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