SCENESETTER FOR CODEL POE TO BUDAPEST, MAY 29-30,

UNCLAS BUDAPEST 000381 SENSITIVE SIPDIS EUR/CE FOR LAMORE; H FOR LSHANE AND CAUSTIN; H PLEASE PASS TO REP POE'S OFFICE; EMBASSY KYIV PLEASE PASS TO CODEL POE E.O. 12958: N/A TAGS: PGOV OREP PREL EFIN OTRA HU SUBJECT: SCENESETTER FOR CODEL POE TO BUDAPEST, MAY 29-30, 2009 REF: STATE 53051 ¶1. (U) Embassy Budapest warmly welcomes the visit of CODEL Poe to Budapest from May 29-30, 2009. We look forward to your visit and would like to provide the following information in preparation for your arrival. ECONOMIC AND POLITICAL CLIMATE IN HUNGARY ¶2. (SBU) The global financial crisis hit Hungary in October 2008, when global deleveraging and investor risk aversion caused a "freezing up" of the government bond market and interbank lending. Although Hungary's banking sector had little exposure to toxic assets, the government's fiscal mismanagement in recent years - including a budget deficit approaching 10 percent in 2006 - caused Hungary to be hit harder than many of its neighbors in Central Europe. In order to help restore investor confidence and ensure Hungary's ability to finance its public and private debt, the Hungarian government in November 2008 negotiated a USD 25 billion stabilization loan package with the IMF, the EU and the World Bank. In April 2009, the Hungarian government re-commenced government bond auctions following a six-month suspension, based on improved investor confidence. ¶3. (SBU) The economic downturn in Western Europe is impacting the real economy in Hungary. Hungary's open economy relies heavily on Western European markets as a destination for its exports, and the poor economic forecast in Western Europe is contributing to an expected 6.7 percent economic contraction for Hungary in 2009. As the Government imposes expenditure cuts in order to meet commitments made to the IMF to accelerate the reduction of its budget deficit, Hungary cannot use fiscal stimulus to help mitigate the effects of the economic downturn. ¶4. (SBU) After attempting for one year to govern without a Parliamentary majority and consistently trailing the opposition FIDESZ party in public opinion polls, Socialist Prime Minister Gyurcsany resigned in April 2009 and was replaced by Prime Minister Bajnai. An unaffiliated technocrat who had previously served as Minister of Development and Economy, Bajnai promised a "government of experts" with a one-year mandate to deal with the country's economic crisis. Critics, however, note that members of Gyurcsany's political circle still occupy a number of top jobs, while the government relies on the support of the Socialists and the free-market oriented Free Democrats to pass its agenda. ¶5. (SBU) In the coming months, PM Bajnai will attempt to muster political support for his USD 4.6 billion economic recovery plan, which involves substantial cuts to social welfare programs, ministry budgets, and public sector workers' benefits. The plan also includes shifting the tax burden away from labor to wealth and consumption. Analysts are cautiously optimistic, noting that if Bajnai is able to successfully implement the plan, it will enable Hungary to reduce its budget deficit and improve its competitiveness. Bajnai faces an uphill battle, however, as FIDESZ and public sector labor unions strongly oppose key elements of the plan, while the Socialists will probably be increasingly reluctant to vote for measures that negatively impact their core constituents as 2010 elections approach. ¶6. (SBU) The campaign for the European Parliament is currently underway with elections scheduled for June 7. FIDESZ is attempting to cast the election as a referendum on the Socialist government. The Socialists--almost certain to do poorly--are attempting to downplay the significance of the election. A disturbing element in this election is the presence of Jobbik, a far-right party espousing a divisive mix of anti-Roma, anti-Semitic, and anti-globalization ideology. Polling indicates Jobbik may garner the necessary 5 percent to enter the European Parliament. COOPERATION ON DEFENSE, COUNTER-TERRORISM, AND LAW ENFORCEMENT ¶7. (SBU) Although focused largely on the state of the economy and the domestic political situation, Hungary is a regular contributor to NATO missions in the Balkans, Afghanistan, and Iraq. Hungary has committed to keep 1,000 troops abroad serving in various alliance and coalition (NATO, EU, OSCE, UN) missions, the third largest contingent as a proportion of force strength, behind the U.S. and the UK. Hungarian soldiers currently participate in 21 missions outside of Hungary, half of whom are in the Balkans. Hungary has led a Provisional Reconstruction Team in northern Afghanistan since 2007, assumed control of Kabul International Airport last fall, and will send a 40-man infantry platoon to support Afghan elections in August. In January 2009, Hungary and the Ohio National Guard deployed a Hungarian-led combined infantry Operational Mentoring and Liaison Team to train an Afghan National Army battalion. Hungary also maintains a small presence in Iraq, with three soldiers on the ground training Iraqi staff officers under NATO Training Mission-Iraq. Defense spending, however, remains well below the NATO target of 2 percent of GDP as public spending under Hungary's strained government budget tends to focus on social welfare and infrastructure development. ¶8. (SBU) NATO's Strategic Airlift Capability C-17 Consortium is preparing to base its operations at Papa Air Base in Western Hungary. The U.S. presence will include 60 Air Force personnel and 90 U.S. contractors. Boeing will conduct all maintenance on the three aircraft to be based at Papa. The first