CENTRIFUGAL FORCE: QUESTIONING THE COALITION

C O N F I D E N T I A L SECTION 01 OF 02 BUDAPEST 000317 SIPDIS SIPDIS DEPARTMENT FOR EUR/NCE; PLEASE PASS TO NSC FOR ADAM STERLING E.O. 12958: DECL: 03/25/2013 TAGS: PGOV PREL KDEM HU SUBJECT: CENTRIFUGAL FORCE: QUESTIONING THE COALITION REF: BUDAPEST 270 AND PREVIOUS Classified By: P/E ERIC V. GAUDIOSI; REASONS 1.4 (B) AND (D) TOIL AND TROUBLE IN THE COALITION ¶1. (C) Strains within ) and between - the MSzP and the junior coalition partner SzDSz are becoming visible as they approach their respective spring meetings. ¶2. (C) Ironically, Prime Minister Gyurcsany may be the less lame duck despite the results of the March 9 referendum (reftel). Despite continuing rancor with party insiders like Defense Minister Szekeres, a combination of public resolve and private contrition appears to have staved off the prospect of an immediate move against him by his rivals within the party. That said, Political Scientist Zoltan Kiszelly observes that the PM seems to be on probation. MSzP MPs are going public with their intention to win the 2010 national elections "with Gyurcsany or without him." The Prime Minister reportedly pledged to work more closely with the parliamentary faction at a closed-door meeting March 23, and the latest thinking is that the party will reserve judgment until later this year or early 2009. ¶3. (C) Political Scientist Kornelia Magyar believes that tempers within the MSzP will cool, characterizing the immediate reaction following the referendum as "panic by those who didn't realize that defeat was inevitable." She sees little chance of a move against Gyurcsany in the near-term, but believes the PM will have to continue his "penance" at the party's upcoming congress on March 29. The majority of our contacts agree, but do not discount the possibility of a "revolt" at this weekend's meeting, perhaps to force Gyurcsany to step down as Party President. ¶4. (C) The space to watch, both Szekeres and Magyar advise, is the brewing conflict within the SzDSz and the potential rupture of the coalition. DEATH OF A SALESMAN? ¶5. (C) Long-standing allegations of irregularities during last year's election of Janos Koka as SzDSz Party President have snowballed into a major challenge to his leadership. Although the charges of fraudulent voting during last year's party congress remain under investigation, Koka's public comments that he "would have won anyway" have prompted Minister of Environment Gabor Fodor ) who lost the party presidency to Koka by a handful of votes ) to "suspend" his membership in the party. Fodor has been joined by several other SzDSz officials, including MEPP (and aspiring Foreign Minister) Istvan Szent-Ivanyi, and even long-time Budapest Mayor and SzDSz icon Gabor Demszky may follow suit. At this point, SzDSz National Council member Laszlo Csozik believes a new election may be necessary to clear the air. Koka has called for an extraordinary meeting of party delegates to discuss the issue, and Csozik expects the SzDSz's National Council to clear the way for a revote later this summer when it convenes on April 4. ¶6. (C) The scandal comes at a terrible time for Koka, who has little to show for his year at the helm. His ambitious reorganization of the party bureaucracy is still a work in progress. Health care reform legislation, a key priority for the SzDSz which Koka has made a condition of their continued participation in the coalition, appears to be moving toward either a public referendum in the fall or preemptive revision by the MSzP. Having left the Ministry of Economy to focus on his party responsibilities, Koka has lost his bureaucratic base to weigh in on issues ranging from transparency to energy security (though many in the business community remain underwhelmed by his performance and opposition officials feel poorly done by Koka's perceived grandstanding on the energy issue). ¶7. (C) Worse still, the party's poll numbers continue to hover below the five percent threshold required for representation in Parliament. Conservative commentator Ivan Baba believes the party rank-and-file have no sentimental reason to support Koka, a doctor-turned-entrepeneur widely regarded by older SzDSz hands as a "sky-diver" who joined the party without any real ideological connection to its base. (Note: In contrast to Koka's high profile, Fodor has cultivated an intellectual air very much in keeping with the party's self-image. His supporters seem willing to overlook persistent questions regarding his work ethic ... to say nothing of his original membership in FIDESZ and his relationship with President Solyom, and MSzP members seem to regard him as more "reasonable" when it comes to health care reform. End Note.) BUDAPEST 00000317 002 OF 002 DON'T LET THE DOOR HIT YOU ( ¶8. (C) Many in the MSzP will not bother to conceal their glee at Koka's troubles. As one MP commented, "even if there isn't a crisis in the coalition, there is a need for one." For the Socialist bedrock, the "agitation" of the SzDSz on reform has led the coalition to the brink of electoral disaster. Although the MSzP continues to take a beating in the polls, the much smaller SzDSz is facing extinction. With that threat in the air, the Socialists may throttle back further on reform, effectively daring the SzDSz to walk out of the coalition ( and into presumed oblivion. Although neither side wants new elections, the MSzP senses a relative advantage in that it would lose but at least survive. Their calculation - and Csozik's confidential admission - is that either a damaged Koka or a new replacement would likely prove a more docile partner. (That might entail, Csozik tells us, giving up the Ministry of Health in exchange for the MFA, thus putting the controversial issue of health care reform in more "reliable" Socialist hands.) Even if the coalition does split, some Socialists insist, the MSzP could pursue an agreement with the independent Hungarian Democratic Forum (MDF),or even hold a narrow majority in Parliament without the SzDSz (while still counting on them to support the government should the opposition initiate a vote of no-confidence). THE TORCH HAS BEEN DROPPED ¶9. (C) Comment: High dudgeon nothwitstanding, inertia and self-interest still argue for the coalition to hold together - especially with the opposition polling at record highs. Csozik believes that the coalition will survive this latest strain as it weathered the crisis of Prime Minister Medgyessey's replacement in 2005, and Szekeres admits that "the MSzP cannot move until the SzDSz puts its house in order." Although that may take time, the walls appear to be closing in on Koka. With his departure ) or his defeat in a special election ) the MSzP and the SzDSz might be able to broker a new agreement. But the coalition can no longer be taken for granted by either party. Nor, if the SzDSz's poll numbers are any guide, can the public appeal of their message of a trans-Atlantic foreign policy and a pro-reform domestic agenda. End Comment. FOLEY