Identifier
Created
Classification
Origin
08BUDAPEST1005
2008-10-17 09:01:00
CONFIDENTIAL
Embassy Budapest
Cable title:
THE UPSIDE OF MELTDOWN: POLITICAL OPPORTUNITY AND
how-toVZCZCXRO7851 PP RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR DE RUEHUP #1005 2910901 ZNY CCCCC ZZH P 170901Z OCT 08 ZDK FM AMEMBASSY BUDAPEST TO RUEHC/SECSTATE WASHDC PRIORITY 3479 INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY RUEHZL/EUROPEAN POLITICAL COLLECTIVE
C O N F I D E N T I A L BUDAPEST 001005
SIPDIS
DEPARTMENT FOR EUR/CE AND EB; TREASURY FOR DAS ERIC MEYER;
PLEASE PASS TO NSC FOR ADAM STERLING
E.O. 12958: DECL: 10/17/2013
TAGS: PGOV ECON EFIN HU
SUBJECT: THE UPSIDE OF MELTDOWN: POLITICAL OPPORTUNITY AND
ECONOMIC HAZARD
REF: BUDAPEST ECON UPDATE OCTOBER 15
Classified By: P/E COUNSELOR ERIC V. GAUDIOSI; REASONS 1.4 (B) AND (D)
C O N F I D E N T I A L BUDAPEST 001005
SIPDIS
DEPARTMENT FOR EUR/CE AND EB; TREASURY FOR DAS ERIC MEYER;
PLEASE PASS TO NSC FOR ADAM STERLING
E.O. 12958: DECL: 10/17/2013
TAGS: PGOV ECON EFIN HU
SUBJECT: THE UPSIDE OF MELTDOWN: POLITICAL OPPORTUNITY AND
ECONOMIC HAZARD
REF: BUDAPEST ECON UPDATE OCTOBER 15
Classified By: P/E COUNSELOR ERIC V. GAUDIOSI; REASONS 1.4 (B) AND (D)
1. (C) As Hungary's markets continue their rough ride
(septel),Prime Minister Gyurcsany has seized on this
weekend's "National Summit Meeting" as a means to address
both Hungary's immediate economic challenges as well as his
own long list of political problems. Designed to bring
together Hungary's elected leaders and selected experts, the
summit has provided the government with badly-needed cover to
withdraw his troubled tax plan, budget proposal, and
privatization initiative.
2. (C) Although the government has played down the prospect
of reaching a national accord on economic policy, the summit
may also provide a venue for the government to score
rhetorical points on long-standing (and long-dormant) issues
ranging from corruption to administrative reform. As one
contact quipped, this is another example of the government
"expanding a problem it cannot solve."
COLD COMFORT FROM ICELAND, COLD SHOULDER FROM BRUSSELS?
3. (C) This domestic activism has been mirrored in a wave of
proposals for EU action. In addition to his "12-step
program" for domestic consumption (ref a),the PM also sought
EU support in Brussels October 15. Judging from his call to
liberalize the European Central Bank's ability to intervene
beyond the Euro Zone and to lift the 3 percent deficit target
in Hungary's Convergence Program, his intent is to loosen the
fiscal constraints Brussels has placed on Budapest.
4. (C) According to brief references in the media, the PM's
proposals were "not refused." Based on Ambassador Foley's
conversation with National Security Advisor Karoly Banai, we
know that the PM returned to Budapest ahead of schedule given
the sharp decline in the forint andthe record drop in the
stock market (septel).
5. (C) We also suspect that the quest for external
assistance is a two-edged sword. Although news of the IMF's
willingness to provide assistance to Hungary helped calm the
markets early in the week, the markets dropped again shortly
thereafter as critics condemned "the last act of a desperate
debtor" and many questioned whether Hungary "could go the way
of Iceland."
ECONOMICAL WITH THE TRUTH
6. (C) Critics see these maneuvers as vintage Gyurcsany: a
big (if not to say exaggerated) idea which capitalizes on
events to retreat from his mistakes, to readjust his
priorities, and to redistribute responsibility. Political
commentator Laszlo Keri told select Ambassadors October 14
that the crisis had provided Gyurcsany with a deus ex
machine, allowing him to solidify his position within the
MSzP, cast himself as the defender of the common man, and
call for an end to discussion of early elections.
7. (C) The Prime Minister is blessed with a short memory and
quick reflexes. As FIDESZ Party President Viktor Orban
tartly observes, Gyurcsany has moved from confident
predictions of "no impact" from the global crisis to
convening the summit in less than one week. Along the way,
he has placed blame not on the failure to undertake further
reforms but rather on unnamed "attackers" intent on
"destabilizing Hungary's economy."
