GYURCSANY STAYING PUT AND GOING PUBLIC ON REFORM

C O N F I D E N T I A L SECTION 01 OF 02 BUDAPEST 001723

SIPDIS

SIPDIS

DEPARTMENT FOR EUR/NCE; PLEASE PASS TO NSC FOR ADAM STERLING

E.O. 12958: DECL: 10/12/2012
TAGS: PGOV KDEM HU
SUBJECT: GYURCSANY STAYING PUT AND GOING PUBLIC ON REFORM

REF: BUDAPEST 1679

Classified By: P/E Counselor Eric V. Gaudiosi: Reasons 1.4 (b) and (d)


1. (C) Summary: Anti-corruption efforts remain at center
stage as the opposition has tabled an 8-point program in
response to PM Gyurcsany's controversial proposal to "bleach
the black economy." Coalition insiders report considerable
discontent with PM Gyurcsany as the Zuschlag scandal (reftel)
continues to play out and the government contemplates taking
further reform proposals directly to the public as a
referendum. That said, they indicate that the PM has
rebuffed the suggestion that he step down and assess that the
MSzP is unlikely to "do more than complain" in the near term.
That leaves the PM likely to continue managing the delicate
coalition dynamic in which the SzDSz demands progress on
reform and the MSzP rank-and-file resists dramatic changes.
End Summary.

BLEACH AND BACKLASH


2. (C) Although the Zuschlag scandal continues to percolate
(reftel),debate has increasingly focused on rival proposals
by the Prime Minister and the opposition to combat
corruption. While admitting that he had known of the
allegations against Zuschlag "this spring," the PM has denied
all wrongdoing and continued to advocate his 7-point program
to "bleach the black economy." His proposed measures range
from the restriction of reimbursements of parliamentariams
expenses to the prohibition on MPs holding other offices.
(Note: By our rough count, approximately 80 members of the
coalition and an equal number from the opposition are
"dual-hatted" as local or regional officials in addition to
their parliamentary positions. End Note.)


3. (C) Response to the PM's latest recommendations within
the MSzP has been tepid at best, and the government has not
formally submitted the package to Parliament for
consideration. Cabinet Minister Peter Kiss has conceded to
us privately that the government underestimated the backlash
within the MSzP, and former SzDSz leader Gabor Kuncze tells
us that many in Parliament feel that "Gyurcsany is blaming
386 MPs because 1 man (Zuschlag) stole." They will
doubtless be further irked by the government's concurrent
announcement that it is considering a 300 percent increase in
senior civil service salaries to "keep pace with the private
sector."

I'LL SEE YOUR SEVEN POINTS AND RAISE YOU ONE (


4. (C) Even without strong support from the party, Gyurcsany
has indicated his willingness to table the package as a
public referendum. In contrast to his own party's
ambivalence (or antipathy),his proposals have polled well,
receiving over 60 percent support in initial pubic opinion
surveys, prompting one MSzP MP to accuse the PM of daring to
"involve the public in politics." Many note that "going
public" would have the consequence ) and political benefit
) of undercutting FIDESZ's efforts to organize a referendum
on key elements of Gyurcsany's austerity measures.


5. (C) FIDESZ has counter-punched with an 8-point program,
including a proposal to reduce the number of MPs to 200 and
several recommendations designed to restrict political
advertising and to make public the tax declarations,
salaries, and benefit packages of public officials. (It also
proposes to freeze MPs' salaries until Hungary adopts the
Euro, prompting some to joke that the measure "would be
permanent.")

THE PROBLEM BENEATH THE SCANDAL


6. (C) In a private meeting with the Ambassador October 9,
Kuncze remarked that the Zuschlag scandal had highlighted the
fact that "we do not separate political parties from civil
society and we do not track money from political parties to
civil organizations." Although much of the attention to date
has focused on Zuschlag, in Kuncze's view the system of
opaque funding and politicized prosecutions "that produced
him invites abuse by all parties." The result, he noted, has
been "criticism on individual cases but no consensus to fix
the underlying problems."

NEEDLING THE MSZP ( AND THREADING THE NEEDLE WITH THE SZDSZ


7. (C) Kuncze credits Gyurcsany's latest reform package in
principle as an attempt to break with the status quo and
"escape forward." He was candid in criticizing the PM's
political tactics, however, noting that "insulting the
Parliament" will drive his popularity even further down with
the MSzP rank-and-file. It will also, he cautioned, further

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alienate a party caucus "more committed to trying to make a
broken system work than making necessary reforms."


8. (C) That said, Kuncze minimized the prospect of an
internal move against Gyurcsany, remarking that "the MSzP has
"the courage to complain ( but not to act." Nor does it
have a viable replacement at hand, as "(Parliamentary
Speaker) Szili is incapable, (Defense Minister) Szekeres is
not credible, and (Cabinet Minister) Kiss is a caretaker at
best." Although Kuncze admitted that there was talk of Ptere
Kiss as Prime Minister and FinMin Veres as party president,
he believes the party will "let Gyurcsany shoulder the
burden" into 2009, and predicts that the PM will offer the
party rank-and-file concessions with regard to health care or
tax policy in return.


9. (C) Former PM Megyessey ) who was himself forced from
office by the MSzP and SzDSz ) confirms the disquiet within
the party. He confided to Ambassador Foley October 11 that
he had personally advised Prime Minister to step down now as
Prime Minister (in favor of Treasury Minister Veres) but
retain the party presidency in order to keep open the option
of seeking reelection in 2010, but reported that Gyurcsany is
"not at all interested."


10. (C) As Kuncze warned, however, Gyurcsany must also pay
attention to the SzDSz. By not going far enough to follow
through on reforms, he could force his junior partner to
"face the difficult decision" of leaving the coalition. "The
MSzP has been a difficult partner," he admitted, but he
concluded that the SzDSz is "not dissatisfied ( yet."

COMMENT: ACCIDENTAL CONSENSUS?


11. (C) SzDSz leader Koka has described the latest round
between the Prime Minister and the opposition as a
"referendum tsunami," and both sides are indeed taking their
respective ) and ironically often complementary ) proposals
to the public as they race to take the high ground on
corruption. As Kuncze noted, there is growing public
dissatisfaction with a political elite that Kuncze described
as "once being our father figure but now acting like a
child." Electoral advantage may be motivating the parties
where principle has failed. Although his tactics in taking
the issue to the public rather than to his own party risk
further alienating many within the MSzP, so far Gyurcsany
appears to be managing a complex dynamic that demands
sufficient progress to satisfy the SzDSz but sufficient
patience to placate the MSzP. End Comment.



FOLEY