THE PARTY LINE: WHAT PM GYURCSANY'S SUPPORTERS ARE

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E.O. 12958: DECL: 02/24/2013
TAGS: PGOV PREL ENRG KDEM HU
SUBJECT: THE PARTY LINE: WHAT PM GYURCSANY'S SUPPORTERS ARE
SAYING

REF: A) BUDAPEST 155 B) BUDAPEST 83 C) BUDAPEST 122

D) BUDAPEST 182

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

A WINNING COMBINATION?


1. (C) With his personal popularity ratings still mired well
below 20 percent as he nears the half-way point of his term,
Prime Minister Gyurcsany appears to be playing small ball in
an effort to gradually recoup his standing with the public
(REF A).

Key elements of his public message will likely include:

Playing up the economic impact of further EU-funded
development projects;

Downplaying the March 9 referendum as a "technical exercise"
rather than a "political event";

Rehabilitating his image with international investors by
discussing "tax relief" as a goal for 2009;

Reaching out to wayward MSzP supporters with a "Public
Ownership Initiative" designed to offer citizens subsidized
shares in publicly-held corporations ... thus blunting the
appeal of the opposition's populist rhetoric; and,

Ratcheting back on austerity measures, including by quietly
lifting hiring and salary freezes in the public sector.

THE VIEW FROM GYURCSANY'S CORNER


2. (C) Vocal Gyurcsany loyalists are harder and harder to
find, but Tibor Desszeweffy of the liberal think tank DEMOS
made a vigorous case for the PM at a briefing for the
diplomatic corps February 21. His assertions - and our
assessments - follow:

- Gyurcsany's low numbers are bad but not unprecedented.
Ruling parties have tended to bottom out at the half-way
point of their mandates, he notes, and the MSzP is the only
party to win reelection in Hungary's post-transition history.
Desszeweffy and others firmly believe that Gyurcsany is a
better campaigner than a chief executive, and profess
confidence that he will win back the MSzP base.

Our Take: The cure may be worse than the disease.
Gyurcsany's numbers have been lower longer than anyone
expected. Although even the opposition regards Gyurcsany's
ability to work the public with grudging respect, the PM's
February 18 speech to Parliament was widely viewed as a
lackluster attempt to protect his flanks from populist
attacks. Our principal concern is the prospect that fiscal
restraint will be the first casualty of any such political
offensive (REF B).

- The opposition's talk of early elections will yield
diminishing returns as the public tires of "rhetoric and
referenda" without results. "We know we'll lose on March 9,"
Desszeweffy concludes, "and we know that it won't matter on
March 10."

Our Take: The risk of popular disillusionment strikes us as
real. Although rumors are once again in circulation
regarding Gyurcsany's imminent departure, the referendum
itself cannot compel him to step down. Lopsided losses in
the referendum may motivate Gyurcsany's rivals to make a move
within the MSzP in the near term, but some voters -
particularly potential swing voters - will likely tire of a
seemingly permanent campaign (REF C).

- The SzDSz will see no alternative but to remain in the
coalition, as Gyurcsany still represents "the best bet for
reform."

Our Take: With the media focusing on allegations of fraud in
Party President Koka's election last year, the SzDSz has been
further on the defensive in the past weeks. With their
projected election returns still below the 5 percent required
for representation in Parliament, the SzDSz has few
alternatives to using what leverage it has within the
coalition. That will likely mean swallowing its complaints
that Gyurcsany has taken the credit for "their" reforms, and
overlooking slights such as the PM's reported failure to
inform them of his planned tax reductions.

- After years of constant "adjustments," Desszeweffy argues
that Gyurcsany finally has the staff he needs in the PMO to

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develop and implement his policy initiatives in the run-up to
the next elections.

Our Take: Although the clear intention is to make the PMO
the real locus of decision-making, constant turn-over there
has taken its tol. The result is a young staff - led by
newly-appointed, 28 year-old, Chief of Staff Adam Ficsor -
which often sacrifices professional experience for political
loyalty. Thus far they seem to have made more headlines and
bureaucratic enemies than progress.

THE RISK OF UNPLEASANT SURPRISES


3. (C) Comment: Personally close to Gyurcsany, Desszeweffy's
defense outlines the key tactics and themes GoH officials
will likely employ in the months ahead as they try to paint a
bad picture in the best possible light. The role of foreign
policy in this calculus remains unclear. The relative
freedom of foreign affairs may have growing appeal for
Gyurcsany given its contrast with Hungary's domestic
political gridlock. But a more activist Hungary may be a
less predictable partner. The GoH may still find itself, in
the words of one observer, "torn between doing nothing ( and
doing the wrong thing." Especially on key issues such as
energy security, Hungarian policy-making has often been
myopic in its conception and opaque in its execution (REF D).
The temptation to score domestic points will further reduce
the GoH's strategic focus and further increase the risk of
unpleasant surprises. End Comment.

FOLEY