NEW HUNGARIAN PRIME MINISTER OR EARLY ELECTIONS?

C O N F I D E N T I A L BUDAPEST 000234

SIPDIS

DEPARTMENT FOR EUR/FO AND EUR/CE JAMIE LAMORE. PLEASE PASS
TO NSC JEFF HOVENIER AND KHELGERSON

E.O. 12958: DECL: 03/24/2014
TAGS: PGOV PINS HU
SUBJECT: NEW HUNGARIAN PRIME MINISTER OR EARLY ELECTIONS?

REF: BUDAPEST 225

Classified By: Acting P/E Counselor Jon Martinson, reason 1.4 (b,d)


1. (U) Summary. Negotiations continue between the ruling
Socialist party and their former coalition partner Free
Democrats on a Prime Minister candidate to replace Ferenc
Gyurcsany. Gyorgy Suranyi, former National Bank governor,
appears to have SzDSz support, but he publicly states he will
only accept the nomination if the opposition Fidesz party
agrees to a "cease fire." If the constructive
vote-of-no-confidence fails to elect a new PM -- and
Gyurcsany still follows through with his resignation -- a new
PM could be nominated by President Solyom. For the first
time, today Solyom publicly supported early elections as the
most democratic way to form the new government. End summary.

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POTENTIAL MSZP/SZDSZ AGREEMENT - FIDESZ OPPOSITION
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2. (C) Following Prime Minister Gyurcsany's announcement that
he will resign following a constructive
vote-of-no-confidence, currently scheduled for April 14
(reftel),the governing Socialist party (MSzP) and former
coalition partner Free Democrats (SzDSz) are working towards
an agreement on an acceptable Prime Minister candidate.
Currently, MSzP proposes three potential candidates: Gyorgy
Suranyi, former National Bank governor; Ferenc Glatz,
historian, and one-time Minister of Culture in the last
communist government; and Andras Vertes, CEO of the GKI
Economic Research Institute. Suranyi is emerging as the most
likely choice, however, he has stated publicly that he is
still uncertain as to whether he will accept the offer.
(Comment. Karoly Banai, the Prime Minister's Security and
Foreign Policy Advisor, told the Ambassador on March 24 that
Suranyi told the SzDSz leadership that if the opposition
Fidesz party does not agree to call a "cease fire" on
targeting a Prime Minister who pushes needed economic
reforms, he would be reluctant to accept the offer. During a
dinner meeting with the Ambassador on March 23, Fidesz
President Viktor Orban, having just met with Suranyi, told
the Ambassador that he, Orban, had already "killed several
potential Prime Minister candidates," reflecting Orban's
intent to continue to push for early elections rather than
support any PM candidate, "even if one came from the right."
End comment.)


3. (C) SzDSz party executive committee member Matyas Eorsi
(strictly protect) told EmbOff on March 25 that he tried to
convince Suranyi to accept the nomination with the proviso
that Suranyi demand that SzDSz join in a coalition government
again with MSzP. Eorsi said that Suranyi does not want to
lead a minority government, and as the Socialists do not have
a majority in Parliament, Suranyi would need SzDSz support in
any case. Eorsi estimated that the two parties would come to
an agreement on an acceptable candidate within the next two
days, and SzDSz MP Klara Sandor told the Ambassador on March
25 that the Suranyi candidacy is "a done deal."

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FAILED NO-CONFIDENCE VOTE - WHAT THEN?
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4. (C) If MSzP and SzDSz agree on a PM candidate within the
next two days, the proposed April 14 constructive
no-confidence vote may occur as early as April 8. If the
motion does not pass and Prime Minister Gyurcsany steps down,
as he has stated, then President Solyom has to nominate a new
PM candidate. If Parliament does not elect the President's
nominee within 40 days, the President must dissolve
Parliament and set a date for new elections. (Comment.
During the Ambassador's farewell call with President Solyom
on March 25, the President restated his morning comments to
the press that early elections would be the most democratic
method to select a new government. Stating that MSzP and
SzDSz are only agreeing on a PM candidate and not a platform
or a coalition to support a platform, the result will be
another year of ineffective government. With early elections,
all the political parties would be forced to outline for the
voters their plans, a more democratic option that would
result in leadership that has a clear mandate from the people
and a greater ability to address Hungary's economic crisis.
End comment.)

