Hungary - 2006 Election
In the April 2006 election, Prime Minister Ferenc Gyurcsany and his Socialist-liberal coalition were re-elected, the first time since communism that a sitting government renewed its mandate. The SZDSZ pulled out of the coalition in April 2008, leaving the MSZP to govern alone. After the dissolution of the coalition with SZDSZ, Prime Minister Gyurcsany reduced the number of ministries in the cabinet from 17 to 13.
The global economic crisis spilled over into Hungary in autumn 2008, and severely impacted the country. Hungary concentrated on structural investment, and had a higher skills-base than most of its neighbors. Exports had steadily risen since 1993; over 75% of trade was with the European Union. However much needed structural reforms had not been tackled. Attempts by the government to reform the health service were dropped after a referendum in March 2008 showed strong public opposition to paying for health services. Tax rates and tax avoidance are high. Hungary's economy is small, open, and therefore vulnerable to the impacts of the global financial and economic crisis. The government secured an IMF loan in November 2008 to prevent speculators making a run on the forint.
As a result of the 2008 global economic crisis, Hungary's economy turned into a recession. This year a negative growth of 5-6% is expected. Unemployment was projected to increase from the current 7.8% to 9% this year, and inflation was projected to decrease from 6.3% to 3-4% in 2009. Nearly 90% of GDP was generated by the private sector compared with just 10% in 1990.
The country was severely affected by the financial crisis, which in 2009 was coupled with a serious political crisis. In March 2009, Ferenc Gyurcsány, the prime minister and leader of the governing Hungarian Socialist Party, resigned.
In April 2009, after lengthy negotiations with the Socialist Party, the Alliance of Free Democrats decided to support the independent Gordon Bajnai, the former Minister of Economy and National Development as prime minister. Bajnai appointed a so-called "provisional expert government," emphasizing that he did not have political ambitions and took office for only one year to ensure an economic recovery. As a result, the Socialist Party had to govern in the minority during a year when the country faced serious economic troubles and mounting unemployment.
Further symptoms of social and economic troubles included a series of organized attacks on Roma people in the northeastern region of Hungary; the failure of an NGO-initiated campaign for more transparent election financing; and a joint call by major embassies to the Hungarian government warning of the decline in foreign investors' trust due to the government's lack of transparency. All of these events left a bitter mark on civil society, which showed little capacity for dealing with the challenges.
Frustrated at its failure to implement promised reform (particularly after its heavy defeat in March in a referendum on health charges), the Free Democrats left the coalition in April 2008, saying they would only support the government on a case by case basis. Prime Minister Bajnai (who belongs to no party) governed with support from the Socialist Party and the Liberal SzDSz Party. The government's main pledge was to continue to reduce the budget deficit in line with a Convergence Program approved by the European Union and to pursue structural austerity in line with the IMF stand-by facility agreed in autumn 2008.
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