KOKA IN COMMAND: ECONOMY MINISTER OUTLINES REFORM

C O N F I D E N T I A L SECTION 01 OF 02 BUDAPEST 000788

SIPDIS

SIPDIS

DEPARTMENT PLEASE PASS TO NSC FOR ADAM STERLING

E.O. 12958: DECL: 05/14/2017
TAGS: PGOV PREL ECON ENRG
SUBJECT: KOKA IN COMMAND: ECONOMY MINISTER OUTLINES REFORM
AGENDA AND PARTY PROSPECTS

REF: BUDAPEST 732

Classified By: P/E COUNSELOR ERIC V. GAUDIOSI; REASONS 1.4 (B) AND (D)


1. (C) A confident and conversant Economy Minister and SZDSZ
party president Janos Koka outlined his views on the GoH's
reform agenda and reviewed the SZDSZ party's prospects in a
meeting with Ambassador Foley May 15. Koka cast his efforts
to "rebuild the SZDSZ nation-wide" as a means to "complete
the transition we started in the 1980s" while adjusting to
"new challenges." He openly described "not tension but
difficulty" in his relationship with Prime Minister
Gyurcsany, whom he sees as hampered by low public approval
ratings and helpless to control others within his own MSZP
party (reftel). Koka wants "the momentum of reforms - and
not the debate within the coalition" to be the story, and
sees a one-year window to make progress on issues including
health care, taxes, pensions, public administration, and
transparency. Although he is optimistic, he cautioned that
he would have "no interest" in remaining in the governing
coalition without continued efforts toward that end. He has
every interest - as do we - in making his upcoming trip to
the US a success. End Summary.

SZDSZ UNDER NEW MANAGEMENT


2. (C) Reviewing his agenda as SZDSZ party president, Koka
underscored the importance of "rebuilding the party
nation-wide" and "increasing our strength in parliament."
Billing the SZDSZ as "the only real pro-market liberal party"
in a political landscape dominated by "populists," he set the
party's goal as "completing the changes we began in the
1980s." Although he noted polls reflecting public support
for the party below 5%, he pointed out that "20% of the
public lives a liberal lifestyle." He wants to expand the
party beyond its current stronghold of Budapest and the
surrounding counties, targetting "the Starbucks generation"
and university students as a key demographic to help the
SZDSZ reach its goal of a 10% share in the next national
elections. Toward this end, he is working to bring new faces
into the party leadership and to increase its profile on
foreign policy issues.

THE COALITION LANDSCAPE


3. (C) Responding to the Ambassador's question regarding the
dynamic within the governing coalition, Koka readily
acknowleged substantive differences with PM Gyurcsany's MSZP
on health care, energy security, and transparency. He
believes that "real life" demands that Hungary "address its
energy dependency on Russia, simplify its tax code, purify
its political life, and rationalize its public
administration." He cited "not tension but difficulty" with
Gyurcsany on these issues.


4. (C) But the real problem, he continued, lies not with
Gyurcsany but with the rest of the MSZP. The majority of the
party "feels threatened by reform" ... and the PM feels "too
threatened by his low poll numbers" (the lowest of any
post-transition Prime Minister) to contend with the MSZP's
other power-brokers. For his part, Koka is confident "my
party is behind me ... but I cannot solve the MSZP's
problems."


5. (C) Koka's "fear and frustration" is that the
government's hesitation over the next steps in the reform
agenda will become the problem. Although he cited positive
results in deficit reduction, employment, and exports and
predicted that bold measures "will be accepted by the
public," he warned that continued gridlock will "become the
story" and risk losing the momentum established in the past
year. Parliamentary Speaker Katalin Szili (MSZP),he
suggested, had been wrong to suggest a period of
"consolidation," expressing his concern that the governmentis moving "too slowly rather than too quickly." The GoH, he
concluded, has only a "one-year window" to move forward and
"cannot afford to blink," whether with Russia over energy
security or with its domestic opponents over reform.


6. (C) If the Prime Minister is not willing (or able) to
"make these strict decisions" to "finish what we started,"
Koka concluded, then "I have no choice but to be very strict"
and "no interest in remaining in the coalition."

RESOLUTE ON ENERGY SECURITY


7. (C) Turning to energy security, Koka commented that the
recent Russian agreement with Kazakhstan and Turkmenistan

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"doesn't kill Nabucco." He has tentatively identified
September 14 as the date of the Nabucco conference in
Budapest, and will invite "everyone with interest in the
issue." He associated himself strongly with the pro-Nabucco
statements made by Defense Minister Szekeres during his
recent visit to Washington, and asked for our assistance in
securing meetings for his own planned trip to Washington in
late June so that he could continue to "work this issue." He
specifically requested the opportunity to meet with Secretary
Bodman, and we request the assistance of Washington agencies
in making his trip a success.

HOPEFUL ON TRANSPARENCY


8. (C) Koka reported that he had reached "full agreement"
with PM Gyurcsany on party financing reforms and remains
hopeful that legislation can be introduced with the
participation of the opposition. He expressed his eagerness
to "push forward" with the Transparency Working Group, and
suggested that individual FIDESZ MPs are "committed to
reform" but often shy away from overt cooperation with the
diplomatic community and international business due to the
party's "political marketing." (Note: This may be heightened
on the eve of this weekend's FIDESZ party congress. End
Note.) Nonetheless, he believes the issue is a "Hungarian"
rather than a partisan one and remains ultimately optimistic
regarding the chances of progress.


9. (C) Comment: Koka's enthusiasm is unbounded but as yet
unproven. A strategic thinker and a sharp manager, even he
will have his hands full rebuilding the SZDSZ as he rides
herd over issues including energy reform and transparency.
Although he evinced no personal animosity toward Gyurcsany,
nor was he particularly empathetic about "his problems,"
reinforcing the view of many insiders that there is no longer
a personal relationship to balance their respective political
calculations (reftel). Koka's talk of taking the SZDSZ out
of the coalition strike us as extreme for the moment, but he
may see a readiness to do so - though likely under conditions
that will not prompt new elections (reftel) - as the best way
to focus the PM on the government's reform agenda rather than
his own political survival. Describing himself as "a
conservative liberal," Koka is clearly to the right of many
SZDSZ members; he may see his efforts to bring the party to
the center as political evolution in the face of political
extinction. End Comment.


FOLEY