By Krisztina Than (Reuters)
A massive international rescue package for Hungary is intended to stabilise financial markets and may help the Socialist minority government, but ordinary Hungarians are likely to suffer from painful spending cuts.
The International Monetary Fund, World Bank and European Union have announced a much bigger than expected $25.1 billion financial package to help restore investors' confidence in Hungary's currency and financial markets, the first such package for an EU member.
The government has already made clear it will have to curb pensions and cut public sector wages next year at a time when recession is looming and unemployment rising.
In the short term, analysts say the programme, equivalent to just under a fifth of Hungary's annual economic output, is likely to galvanise enough support for the minority Socialist government to stave off pressure for an election, pass next year's budget, and quell internal party dissent.
But in the longer term, it is likely to hit voters, notably pensioners and public sector workers, disproportionately hard. The main right-of-centre opposition party, Fidesz, far ahead in polls, is already seeking to make capital out of the crisis.
BUDGET IS KEY
The hastily revised 2009 budget, which targets a deficit of just 2.6 percent of GDP against 3.4 percent this year, is key to the survival of Ferenc Gyurcsany's government.
His Socialists have been in the minority since the Free Democrats quit the coalition in April.
Free Democrat leader Gabor Fodor says it is too early to say if they will back the budget, but his party says early elections would only further erode investor confidence.
Since Gyurcsany's proposed spending cuts are broadly in line with their own policies, and the Free Democrats are languishing at around 1 percent support with little to gain from bringing him down, the budget appears likely to pass with their help.
"In the short term and medium term it (the crisis) can stabilise the situation of the government … as it seems more likely now that the budget will be passed," said political analyst Zoltan Kiszelly.
He said staving off the financial crisis should also strengthen Gyurcsany's position within his own Socialist party and that, if the crisis management lasts until March, he will most likely be re-elected then as party president.
Gyurcsany said the IMF package was a protective shield, providing Hungary with access to financing and averting the threat of default "even in the most extreme situation".
LOSS OF INDEPENDENCE?
But some Hungarians, including Fidesz, say that by turning to the IMF for help again after securing a standby credit in 1996, Hungary will lose part of its independence.
"As a citizen of Hungary, all I can say is that it is shameful that we have got to this point," Fidesz chairman Viktor Orban told a conference.
"Hungary has been on a leash before, which was dubbed IMF help, and we know exactly that this means: a partial loss of our sovereignty."
Fidesz scored 28 percent in a recent Szazadveg-Forsense opinion poll, with the Socialists on 18 percent.
The Socialists are certain to face protests from the unions and their core voter base, pensioners, against the planned pay and spending cuts, although the next election is not due until 2010.
"We should not take it (IMF help) as we will become dependent again, and now they will dictate and there will be very tough austerity measures," said Ilona Bona, a pensioner who still works to make ends meet.
"I myself have a child who is at university, and also two grown-up kids who have families, and they will be affected too."
Kornel Pechan, a professional singer, said: "This is debt for us citizens, and living off credit is never really good, in Europe at least … It was widespread in America but they ended up in trouble.