FAMILY FEUD: COALITION DEADLOCKED IN BUDAPEST

C O N F I D E N T I A L SECTION 01 OF 02 BUDAPEST 002489

SIPDIS

SIPDIS

DEPARTMENT FOR EUR/NCE MICHELLE LABONTE, PLEASE PASS TO NSC
FOR ADAM STERLING

E.O. 12958: DECL: 12/05/2011
TAGS: PGOV KDEM HU
SUBJECT: FAMILY FEUD: COALITION DEADLOCKED IN BUDAPEST

REF: BUDAPEST 2004

Classified By: POL/C ERIC V. GAUDIOSI; REASONS 1.4 (B) AND (D)


1. (C) Ambassador Foley met with Budapest Mayor Gabor
Demszky December 6 as Demszky's SZDSZ party remained
deadlocked with coalition partner MSZP over the appointment
of the municipal leadership. The conflict comes as the
coalition clings to a one-vote majority in the municipal
assembly following what one SZDSZ official described as
"stunning" setbacks in the October local elections. The
tension has been further heightened by Mayor Demszky's very
public refusal to accept the MSZP's Erzsebet Nemeth as one of
his Deputy Mayors, and the MSZP's counter that they will
nominate a person from "other parties" if Demszky does not
relent (NOTE: Building on Demszky's promise to accept "anyone
but Nemeth," MSZP sources have been quoted in the press
saying they will nominate a person from a third party if
Demszky refuses the Nemeth nomination).

DYSFUNCTION JUNCTION?


2. (C) Although Demszky has maintained that his opposition
is rooted in Nemeth's refusal to accept responsibility for
supervising health care issues and her "confrontational"
nature (an opinion the majority of the MSZP representatives
on the city council reportedly share behind closed doors),
talk around town suggests that Demszky's position is also
driven by his personal conflict with Andras Bohm, an SZDSZ
official romantically involved with Nemeth. He told the
Ambassador explicitly that he had long warned the MSZP that
he would not work with Nemeth and indicated that he is even
ready to give the MSZP more positions in return for its
withdrawal of her nomination. His adamant position, he
continued, may be contrary to "political correctness" but
remains "fully within my rights." He noted pointedly that
"PM Gyurcsany should understand," as Gyurcsany had similarly
rejected Demszky's close friend Balint Magyar as Minister of
Education.


3. (C) After weeks of downplaying the deadlock, party
officials are now conceding that "there is no dysfunction yet
... but it is on the horizon." With the media observing that
the dispute is "no longer a local affair," PM Gyurcsany
continues to publicly urge the SZDSZ to accept Nemeth.
Demszky noted to the Ambassador that "this has been the worst
press I've gotten in years," thanks to the "MSZP's influence
over the media," but reiterated that he is "willing to pay
the price for my veto" and concluded that there is "light at
the end of the tunnel."

FIDESZ WAITING IN THE WINGS?


4. (C) With complaints about the city, and particularly its
long-time mass transit problems, as constant background
noise, this latest rift has made the five-time mayor look
petty to supporters and vulnerable to opponents. His strong
support of Budapest Police Commissioner Gergenyei - in the
face of strong criticism from the opposition - has also
helped keep the story of the October violence in the news.
We note that all of the applicants interviewed for our recent
LES vacancy in the Political Section - all young,
professional Budapest natives who had grown up during
Demszky's tenure - were uniformly cynical regarding the
Mayor, often taking municipal corruption for granted.


5. (C) Political scientist Zoltan Kiszelly predicts that the
race to succeed Demszky - and to control the city's estimated
3,000 patronage positions - is already on. He believes the
real competition is within FIDESZ. Several of the party's
most promising younger members, including Zoltan Pokorni,
Antal Rogan, and Tamas Gabor Nagy are now district mayors in
Budapest and are reportedly angling for the party's
nomination in the next election.

TROUBLE IN PARADISE?


6. (C) Though certainly compounded by the personalities
involved, the clash in Budapest could be a symptom of broader
troubles within the governing coalition. The SZDSZ emerged
as the clear loser of the October local elections (reftel),
and both party insiders and outside observes believe the
party paid heavily for its dogged loyalty to the coalition
with the MSZP despite the fallout from the "Gyurcsany tape."
Indeed, some joke that "the SZDSZ died for Gyurcsany's sins."


7. (C) Last rites may be premature, but retirements are not.
Demszky has stated that he will not run for another term,
and Party President Gabor Kuncze will step down from his
leadership position in the Spring. The succession battle for

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the party leadership will likely pit Minister of Economy
Janos Koka against MP Gabor Fodor. Koka, personally close to
Gyurcsany and already responsible for a host of high-profile
issues including energy, may have difficulty taking on yet
another task. Fodor recently told poloff that within the
party he is "stronger now than in the past" but has not yet
decided whether or not to seek the position. By his demeanor
Fodor was clear that there is little love between him and
Koka. Demszky (among others) believes Koka's reputation as a
"liberal ... but not socially sensitive millionaire" will be
a disadvantage in the race, and former PM Medgyessey believes
Koka is "still five years away from being ready for the job."
Fodor, a founding FIDESZ member (and one-time room-mate of
Viktor Orban) who later broke with the party over its move to
the right in the 1990s, is seen as an intellectual lacking
the strong connection to the party's liberal economic
tradition. Nonetheless, diverse observers including Demszky
and Orban like his chances as he is moving to the center and
less associated with the party's "nomenklatura." Most
observers see the race as too close to call at this point,
although Labor Minister Kiss spoke for many in commenting
that "neither Koka nor Fodor is Kuncze's equal." Kiss
suggested that the two rivals should divide responsibility as
party and parliamentary faction leader in order to avoid a
drawn-out struggle.

YOU ONLY HURT THE ONES YOU LOVE


8. (C) Such a struggle could hurt the MSZP as well. SZDSZ
officials have been critical of some elements of the
government's agenda, and Koka recently became the first
minister in Hungary's recent history not to support the
government's position when he voted against a measure to
revise pension regulations. Current polling projects the
SZDSZ as unable to meet the 5% threshold required for
representation in Parliament in the next elections, and as
the competition within the SZDSZ increases the candidates
will be tempted to distance themselves not only from each
other but also from the MSZP. Many in the SZDSZ feel taken
for granted by the Gyurcsany government, and careless talk
from MSZP officials about pursuing the center-right MDF as
its new coalition partner have only exacerbated the
situation.


9. (C) Demszky believes the "strange" but long-standing
coalition between the SZDSZ and the MSZP will remain a "fixed
point" in Hungary's political constellation, provided the
Gyurcsany government maintains its commitment to reform.
Even then, there will be differences of opinion. Demszky
cautioned that the government will have to pay careful
attention to "consequence management" as it moves forward on
austerity measures in order to prevent "the people - and not
just the hooligans" from "taking to the streets." He also
suggested that a majority of the party's members would look
toward a centrist political alliance with a "moderate,
responsible conservative party like the MDF" given their
common anti-communist traditions.


10. (C) Comment: Although Kuncze tells us privately that he
believes a face-saving compromise is possible, resolving the
present impasse in Budapest will not solve the SZDSZ's
longer-term dilemma. With its traditional agenda largely
expropriated by Gyurcsany, it is now facing a cycle of
decline and - they hope - renewal that has been a feature of
Hungarian political culture. The MSZP and the MDF have been
through similar periods, and many expect FIDESZ to confront a
similar tipping point. But with its last stronghold in
Budapest reduced to the narrowest of margins and its two most
visible leaders planning to step down, it appears to be the
SZDSZ's turn to remake itself ... or face the consequences.
End Comment.
FOLEY