Index recently ran a condensed political analysis from financial analysts at Erste Bank, entitled The Market doesn’t care for Grand Coalitions. The upshot of the article is that across Central Europe, the political scene is characterized by weak parliamentary majorities. The writers give a general overview of East-Central Europe, which is unfortunately so severely condensed as to be nearly unusable to a foreigner, as the writer has conveniently renamed the Czech, Slovak, and Polish political party names into Hungarian equivalents that do not always translate well… but it backs up the general unease felt by the markets at the thought of stagnating “grand coalitions” of opponents unable to actually do anything but accrete new layers of muddled regulations.

However, along with this Erste Bank’s analysts give a description of Parliamentary events for the upcoming April election in Hungary (which will then be followed pretty-much region-wide), and either the bankers, or else Index’s writer demonstrates the clear difference between politics under a parliamentary system, vs. a presidential/congressional system.

An abbreviated translation follows:

Hungary: American Model, probable neutral effect on market
Since the 2002 elections, the following Parliamentary seats are in place(FN1):
178 for the Socialist Party (MSZP)
20 seats for the Free Democrats (SZDSZ)
164 for the Young Democrats (FIDESZ — pronounce it “feed ace,” with the stress on the first syllable)
24 for the Hungarian Democratic Forum (MDF)

Since then, four seats have moved from MDF to FIDESZ, and there are 12 independent seats.
The MSZP/SZDSZ coalition is fragile, and the opposition won the 2005 presidential election. The Prime Minister, who has been in office since September, 2004, is Ferenc Gyurcsany.(FN2)

According to Erste analysts, it is uncertain if SZDSZ can make the 5% total vote required to actually hold seats in the parliament, and MDF has a “minimal chance” to make the same requirement. This is critical, because with the two large parties enjoying almost equal support, the success or failure of the small parties make or break the deal, election-wise.

Because the race is tight, the primary questions being addressed are not reforms, but rather populist questions such as energy prices, pensions, social services, etc.(FN3) The most important tasks for the Hungarian regime will be the reform of state administration, healthcare, education, and a badly-needed reform of the tax system.

According to analysts, the market will not penalize either party in government, in the hopes of reforms being carried out shortly after election (i.e., strong market correction because of lack of foreign investors, or state-deficit financing woes). Investors generally see good and bad in both the major parties, and therefore don’t see much difference which is in power so long as “something happens” on the reform front. For that to happen, however, what is needed is a strong majority.

General odds for next government:
MSZP+SZDSZ – 45%
FIDESZ (minority) – 40%
FIDESZ+MDF – 15%
FIDESZ+MSZP – 0-2%

If MSZP+SZDSZ wins, or if FIDESZ+MDF win, the markets will respond positively. However, if FIDESZ wins alone in a minority government because the MDF could not stay in parliament, this will be received negatively, as FIDESZ has a historical tendency to make nationalist and anti-market statments, particularly in regards to privatisation. Similarly, a “Grand Coalition” with FIDESZ+MSZP, although the least likely possibility, would be received very badly.

So, what’s the point? What makes this any different than any generic political report for the region? Well, it’s the perception… this dilemma is presented as equivalent to politics in America, because there is vitriolic antagonism between two parties whose very close demographic split makes it hard to form a government, and where the two heads of the parties are continually at each others’ throats.(FN4)

Of course, this is nothing like America at all, and as mentioned at the beginning of this entry, the difference between the two can be laid directly at the feet of the differences between a Parliamentary and a Presidential political regime. In Hungary, as well as throughout Central Europe, politics is bitter, because a parliamentary system controls so much of the government, and therefore daily life, in some cases all the way down to who gets tenure and who gets to be Department Head at one’s University. It’s 24/7 high-stakes bingo, and whoever manages to fill in Parliament first gets to take it all.

Beyond that, though, simply explaining where the metaphors break down takes an entire evening and at least two bottles of wine (Americans beware, Europeans actually seem to get better at foreign languages the more they drink.) George Bush would love to have as much control over the Republican Party as either Gyurcsany or Viktor Orban have over their respective parties. The utter revolt within the Republican party over Harriet Miers’ nomination, and the ongoing one regarding pork spending, would be simply unthinkable in Hungary. With the Democrats out of power, it’s hard to even say who might be the head of their party… Howard Dean as DNC head? The comparison doesn’t work, because however much Dean may be able to get attention behind the scenes in fundraising, or out in public due to his position, Democrats in office are pretty much free to support him, completely ignore him in public, or even use him for target practice, depending on what favors re-election with local constituencies. Anybody who tried that in Hungary would be politically “on the street” by the afternoon.

With misunderstandings like this, it’s no wonder Europe and the U.S. are divided: just because they’re both “western democracies” doesn’t mean that they play politics by the same rules, or even using the same pieces and game board.

Footnotes:
1. Quick party overview, as Hungarian politics can be confusing. The MSZP is socially left-wing, and economically towards the right. The SZDSZ can be considered as a sort of “libertarian lite,” but it often breaks down to be essentially a bourgeois/small-business party, rather than libertarian as understood in the American context. The MDF is a socially very conservative, and economically middle of the road by European standards — it tends to be the “old peoples’ party,” in coalition with FIDESZ. FIDESZ is populist and theoretically anti-communist, though it tends to be economically very left-wing, and is infamous for its policy positions blowing with the wind of whatever poll happens to be have been taken recently.)

2. Gyurcsany is a businessman-cum-politician who has made a sincere effort, but is obviously out of his depth, and gets no respect at all except from the truest of the true believers amongst his own party.

3. This is especially critical because of the strict and somewhat cruel EU accession policies mandating artificially “EU-harmonized” prices in a country where salaries and purchasing power are nowhere even vaguely near the EU average, meaning that the Hungarian middle class is crushed and the lower class barely surviving. (For example, a back-of-the-envelope calculation I made last time I was in Budapest in November put prices for chicken at a buying-power-adjusted $9/lb.)

4. The primary rhetorical battle lines run as follows: FIDESZ: “The MSZP are a bunch of unreformed communists trying to stamp out traditional culture and ruin the middle class” (and where nobody can overhear it: “for the sake of the gypsies.”) MSZP: “FIDESZ and Viktor Orban are a bunch of demogogues who blow in the wind and pass out promises like candy, but have no concrete proposals.”

Russell is a new contributor at Publius Pundit. He is fluent in Hungarian and will be posting about the country and the region. He also blogs at Boxing Alcibiades.