8. (C) Comment: Keri believes that his quick reaction has
allowed Gyurcsany "to win this round," and even SzDSz wise
man Peter Tolgyessey - no fan of Gyurcsany's - has grudgingly
credited the PM with "deft bravado." But domestic and
international confidence have been shaken, and the government
could very easily contribute to the crisis it is trying to
calm. The latest opinion polling reflects a public mood of
"crisis but not yet of panic." Keri cautions that the crisis
may have provided the PM with his last, best chance to
reverse his political fortunes. As Defense Minister Szekeres
notes privately, however, to do so Gyurcsany will need to do
more than substitute short-term crisis management for
longer-term reforms. End Comment.
Foley
SIPDIS
DEPARTMENT FOR EUR/CE AND EB; TREASURY FOR DAS ERIC MEYER;
PLEASE PASS TO NSC FOR ADAM STERLING
E.O. 12958: DECL: 10/17/2013
TAGS: PGOV ECON EFIN HU
SUBJECT: THE UPSIDE OF MELTDOWN: POLITICAL OPPORTUNITY AND
ECONOMIC HAZARD
REF: BUDAPEST ECON UPDATE OCTOBER 15
Classified By: P/E COUNSELOR ERIC V. GAUDIOSI; REASONS 1.4 (B) AND (D)
1. (C) As Hungary's markets continue their rough ride
(septel),Prime Minister Gyurcsany has seized on this
weekend's "National Summit Meeting" as a means to address
both Hungary's immediate economic challenges as well as his
own long list of political problems. Designed to bring
together Hungary's elected leaders and selected experts, the
summit has provided the government with badly-needed cover to
withdraw his troubled tax plan, budget proposal, and
privatization initiative.
2. (C) Although the government has played down the prospect
of reaching a national accord on economic policy, the summit
may also provide a venue for the government to score
rhetorical points on long-standing (and long-dormant) issues
ranging from corruption to administrative reform. As one
contact quipped, this is another example of the government
"expanding a problem it cannot solve."
COLD COMFORT FROM ICELAND, COLD SHOULDER FROM BRUSSELS?
3. (C) This domestic activism has been mirrored in a wave of
proposals for EU action. In addition to his "12-step
program" for domestic consumption (ref a),the PM also sought
EU support in Brussels October 15. Judging from his call to
liberalize the European Central Bank's ability to intervene
beyond the Euro Zone and to lift the 3 percent deficit target
in Hungary's Convergence Program, his intent is to loosen the
fiscal constraints Brussels has placed on Budapest.
4. (C) According to brief references in the media, the PM's
proposals were "not refused." Based on Ambassador Foley's
conversation with National Security Advisor Karoly Banai, we
know that the PM returned to Budapest ahead of schedule given
the sharp decline in the forint andthe record drop in the
stock market (septel).
5. (C) We also suspect that the quest for external
assistance is a two-edged sword. Although news of the IMF's
willingness to provide assistance to Hungary helped calm the
markets early in the week, the markets dropped again shortly
thereafter as critics condemned "the last act of a desperate
debtor" and many questioned whether Hungary "could go the way
of Iceland."
ECONOMICAL WITH THE TRUTH
6. (C) Critics see these maneuvers as vintage Gyurcsany: a
big (if not to say exaggerated) idea which capitalizes on
events to retreat from his mistakes, to readjust his
priorities, and to redistribute responsibility. Political
commentator Laszlo Keri told select Ambassadors October 14
that the crisis had provided Gyurcsany with a deus ex
machine, allowing him to solidify his position within the
MSzP, cast himself as the defender of the common man, and
call for an end to discussion of early elections.
7. (C) The Prime Minister is blessed with a short memory and
quick reflexes. As FIDESZ Party President Viktor Orban
tartly observes, Gyurcsany has moved from confident
predictions of "no impact" from the global crisis to
convening the summit in less than one week. Along the way,
he has placed blame not on the failure to undertake further
reforms but rather on unnamed "attackers" intent on
"destabilizing Hungary's economy."
8. (C) Comment: Keri believes that his quick reaction has
allowed Gyurcsany "to win this round," and even SzDSz wise
man Peter Tolgyessey - no fan of Gyurcsany's - has grudgingly
credited the PM with "deft bravado." But domestic and
international confidence have been shaken, and the government
could very easily contribute to the crisis it is trying to
calm. The latest opinion polling reflects a public mood of
"crisis but not yet of panic." Keri cautions that the crisis
may have provided the PM with his last, best chance to
reverse his political fortunes. As Defense Minister Szekeres
notes privately, however, to do so Gyurcsany will need to do
more than substitute short-term crisis management for
longer-term reforms. End Comment.
Foley