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Hungarian report Hungarian report
by Euro Reporter
2012-04-18 07:39:20
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PM to shake up government in two weeks

Hungary's Prime Minister Viktor Orban will reshuffle his government within the next two weeks and plans to appoint a close political ally to deal with the International Monetary Fund if Budapest overcomes an impasse and formally launches talks with the fund. Citing several unnamed sources close to the ruling Fidesz party, the website said Orban would appoint a new minister in charge of healthcare and education as well as new heads of his own office and the ruling Fidesz party's parliamentary group. The Fidesz cabinet has prompted protests from foreign governments and business to two years of policy that critics say have undermined Hungary's democratic institutions, but Orban's domestic ratings remain stronger than those of his rivals even if voters say the country is on the wrong track.

Brussels' objections to several laws have also blocked talks on an EU/IMF financial backstop, with analysts increasingly suspicious Orban is not serious about a new deal a year after he walked away from earlier discussions. The government says it is doing everything in its power to begin formal talks and Origo.hu reported that if the two sides do formally come to the table, Orban would replace the minister currently in charge, Tamas Fellegi, with former finance minister Mihaly Varga. Varga, currently the state secretary heading the prime minister's office, has credibility with financial markets and with international partners, analysts said. He also has more political weight than Fellegi. But Citigroup analyst Eszter Gargyan said the changes in the government line-up would be no guarantee of progress.

"It could be positive but there is a risk that this is just yet another communication tool to pretend (we) are getting close to the start of negotiations on financial assistance," she said. Orban will only reshuffle the IMF/EU negotiating team once there is palpable progress on the loan talks. The reorganization will not affect the responsibilities of Economy Minister Gyorgy Matolcsy, architect of the government's economic policies, the web site added, a sign that Orban will stick to his guns on the economy. "As long as Economy Minister Matolcsy is in his position, there will be no meaningful shift in economic policy I think," Gargyan said.


Hungary will need to stand down in several areas in IMF/EU aid talks

It would be extremely important for Hungary to reach a credit deal with the IMF, but not primarily because of the funds the lender would provide. The situation is paradoxical because if Hungary has access to the Fund’s money it will probably not need to draw from the credit facility, Török said at Raiffeisen’s press conference today. The country needs the IMF to restore confidence in the country, as it cannot be remedied by splendid economic successes or economic policy itself, he added.

In order to achieve that the government will need to make an about turn in several areas, launch further structural reforms and carry out a regrouping of income, the chief analyst said. A deal with the IMF/EU can reduce the country’s risk premium and lead to lower yields and cheaper funding. Török estimates that an agreement on a credit line could lower longer bond yields by at least 50 basis points, but possibly by 100-150 bps too. As for the yields of shorter maturity instruments the analyst believes a deal could put the possibility of a rate cut back on the table not only in the Monetary Council but also on the market.

Török does not believe it would make much of a difference if the credit line is extended for two or three years. The deal will most likely be linked to the political cycle, he said, reminding that the Stand-By Arrangement received in late 2008 lasted until the second quarter of 2010 and that it was extended by six months by the Gordon Bajnai-led government.


Prosecutors probe Hungary lawmaker's racist speech

Geza Fazekas, spokesman for the Central Investigative Prosecutor's Office, said Wednesday that a speech by Zsolt Barath of the far-right Jobbik party is being examined because of a complaint by Rabbi Slomo Koves, who considered that the April 3 remarks agitated against Hungary's Jewish community.
Barath commemorated the "Tiszaeszlar case," the 1882 disappearance of Eszter Solymosi, a 14-year-old peasant girl which for decades stoked anti-Semitic feelings in Hungary. Her body was never found and several Jews accused of her murder were acquitted in 1884. If prosecutors think there are grounds for investigating Barath for incitement against a community they can ask for his parliamentary immunity to be removed, Fazekas said.
A proposal by the Socialist Party, the largest opposition group, to set up a parliamentary ethics committee so lawmakers can be disciplined for racist, anti-Semitic, xenophobic or anti-Islamic remarks, was supported by Prime Minister Viktor Orban and most of the deputies from his Fidesz party. Orban said the government guaranteed the safety of all minorities in the country.

"We will protect them, including the Jewish minority living in Hungary," Orban said Tuesday. Jobbik won nearly 17 percent of the vote in the 2010 elections and is the largest opposition party after the Socialists. Its slipping popularity has been based on an extreme nationalist message with strong anti-Roma and anti-Semitic overtones.

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