WAKE ME WHEN SEPTEMBER ENDS: PARLIAMENT RETURNS

C O N F I D E N T I A L SECTION 01 OF 02 BUDAPEST 001468 SIPDIS SIPDIS DEPARTMENT FOR EUR/NSC; PLEASE PASS TO NSC FOR ADAM STERLING E.O. 12958: DECL: 09/05/2012 TAGS: PGOV PREL KDEM ECON ENRG HU SUBJECT: WAKE ME WHEN SEPTEMBER ENDS: PARLIAMENT RETURNS REF: A) BUDAPEST 1422 B) BUDAPEST 1414 Classified By: P/E COUNSELOR ERIC V. GAUDIOSI; REASONS 1.4 (B) AND (D) ¶1. (C) Summary: The running debate over the Magyar Garda has generated more heat than light as Parliament prepares to return to session September 10 (ref a). This issue remains a potential flashpoint, but members on both sides of the aisle are pledging cooperation on key issues even as they expect a season of continued conflict between the government and the opposition. The government is likely to pursue limited initiatives and to prioritize continued deficit reduction over deeper structural reforms. Opposition leaders have pledged to engage constructively, but feel their base expects them to respond to what they perceive as the PM's attempts to create "hysteria" and to "criminalize opposition." Both sides will likely keep a close eye on the spring referendum, on the 2009 European Parliamentary elections, and on polling showing record frustration with the political elite. End Summary. LIMITED REFORM, UNRESTRAINED RHETORIC? ¶2. (C) Both the government and the opposition continue to regard 2007-08 as a critical year. For Prime Minister Gyurcsany, the coming months represent the arrival of EU assistance and the (hoped-for) reversal of recent economic indicators. Talk of broader reforms, once jokingly described by Minister for Development Gordan Bajnai as "changing everything all at once," is an increasingly distant memory as the government focuses on modest initiatives on the margins. With recent reforms criticized as "the government's war against the people," major initiatives such as health care reform the subject of debate even within the coalition (septel),and his own party restive, Gyurcsany will likely want to avoid further budget cuts even while he pursues further deficit reduction. The likely result: further ) albeit fitful ) revenue enhancement without significant progress on fundamental structural change. ¶3. (C) Although the PM will likely set only modest goals for this season, his rhetoric may continue to veer toward the extreme. As it did during the demonstrations of 2006, the government may seek to focus the national debate not on its decisions but on the opposition's alleged threat to Hungarian democracy. ¶4. (C) Former FM Janos Martonyi believes that the PM has "already overstepped all boundaries" by "playing the fascist card," and other moderates within FIDESZ believe the PM is attempting to create "hysteria" by exaggerating extremist sentiment. Indeed, Martonyi and others argue that this has only fanned the flames, giving the Garda "priceless publicity." They assert Gyurcsany will attempt to "criminalize all opposition" in the months ahead. CONTINUED RESISTANCE ( ¶5. (C) For FIDESZ, 2007-08 represents not an economic turning point but a political tipping point. As the 2009 European Parliamentary Elections approach, the opposition will focus on a spring referendum both as a means to continue attacking the government and as a vehicle to mobilize its political base. In a meeting with the diplomatic corps September 5, Orban described the referendum as "a supplementary constitutional process ( but the last avenue open to the people to discuss the government's policies." An air of uncertainty hangs over the referendum, however, as the law is vague as to the consequences of the vote. In practical terms, many in FIDESZ ) and perhaps some in the MSZP ) see the referendum as a way to force Gyurcsany from office by handing his rivals a convenient pretext to demand his departure from within. ¶6. (C) As FIDESZ faction leader Tibor Navracsics tells us, the opposition will play a careful balancing act. With Orban's statement to the diplomatic corps September 5 denouncing the Garda as "a stupid answer to Hungary's problems," the party has worked hard ) and come far ) in distancing itself from the extreme right. Though sensitive to pressure from the International Community - and especially from the US - FIDESZ is also under pressure to make sure that it does not lose the rhetorical contest in front of supporters who Tibor Navracsics believes "see attacks as decisiveness and restraint as weakness." While Orban has pledged "lawful and peaceful resistance," FIDESZ's rhetoric will likely continue to cast Gyurcsany as illegitimate, his government as incompetent, and protests as the unavoidable result. WITH ISOLATED POCKETS OF COOPERATION BUDAPEST 00001468 002 OF 002 ¶7. (C) There are still some areas of agreement despite the discord. Although the most visible symbol of gridlock ) the opposition's departure during the PM's addresses in Parliament ) will continue, Orban has pledged that FIDESZ will be "constructive and cooperative" by "supporting ideas that are good for Hungary." ¶8. (C) We understand that legislation to protect key industries from foreign take-over will be put on a fast-track for approval, with initial entry into force expected by October 1. This will be an important tangible result of bipartisan cooperation to protect MOL from a hostile take-over, an issue which has helped underscore the importance of energy security to the public and the body politic. ¶9. (C) Following five-party talks hosted by President Solyom, an agreement on budget oversight also seems within reach. Although FIDESZ is pressing for a small independent oversight body and the MSZP reportedly proposing a larger bureaucracy, both are working toward a compromise that will make budgetary data more credible and accessible. More important, it will help Hungary break its cycle of pre-election spending sprees followed by austerity programs. ¶10. (C) The parties are also in open competition to establish their bona fides on Cuba, with an uneasy truce in place between the government and FIDESZ as both work to support a democratic transition (septel). FIDESZ officials have also expressed broad support for the PM's outreach to China (ref b). ¶11. (C) Comment: While small, these steps could play well with a public that is increasingly disenchanted with the political leadership writ large. Polling shows respect for the political elite hovering at only one-third of the population, and Orban himself believes that this reflects "frustration with a government that can't govern and an opposition that has been too weak to remove it." End Comment. FOLEY