Referendum to result in decisive “yes” for indecision

Hungarians will go to the polls on Sunday for a referendum aimed at overturning three “user fees” for certain government services recently introduced by the government with the aim of trimming the country’s dire fiscal budget and streamlining its dysfunctional public administration. While public opinion polls in the days leading up to the vote have been ambiguous – all point to a “win” for those supporting canceling the fees, but most are mixed on whether turnout will be high enough to validate the vote – one thing is clear: the referendum will mostly serve to further muddy Hungary’s already deeply confused political and economic situation.

The drive for referendum was begun even before the government introduced the fees on doctors’ visits, hospital stays and college tuition. On October 23, 2006, a chaotic day when riots enveloped parts of downtown Budapest, opposition leader Viktor Orbán announced his party’s intention to force a popular vote on elements of Prime Minister Ferenc Gyurcsány’s much-needed austerity program. Though Fidesz’s original plan was to put up to seven questions on the ballot, the list of demands was gradually culled to Sunday’s final three.

Superficially, the vote is straightforward. Should Hungarians have to pay a small charge every time they see a doctor or stay in a hospital, or tuition fees when they enroll in an institution of higher learning? Likewise, it is clear that most Hungarians don’t want to pay for such public services, and most who turn out on Sunday will vote to void these fees, regardless of their relatively insignificant size – the doctor and hospital visit fees are a flat Ft 300, or just over €1 – and irrespective of a consensus that the institutions getting the money are in desperate need of funds and reform.

But it is also apparent that most voters consider the referendum a gimmick at best, and don’t expect it to result in any meaningful change. They are right.

Already, the government is making it clear that, regardless of the outcome on Sunday, it will continue its efforts to rein in the state’s still dangerously high fiscal gap, and to rationalize the provision of public services. The fact is, the Hungarian state simply doesn’t have any choice but to begin charging its citizens for the myriad services it provides, and to make these services work better. So a victory for the “yeas” will be less like popping a balloon and more like quickly squeezing it – what’s displaced will simply bulge out somewhere else.

Meanwhile, with Fidesz already the undisputed favorites to win the 2010 general election, the party has no reason to try to actually pop this balloon of reform. As the benefits of the austerity package and public administration reforms are likely to only become apparent once it is safely returned to power, while making the government ever more unpopular, Fidesz’s interests are strongly served by a deepening of the very reforms it is so vehemently campaigning against.

At the same time, a valid “yes” vote will certainly weigh on the country’s economy, especially in terms of attracting new investment, and the appetite abroad for the billions of forints of bonds the state needs to sell to finance its chronic overspending. But as bond traders say, this kind of nonsense is already “priced in.”

As for the medium-term political implications of the referendum, they are similarly unlikely to be dramatic. Initially, Orbán and others in the opposition framed the referendum as a vote of no confidence in the government that should, if successful, force new elections. But in part because of his party’s interest in the continuation of reforms, he and others on the “nationalist left” have stepped back from this position.

It is also unlikely that the deeply unpopular Gyurcsány would quickly step down or be shown the door by his Socialist colleagues, even in the event of a humiliating landslide on Sunday. Instead, he will probably stay in office to do the donkey work of the reforms, and then let a more popular colleague – perhaps Parliamentary Speaker Katalin Szili or Defense Minister and party deputy head Imre Szekeres – take charge in advance of the 2010 vote. Unless, of course, the country’s stagnant economy begins to perk up noticeably, in which case he could conceivable stand once again for PM.

However, there is one scenario under which Sunday’s vote could trigger a political storm. Were turnout to be notably low – or, far less plausibly, were the “nays” to carry the day – Orbán would probably find his position as Fidesz head (and overall “voice of the opposition”) untenable. But having lost two general elections and overseen one referendum that failed to garner an adequate turnout, a “win” for the government on Sunday would be the straw breaking the camel’s back. And despite his wounds, Orbán remains one strong and stubborn camel.

So all in all, whatever happens on and because of Sunday is unlikely to come close to living up to the hype in the Hungarian press, and will instead just add to the muddle. In fact, while Hungary’s post-Soviet democracy is less than 20 years old, its voters could easily be forgiven for passing up their still new sovereign rights as citizens in favor of a nice Sunday in the park.