Hungarians Fret over Nation's Troubled Economy

Demonstrations continued in Hungary on Monday, sparked when the nation's the prime minister was recently caught on tape admitting that his political party had lied about Hungary's economy to win re-election. Economists and ordinary citizens blame the nation's economic troubles on everything from rampant tax fraud to the lingering effects of communism.

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Protests enter a second week on the streets of the Hungarian capital, Budapest, where demonstrators are demanding the resignation of the newly elected prime minister. The protests spring from a leaked video showing a Hungarian leader admitting that his party lied about the condition of Hungary's economy in order to win re-election. Hungary's budget deficit and the national economy are expected to dominate elections this Sunday. As NPR's Emily Harris reports from Budapest, the elections are now seen as a referendum on the prime minister's future.

EMILY HARRIS: Post-communist Hungary started in a better economic position than some of its neighbors. The 16 years since then have been a generally stable shift to a market economy. Hungary's current problems started, says economic analyst Peter Hultsár, when both economic parties started promising a lot of government spending. The Socialist Party won.

Mr. PETER HULTSÁR (Economic Analyst): And unfortunately one of the big mistakes of the incoming Socialist Party was that they started to deliver what they promised. And what they promised was, you know, overly too much.

HARRIS: They promised even more during campaigning this spring. But now the budget deficit is almost 10 percent of Hungary's Gross Domestic Product, and Hungary - a member of the European Union - has not met any of the criteria for countries trying to adopt the euro as their currency.

Right after winning elections, Prime Minister Ferenc Gyurcsany told party colleagues that he and they had lied to win and they had to stop. A tape of this speech, recently made public, set off the storm of protests.

Mr. PETER JUHÁSZ (Hungarian Student): I think he must resign.

HARRIS: Twenty-one-year-old Peter Juhász is mostly mad that Gyurcsany lied. Hanging out between classes at Budapest's ELTE University, Juhász says he's also not happy with the prime minister's plan to charge students for their education.

Mr. JUHÁSZ: And the problem of the budget comes from their - the government's roles and government made - the government made this situation, so they have to solve it, not us, not the students.

HARRIS: Prime Minister Gyurcsany ditched the tax cuts he'd promised during campaigning, and instead increased taxes and cut government spending. His policies were applauded by investors and economists, but they also sparked criticism that this is the wrong way to go about bringing the budget back in line. Andras Donchez(ph) advises the opposition Fidesz Party.

Mr. ANDRAS DONCHEZ (Adviser, Fidesz Party): The problem with the austerity measures is that it slows down the Hungarian economy. And even though the government expects certain incomes - tax incomes - many people will be forced to try to evade taxes.

HARRIS: Many people already do. One analyst estimates that a quarter of those working avoid all taxes. And then there's the spending.

(Soundbite of children playing)

HARRIS: Children play on a squeaky swing set on Budapest's southern edge. Thirty-one-year-old Eudit Havanyes(ph) sits on a bench and keeps an eye on her kids, 11, six and two years old. She works as a hotel maid.

Ms. EUDIT HAVANYES (Resident): (Through translator) It's sort of difficult because I am alone. I am single with three children. So it's extremely difficult, but I can manage.

HARRIS: She manages in part because of a government subsidy, which makes up more than half her roughly $700 monthly income. Some critics say the government's social program are often very inefficient. Economic analyst Peter Hultsár calls pension and disability payments a black hole, but establishing real oversight is difficult, he says.

Mr. HULTSÁR: We didn't have a revolution like in East Germany, Romania, whatever, and therefore the whole political elite, of course, changed a lot, but didn't change completely. As time passed, it was more and more difficult to start, you now, significant reforms.

HARRIS: Some supporters of Prime Minister Gyurcsany say he lied about the economy because he felt he hadn't enough time to push through his reforms. Now he has four years, unless those lies bring him down ahead of schedule.

Emily Harris, NPR News, Budapest.

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