A WINTER OF DISCONTENT: WORKERS STRIKE AGAINST

C O N F I D E N T I A L SECTION 01 OF 02 BUDAPEST 001192

SIPDIS

DEPT FOR EUR/CE, EB/OMA, INR/EC; USDOC FOR SAVICH; TREASURY
FOR ERIC MEYER, JEFF BAKER, LARRY NORTON; USEU FOR HAARSAGER

E.O. 12958: DECL: 12/15/2013
TAGS: EFIN ECON PREL ELAB HU
SUBJECT: A WINTER OF DISCONTENT: WORKERS STRIKE AGAINST
TIGHT BUDGETS AND AUSTERITY MEASURES

REF: BUDAPEST 1158

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


1. (SBU) As Parliament is preparing to finish its Autumn
session with the passage of a leaner 2009 budget bill, a
growing number of current and planned transportation industry
and public sector employee strikes are disrupting daily life
in Hungary, and increasing pressure on the cash-strapped
government to provide relief it cannot afford.

TRANSPORTATION STRIKES


2. (U) On December 10, two trade unions at Budapest's
Ferihegy Airport initiated an indefinite strike after having
failed to reach agreement on a new collective bargaining
agreement with the airport operator, Germany's Hochtief. The
union's demands include additional compensation and an end to
layoffs and outsourcing. Although one of Ferihegy's three
terminals remains open and most flights continue to operate,
the delays and uncertainty about possible cancellations has
caused considerable headaches for travelers, and has caused
some airlines to transport passengers two hours by bus to the
airport in Vienna. By December 15, the airport had announced
its intention to bring in foreign personnel to supplement the
Ferihegy workforce.


3. (U) On December 14, the Free Union of Rail Workers
(VDSZSZ) began a nationwide rail strike, seeking a share of
the privatization revenue from MAV Cargo and a pay supplement
for employees of outsource subsidiaries. Although only a
portion of the city's metropolitan transportation network
will likely be affected, a separate half-day strike is
planned by trade unions of the Budapest Transport Company
(BKV) on December 18 unless management meets union demands
for new legislation on financing the city's transport
services.

PUBLIC SECTOR OPPOSITION TO AUSTERITY MEASURES


4. (U) Following the GoH announcement of budget cuts to meet
stabilization package requirements, an estimated 20,000
public sector workers demonstrated on November 29 against
government plans to freeze wages and abolish "13th month"
salaries for public sector workers. Union leaders
subsequently announced an open-ended public sector employee
strike beginning January 12, and have expressed "solidarity"
with airport employees as well.


5. (C) The government is currently in negotiations with
public sector employee unions over the planned measures, but
given government budget constraints, there seems to be little
hope for resolution. Although Cabinet Minister Kiss - the
government's point man on negotiations with the public sector
employees' unions - has attempted to project confidence in
contact with us, these labor problems arrive at a time of
more bad news regarding industrial production, exports, and
manufacturing orders.


6. (C) Some believe that many union demands are unrealistic
attempts to press for the best possible contracts before the
expected economic contraction in 2009. Even outside
observers like Hungarian Academy of Science President Joszef
Palinkas expressed the view that railway trade union demands
that each employee receive HUF 250,000 (USD 1250) for the
privatization of MAV Cargo were "nonsense" and "totally
unrealistic."

GOVERNMENT EASING OF AUSTERITY MEASURES?


7. (C) On December 15, the IMF issued a statement noting that
Hungary is on track to meet its fiscal adjustment targets for
2008 and 2009. At the same time, however, there are reports
that the government is considering rolling back some of its
planned austerity measures affecting public sector employees,
including offering to restore the 13th month payment to
public sector workers, albeit at a capped level of HUF
140,000 (USD 700). The union reportedly rejected this offer,
however, as insufficient. Observers are concerned that
rolling-back the announced austerity measures will further
undermine the government's credibility and make it more
difficult for it to meet deficit reduction targets. K&H Bank
Chief Economist Gyorgy Barcza notes that the Government may
find itself in the worst possible situation - announcing a
compensation package for public sector employees that weakens
the announced austerity package measures, but does not bring
an end to public sector strikes.

BUDAPEST 00001192 002 OF 002




8. (C) Although Minister Veres insists that maintaining
fiscal discipline is the government's top priority, and that
it has little room to maneuver in negotiations with public
sector employees, the GOH is under increasing pressure to
ease some of the planned cuts affecting public sector
employees. The opposition is adding to this pressure, with
comments like those of Fidesz MP Robert Repassy that the
government's austerity measures are "brutal" and will put
700,000 - 800,000 families in "dire straits." Some
economists have also expressed concern that any budget
reserves are needed to offset lower government revenue
resulting from a lower-than-expected inflation rate, and
should not be used as a bargaining chip to prevent strikes by
public sector employees.

NEW YEAR'S IRRESOLUTION


9. (C) Comment. The GoH cannot discount the prospect of
rolling strikes through the holiday period as unions in
diverse economic sectors press for the best possible
contracts before the expected contraction of 2009. As one
contact quipped, "Parliament may be off for two months but
the bad news keeps right on coming." All joking aside, the
government simply cannot accommodate the unions various
demands given the terms of the international stabilization
package. Although there is widespread public frustration
with the strikes and often with the strikers, the government
will win few points for holding a line most Hungarians see as
having been drawn in Brussels and imposed in Budapest. End
comment.
Foley