cuts.”
Fidesz pledged to use its unprecedented mandate to halve the number of representatives in parliament and local councils and create private jobs to lead the economy out of a recession after GDP shrank 6.3 percent last year, the most since 1991. The IMF expects output to continue shrinking this year.
Orban’s two-thirds majority is the biggest mandate for any party in Europe, according to Nezopont Intezet in Budapest. It will also allow the party to change laws governing elections, referenda, citizenship and media, and name members of the Constitutional Court.
Hungary, once a frontrunner in the transition to a free- market economy from communism, lost its edge as successive governments racked up debt to fund higher spending. The European Commission estimates government debt will reach 80 percent of gross domestic product this year, the highest among the EU’s eastern members, while employment is the bloc’s second-lowest after Malta.
The nation is undergoing its fifth year of austerity to narrow a deficit that was the European Union’s widest in 2006 and was 4 percent of gross domestic product last year.
Fidesz, which governed with Orban as premier from 1998 to 2002, gained support as voters punished a Socialist-led government that raised taxes and cut spending.
Former Prime Minister Ferenc Gyurcsany, who defeated Orban four years ago, stepped down during last year’s recession. His support was eroded in 2006 by spending cuts and a leaked admission that he lied about the state of the economy to win the elections that year. The news sparked Budapest’s worst street violence in 50 years.
Further spending cuts by his successor, Gordon Bajnai, stabilized the country’s finances even as the economy lurched into its worst recession since 1991 and unemployment soared. Output fell 6.3 percent last year and the government sees a 0.2 percent drop this year before growth returns in 2011. Socialist Party Chairwoman Ildiko Lendvai resigned after the results were published, she said in a speech broadcast by state television.
Jobbik, a radical nationalist party founded in 2003 which wants to drop free-market reforms, has also tapped into voter resentment during the recession and posted the best showing by an extremist party since the end of communism.
The party wants to revive the gendarmerie, disbanded after World War II for its role in deported Jews to Nazi concentration camps, to police the country’s gypsy minority.
Fidesz already won an absolute majority in parliament in the first round of voting two weeks ago. The runoff yesterday decided the fate of 57 districts where no candidate reached 50 percent in the first round as well as 64 seats that were distributed as compensation for votes for losing candidates.
To contact the reporter on this story: Zoltan Simon in Budapest at email@example.com.