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THREE TOP CANDIDATES
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5. (U) Summaries of the top three candidates follow.

- Dr. Gyorgy Suranyi

Dr. Gyorgy Suranyi continues to be considered by most as the
leading candidate to replace Prime Minister Gyurcsany (see
reftel for additional biographical information). Among the
current candidates, he also appears to be the one most
favored by markets, given his experience as National Bank
governor and his role in earlier economic reforms. An
economist by training, he is seen as both competent and
credible, and enjoys relatively high personal poll ratings.
Although close to the socialists, the fact that he has been
in the private sector for much of the last decade insulates
him from most of the blame for Hungary's current economic
situation.

- Andras Vertes

Since 1987, economist Andras Vertes has been the CEO of the
Economic Research Institute (GKI),one of Hungary's four
major research institutes. Although nominally independent,
GKI analyses tend to support the current government. Born in
1951, Vertes is a graduate of the Budapest University of
Economics, and his primary research focus is macroeconomics
and economic policy. He began his career at GKI in 1975. In
1981 he moved to Hungary's National Planning Office. He
returned to GKI in 1987, first as director and later as CEO.
He has served on a number of economic-related advisory
committees to socialist governments. In 1990, Vertes made an
unsuccessful bid for Parliament as an MSzP candidate.

Although a respected economist, Vertes lacks Suranyi's
finance background and government experience. Many believe
he also lacks the political strength to push through
significant economic reforms. On Hungary's economic crisis,
Vertes characterized Hungary's biggest problem as "the
over-politization of the economic situation." His
priorities for addressing the economic crisis include
preserving financial stability, ensuring that government debt
remains below three percent, and that Hungary develops a
credible Euro-accession plan.

- Ferenc Glatz

Ferenc Glatz is a historian and former President of the
Hungarian Academy of Science. In 1968 he worked for the
History Institute of the Hungarian Academy of Sciences, and
served as Minister for Education and Culture under Prime
Minister Nemeth. In 1996 and 1999 he was elected president
of the National Academy of Science. The reorientation of the
direction of the Academy is considered to be among his major
achievements, refocusing attention on the possibilities,
advantages and turmoil as a result of Hungary's change in
political system and EU accession. At the end of 2008, Glatz
took part in the establishment of the Reform Alliance, which
has put forth a proposal for structural economic reform for
Hungary. Glatz is not viewed as the most likely candidate,
however, as his lack of economic experience appears to make
him an unpalatable candidate for SzDSz. In addition, a
number of analysts question whether he would have the ability
to successfully navigate Hungary through its current economic
crisis.


6. (C) Comment. Although Post views Suranyi as technically
well qualified, his quiet, unassuming nature may not serve
him well in the rough and tumble world of Hungarian politics.
His first public comments concerning his potential
candidacy, stating that he would need Fidesz's support in
order to accept the PM position reflects a certain political
naivete. The current state of affairs surrounding a
potential new Prime Minister reflect the volatile, polarized,
Hungarian political climate. The Socialists need the Free
Democrats support for any potential PM candidate to enhance
the possibility for a successful constructive
vote-of-no-confidence. While SzDSz has stated that they are
willing to work towards an agreement on a candidate, they are
not willing to join a coalition. Eorsi's suggestion to
Suranyi that he accept the nomination only on that condition,
while understandable, may only heighten Fidesz's rhetoric,
railing against any new government as illegitimate, with the
only solution being new elections. Even if the
non-confidence motion fails and the Prime Minister steps
down, the constitutional process to elect a new PM makes it
highly unlikely that Fidesz's goal to hold national elections
in conjunction with the European Parliamentary elections in
June would be possible.
Foley