C-17 is slated to arrive in July. ¶9. (SBU) Hungary remains a committed partner in the fight against terrorism and has worked hard to bring its legal regime concerning counter-terrorist financing up to international standards. Hungary is a member of the Council of Europe's MONEYVAL, and Hungary's small but active Financial Intelligence Unit has been a member of the Egmont Group since 1998. Although Hungary does not maintain a separate domestic list of suspected terrorists and terrorist organizations, it fully implements the UN 1267 Sanctions Committee and EU lists. ¶10. (SBU) Bilateral cooperation in the area of law enforcement is excellent. For example, for the past nine years, the FBI has led a unique joint organized crime task force with the Hungarian National Bureau of Investigation. The task force's primary mission is the investigation of Eurasian organized crime groups with a nexus to Hungary and the United States. Moreover, the task force has engaged in joint investigations with regional partners throughout Europe, targeting organized crime groups, money laundering, and cyber fraud. ¶11. (SBU) The International Law Enforcement Academy (ILEA) in Budapest was established in 1995 as part of an international network of law enforcement academies intended to combat international drug trafficking, criminality, and terrorism through strengthened international cooperation. ILEA Budapest is supported by the Hungarian Ministry of Justice and Law Enforcement, the U.S. Department of State, U.S. law enforcement agencies, as well as law enforcement agencies from throughout Western and Central Europe. ILEA Budapest provides a core eight-week course as well as shorter courses for mid-level officers from 27 Central and East European and Central Asian countries. The majority of the instructors are active officers of U.S. federal law enforcement agencies. Over the past 14 years, training has been conducted in more than 16 languages to over 13,000 police officers. YOUR MEETINGS IN BUDAPEST ¶12. (SBU) On Saturday, May 30, your day will begin with a briefing by key members of the country team, led by Charge d'Affaires Levine. The briefing will cover essential elements of Hungary's political and economic situation as well as aspects of our cooperation with Hungary on defense and counter-terrorism. ¶13. (SBU) Following the briefing, you will meet at our Embassy with Ambassador Karoly Banai, State Secretary for Foreign and Security Policy in the Prime Minister's Office and a rough equivalent of our National Security Advisor. An extremely effective career diplomat, Banai is the senior official in the PMO responsible for defense and security policy and is a valuable interlocutor to the Embassy on a range of issues beyond his foreign and security policy portfolio, including domestic economic reforms and energy security. As Hungary will assume its presidency of the European Union during the first half of 2011, you may consider inquiring whether Hungary has thought about ways to use its presidency to promote further cooperation in the fight against terrorism and support for NATO's operation in Afghanistan. ¶14. (SBU) We are working to arrange a meeting with an appropriate official from the Ministry of Defense. ¶15. (SBU) After meeting with Hungarian officials, we have arranged for you to visit ILEA Budapest, where ILEA Director Penny Hoback will guide you on a tour of the facility and provide additional detail on U.S.-Hungarian cooperation in law enforcement and counter-terrorism. ¶16. (SBU) When you return to your hotel, you will meet Peter Dunai, a journalist from Nepszabadsag, Hungary's largest circulation newspaper, for a short interview. ADMINISTRATIVE DETAILS ¶17. (U) The Control Officer will be Economic Officer Jeff Jordan. Office tel: ( 361) 475-4226; cell: ( 36-30) 274-4180; fax: ( 361) 475-4027; e-mail: jordanjm@state.gov. The Embassy is located at Szabadsag Ter 12, District 5. The Embassy's telephone number is (361)475-4400. Control Officer will meet and assist upon arrival. ¶18. (SBU) Hotel reservations have been made for the CODEL party at the Hotel Intercontinental Budapest, Apaczai Csere Janos u. 12-14, 1052 Budapest, telephone number: ( 361) 327-6355, fax number: ( 361) 327-6655. The room rate is USD 153, including taxes, service and breakfast. ¶19. (U) For U.S. citizens, visas are not/not required in diplomatic, official, or tourist passports for stays in Hungary of less than 90 days. A visa is needed in any type of passport for stays over 90 days. ¶20. (U) There have been no acts of terrorism directed against U.S. interests in Hungary. However, the U.S. Government remains deeply concerned about the security of U.S. citizens overseas. ¶21. (U) Although appreciably low by U.S. standards, Budapest has petty thefts and pickpockets like most urban centers. Budapest visitors are cautioned to be wary of currency scams. Routine scams include overcharging at clubs, cafes, and restaurants around Vaci Street (the central pedestrian area), fake police officers requesting to inspect the money in your wallet, and local ladies offering to practice their English language skills at a local pub with drinks which are outrageously overpriced. Specific clubs and restaurants engaging in unethical business practices and local nightspots of questionable reputation should be avoided and have been identified on the Budapest Embassy web site, www.usembassy.hu. Violent criminal acts are rare; visitors can best ensure their personal safety by exercising the same common sense security precautions and good judgment that one would employ in any other large, cosmopolitan area. ¶22. (U) We look forward to greeting you in person on May 29. Levine