Hungarian coalition's fall signals end of reforms

HUNGARY:  Hungary's junior coalition party said yesterday it would quit the government in protest at Socialist Prime Minister Ferenc Gyurcsany's refusal to back its economic reforms, but pledged not to force an early election.

Mr Gyurcsany had earlier sacked Health Minister Agnes Horvath of the Alliance of Free Democrats following a defeat in a referendum on health reform this month, and said he would amend a law already passed by parliament to let private money into health insurance.

The end of the coalition, which has ruled Hungary since 2002, effectively signals the end of economic reforms and a period of political instability at a time when Hungary's currency and bonds are vulnerable to sharp market selloffs. It may also seal the fate of Mr Gyurcsany, who is at best a lame-duck prime minister and at worst a liability for his party, although the Socialists pledged to continue supporting him.

"With his speech over the weekend, Ferenc Gyurcsany has backtracked ... from our coalition agreement. Therefore the Free Democrats do not wish to continue cooperating with the government in the form of a coalition," party leader Janos Koka told a press conference yesetrday.

Mr Koka said his ministers would withdraw on April 30th and appeared to suggest that his party would support a minority Socialist government from the outside. "It is not the intent nor the interest of the Free Democrats to force early elections," he said.

Mr Koka also said his party might change its mind on leaving the coalition if the Socialists, currently scoring just 15 per cent in opinion polls, replaced Mr Gyurcsany.

The Socialists backed the prime minister after a meeting of top party officials. "The Socialist Party supports Ferenc Gyurcsany," said Istvan Nyako a spokesman for the government.

Political analysts said it was a moot point whether Mr Gyurcsany, who ousted the incumbent prime minister in a party coup in 2004, would stay in power for his full term.

"For the first time in a long time the Free Democrats jointly stood up for the same cause ... It remains to be seen whether the Socialists will do the same for Gyurcsany; this will decide the final outcome," said political analyst Zoltan Somogy.

Early elections would almost certainly result in the Socialists being forced from power and the annihilation of the Free Democrats, who stand at just 1 per cent support in surveys, far below the 5 per cent threshold for entering parliament.

Mr Gyurscany could either rule in a minority government or try to persuade at least four Free Democrats to join the Socialists, enough for an outright majority.

The forint hit a low of 261 to the euro yesterday after the political crisis broke, down from 257 on Friday, on concerns over the government and growing risks that it would break promises to the EU to cut the budget deficit.

© 2008 Reuters

This article appears in the print edition of the Irish Times