ENTER STAGE LEFT: REFERENDUM OPENS THE DOOR FOR

C O N F I D E N T I A L BUDAPEST 001238 SIPDIS SIPDIS DEPARTMENT FOR EUR/NCE; PLEASE PASS TO NSC FOR ADAM STERLING E.O. 12958: DECL: 07/30/2012 TAGS: PGOV KDEM HU SUBJECT: ENTER STAGE LEFT: REFERENDUM OPENS THE DOOR FOR GYURCSANY'S OPPONENTS WITHIN THE MSZP REF: A. A) BUDAPEST 1214 ¶B. B) BUDAPEST 1097 ¶C. C) BUDAPEST 1043 ¶D. D) BUDAPEST 1059 Classified By: P/E Counselor Eric V. Gaudiosi; Reasons 1.4 (b) and (d). ¶1. (C) As the Constitutional Court conducts what may be the final review of questions formulated by the opposition to challenge elements of the Gyurcsany government's reform agenda, the upcoming referendum may increasingly present an opportunity for the PM's rivals within the MSZP to rationalize an overt move to challenge the PM. THE UPCOMING REFERENDUM AND THE PERMANENT CAMPAIGN ¶2. (C) With FIDESZ focused on clearing the final legal hurdles to the referendum before beginning a massive signature drive for voting in the spring, opposition sources from party president Orban to individual staffers are painting the referendum as an opportunity to energize and expand the party's base in anticipation of the 2009 European Parliamentary elections and the 2010 Hungarian national elections (ref d). This would keep Hungary in what one analyst termed "a permanent campaign" for the better part of the next three years. THE LEFT HOOK ¶3. (C) While the advantages to the opposition are obvious, the referendum may also provide the MSZP with a credible pretext to remove PM Gyurcsany. Orban has predicted that the Socialists are "waiting for Gyurcsany to have an 'accident'" (ref c),and in separate meetings with the Ambassador both Cabinet Minister Peter Kiss and MSZP Parliamentary Faction Leader Ildiko Lendvai - members of the party's more traditional wing - have cast the referendum as a chance to "improve dialogue," "adjust course," and "correct mistakes we could have avoided" (ref b). Commenting on the perception that "the government is against everyone," Lendvai mused openly that it would make little sense to "reject reforms but keep Gyurcsany" (or presumably vice-versa). ¶4. (C) Kiss, Lendvai, and other MSZP leaders have emphasized the importance of the referendum as a "step away" from the street" and toward a constitutional process, but Kiss expressed little doubt that the outcome would favor the opposition, asking "who would vote to pay for services they're used to getting for free?" Moreover, their rhetoric contrasts with PM Gyurcsany's harder line. Hardening his position from an original pledge to "respect the results of the referendum," Gyurcsany has more recently remarked that the results "won't matter," indicating that the government will simply "find other revenue sources" to fund its reform. LEAVING SO SOON? ¶5. (C) Comment: That may be a bridge too far for a party whose popularity plummeted in the fall and has yet to recover. Although the reform process has largely stalled, Lendvai and others fear that the party will continue to take the blame for the "psychological impact" on the public, which believes "too much is happening too fast." Despite her expressions of concern about showing weakness in the face of a challenge from FIDESZ, a clear expression of public opposition to the reforms introduced to date would be a plausible pretext to act on the obvious reservations of traditionalists within the MSZP who never liked reforms ... or Gyurcsany. Most observers believe the referendum will receive the 50 percent turn-out required by law, and current polling shows the majority of the questions receiving support from a decisive majority of respondents. If the referendum does return such a clear public rejection, ambiguity in Hungarian law would in theory allow the government to approach the reforms from a different angle. In practice, however such a result may well embolden the MSZP to oust Gyurcsany - as it did his predecessor - and to use the months before the 2009 elections to distance itself from his record. Ironically, some FIDESZ sources fear just such a maneuver, having seen the MSZP climb off the canvas to overcome significant deficits in the polls and win previous elections (ref a). We will watch this space closely in the months ahead. End Comment. FOLEY