HUNGARY'S ELECTIONS: ROUND TWO SCENESETTER

C O N F I D E N T I A L SECTION 01 OF 02 BUDAPEST 000825

SIPDIS

SIPDIS

DEPT FOR EUR/NCE

E.O. 12958: DECL: 04/20/2016
TAGS: KDEM PREL PGOV HU
SUBJECT: HUNGARY'S ELECTIONS: ROUND TWO SCENESETTER
(C-RE6-00145)

REF: STATE 22644

Classified By: DCM Philip T. Reeker. Reasons 1.4 (b) and (d).

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Summary
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1. (U) On Sunday, April 23, Hungary will conduct round two of
its 2006 national elections. This cable reviews the
electoral math and the U.S. interests involved. Following a
strong performance in round one, the governing coalition
parties MSZP and SZDSZ appear poised to carry the day,
although an opposition (FIDESZ) victory is technically
possible. Whatever the outcome, the USG will be able to work
constructively with the party or parties that come to power.
Post will report round two results septel.

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Mechanics
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2. (U) Hungary's electoral system assigns mandates as
individual constituencies, party-list seats and national-list
seats: In round one on April 9, only those
individual-constituency races where one candidate won an
outright majority were decisive. That happened in 66 of the
176 individual-constituency contests. In the remaining 110
individual-constituency races, round one's top vote-getters
will face off this Sunday. In round two's races, the
candidate winning a plurality will take the seat. In order
for a given district race to be valid, there must be a
minimum 25 percent turnout, and turnout is widely expected to
exceed 25 percent in every district, as it did in the 2002
elections.


3. (U) It is technically possible --but unlikely, as
independent computer-modeling analyses confirm-- that the
chief opposition party FIDESZ will win enough seats in the
second round to form the next government. Of the 110 races
at stake in round two, the governing MSZP led in 61 and
FIDESZ in 48 at the end of round one. (In one district, a
local, county-based party is in the lead.) The governing
coalition parties MSZP and SZDSZ made immediate,
post-round-one efforts to cement their lead over FIDESZ:
under an April 11 agreement, MSZP withdrew its candidates in
favor of SZDSZ in three of the 61 districts where it leads,
while SZDSZ threw its support to MSZP in 55. (The agreement
does not extend to the remaining three of the sixty-one
races.)


4. (SBU) Following round one, FIDESZ President Viktor Orban
announced that his party would attempt to capture 75 of the
110 seats still up for grabs in the second round. In fact,
according to the FIDESZ-friendly Szazadveg Foundation, the
party would need to win 81 of the 110 second-round contests
in order to govern alone, and 66 seats in order to govern in
tandem with the junior opposition party MDF. In addition to
the apparent MSZP-SZDSZ lead in individual mandate races
discussed above, the lack of a FIDESZ-MDF cooperation
agreement will make winning even 66 seats an unlikely
proposition. In addition, while it is true that several
individual MDF candidates have either withdrawn from their
races or openly thrown their support to FIDESZ, it is not
clear that MDF voters would cast their ballots for FIDESZ,
even if asked to do so by the withdrawing MDF candidate. (As
of April 20, twenty-one MDF candidates were planning to
remain in the race, 15 were withdrawing and 11 had not yet
made up their minds.)


5. (U) Even after the conclusion of round two, it will still
be some weeks before the next government is formed.
President Solyom is not likely to invite any party to form a
government until after all absentee ballots are counted and
the final, certified results are announced on Saturday, April

29.

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USG Interests
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6. (C) On the whole, USG interests are probably best served
by a continuation of the current coalition. In many ways,
Hungary is a success story and the Socialist-led government
has been a supportive partner of the U.S. It has deployed
troops to both Iraq and Afghanistan, and seems poised to
field a Provincial Reconstruction Team in Afghanistan should
it remain in power. The GOH has cooperated actively in
U.S.-led efforts to combat international terrorism and
organized crime through intelligence sharing and law

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enforcement cooperation. There is sizable U.S. investment in
the Hungary, and the country's continued, healthy growth rate
and good location make it likely that U.S. participation in
the Hungarian market will only continue to grow.


7. (C) While Hungary has not realized earlier hopes that it
would act as the key stabilizing force in the Balkans, it has
largely refrained in recent months from inflammatory rhetoric
about the treatment of ethnic Hungarians in Serbia. Under
the rubric of the EU's Neighborhood Policy and as a member of
the Visegrad Group, the GOH has worked in a low-key but
constructive manner in Ukraine, and recently has shown signs
that it is willing to be more active in Belarus. Its
relations with Russia are keyed to energy, and it can be
expected that a MSZP-SZDSZ government will do little that
would jeopardize the hard-won good relations it has developed
with Moscow. Having SZDSZ in the coalition should ensure
that strong transatlantic ties remain central to the new
GOH's foreign policy thinking.


8. (C) Should it be returned to power on April 23, the MSZP
will likely concentrate on its domestic agenda, where
accomplishments to date have been modest. MSZP and Gyurcsany,
goaded on in some respects by SZDSZ, have indicated a
willingness to take on such mega-projects as local government
reform --effectively, a diminution of the party's political
base in the provinces-- in service of the larger goal of
righting the country's finances. The task of debt reduction,
however, can be expected to limit Hungary's scope for action,
and may further reinforce the GOH's tendency to defer to
Brussels foreign policy issues of interest to the U.S.


9. (C) Although FIDESZ was at the helm when Hungary joined
NATO, today it would likely be a more difficult partner --
especially without the moderating influence of former
coalition partner MDF. In the course of this campaign,
FIDESZ's populist rants have drowned out its earlier
conservatism. Still, FIDESZ decisionmakers have told Embassy
that a FIDESZ government would continue to attach a high
value to the bilateral relationship with the U.S., even while
adopting a more assertive stance when defending perceived
Hungarian interests. FIDESZ interlocutors have said as well
that they would work to restore funding to the military and
support the PRT mission first proposed by the MSZP-SZDSZ
government. The FIDESZ picture on commercial issues is more
cloudy. FIDESZ President Viktor Orban has called past
privatizations into question, and repeatedly pledged to
protect domestic business against the encroachments of
foreign capital. The party justified its December 2004
decision to withhold support for mandate extension for
Hungary's OIF troops by claiming widespread popular
opposition here to the U.S. presence in Iraq. The Orban-era
decision to buy Gripen fighter jets, a purchase with limited
utility for Hungary's ties to the EU and none for its ties to
NATO, serves as an unsettling reminder of the party's
capacity to surprise. Even if the party's nativist forces
were ultimately neutralized, the FIDESZ campaign has made
extravagant pledges for domestic programs, and it is unlikely
that the party would be able to finance them while
maintaining the country's international commitments.

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Comment
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10. (C) The USG will find common ground with whichever party
or parties come to power with the April 23 elections.
Embassy has observed a strict neutrality during the campaign,
reaching out to all parties and engaging with contacts across
the political spectrum. The omens are auspicious for a
return of the current coalition. A less likely scenario is
that MSZP will win an outright majority. FIDESZ does not
appear at this juncture strong enough to win a majority,
either with or without support from the MDF. Embassy will
report the results of round two septel.


11. (U) Visit Embassy Budapest's classified website:
www.state.sgov.gov/p/eur/budapest/index.cfm
WALKER