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DE RUEHUP #0135/01 0321339
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O 011339Z FEB 07
FM AMEMBASSY BUDAPEST
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0697
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 BUDAPEST 000135 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT PLEASE PASS TO NSC FOR ADAM STERLING 
 
E.O. 12958: DECL: 01/30/2017 
TAGS: PGOV PREL ECON KDEM
SUBJECT: BEST SERVED COLD: ORBAN ON REFORM, ENERGY 
SECURITY, AND RELATIONS WITH THE GYURCSANY GOVERNMENT 
 
REF: A) BUDAPEST 100 B) BUDAPEST 105 AND PREVIOUS 
 
Classified By: POL/C ERIC V. GAUDIOSI; REASONS 1.4 (B) AND (D) 
 
¶1.  (C) Summary:  As guest of honor at a dinner hosted by 
Ambassador Foley January 30, a charming and measured FIDESZ 
President Viktor Orban criticized the Gyurcsany government's 
implementation of its austerity package, questioned its 
commitment to reform, and called for EU action on energy 
security.  Orban noted recent friction within FIDESZ (ref a) 
but asserted that he is still "the only one" capable of 
uniting its disparate elements.  Orban is test-marketing a 
mix of populism and trans-Atlanticism as FIDESZ discusses 
more substantive engagement in the public debate.  This would 
be an important step in the long term.  In the short term, 
however, Orban still predicts - and perhaps anticipates - 
tests to the Gyurcsany government's survival in the coming 
months.  End Summary. 
 
THE ECONOMY: BLACK AND WHITE ... AND GRAY 
 
¶2.  (C) Orban opened discussion by addressing the economy, 
asserting that Hungary should focus on incorporating the gray 
market, reducing the tax burden on Hungarian businesses, and 
combatting corruption.  He reiterated his commitment to 
increasing employment opportunities, and maintained that 
lower taxes would increase state revenue by bringing 
unreported economic activity into the mainstream. 
Separately, he added, the government must "crush the black 
market." 
 
¶3.  (C) Orban believes that Prime Minister Gyurcsany is 
backing off his reform agenda.  He views the PM's recent 
references to mistakes in his plan's preparation and 
presentation as a self-indictment, and continues to criticize 
the government's plan as a reduction in spending without 
fundamental structural reform.  Ultimately, he believes the 
government will fail due to Gyurcsany's "an enormous agenda 
... and lack of focus."  He specifically dismissed 
Gyurcsany's "belated" efforts to organize bipartisan round 
tables to discuss the reform agenda as an effort to "bring 
the opposition down with him."  (Note: Even as PM Gyurcsany 
was meeting with the opposition MDF to discuss the reform 
agenda, FIDESZ officials were formally challenging the 
constitutionality of the government's proposals on local 
administration, taking yet another issue to the courts rather 
than the bargaining table.  End Note.) 
 
¶4.  (C) Orban reserved particular criticism for the Prime 
Minister's approach to disbursing EU funds.  He accused the 
government of channeling money to "non-productive elements of 
society" through a government body beyond parliamentary 
oversight and regional commissions controlled by political 
loyalists.  Their goal, he concluded, is to maintain the 
trappings of a welfare state in order to retain the support 
of the MSZP's aging demographic.  This charge echoes the view 
of one businessman, who notes that many failed MSZP 
candidates from the October local elections have "been thrown 
out the door ... only to come back in through the window" 
through regional development commissions stacked with party 
members.  Orban charged that even worthwhile concepts such as 
plans to develop high-tech centers in Szeged and Debrecen 
will fail due to plans that border on the incoherent. 
 
ENERGY SECURITY: SPEAKING SOFTLY 
 
¶5.  (C) Turning to energy security, Orban underscored his 
concern regarding the preponderance of Russian influence and 
expressed hope that the issue could galvanize the European 
Union (ref b).  He is trying to work with like-minded 
colleagues in the European People's Party, but his visible 
discomfort in discussion telegraphed his uncertainty 
regarding Hungary's ability to influence EU institutions. 
Orban also claimed that Russia has intervened to keep the 
forint artificially strong through an agreement between PM 
Gyurcsany and President Putin, thus providing a safety net 
during the government's austerity program. That said, he 
still cited Russian moves to develop pipleline options that 
would exclude Hungary as evidence that Russia's favor is 
fleeting.  He also noted his intention to tone down his 
public rhetoric while working the issue given the political 
risks of incurring Russia's wrath. 
 
FIDESZ: "TWO OR THREE PARTIES" ... BUT ONLY ONE LEADER 
 
¶6.  (C) Although Orban clearly fears Russian intentions, he 
candidly admitted that FIDESZ includes many who are more 
concerned by Washington's status as the sole superpower than 
they are by Moscow (or, for that matter, Tehran, Pyongyang, 
and Caracas).  He also insisted that there is nothing he can 
 
BUDAPEST 00000135  002 OF 002 
 
 
do to influence the anti-American strain in the 
FIDESZ-affiliated press. 
 
¶7.  (C) Orban underscored FIDESZ's strong support among 
younger Hungarians, describing the party as a "broad-based" 
organization committed to "human dignity, christian values, 
and the Hungarian national identity."   He conceded, however, 
that it "could easily be two or three parties."  Conservative 
commentator Sebasteyn Gorka, who has indicated his interest 
in starting a new center-right party, also believes that 
FIDESZ is subject to increasing strain among its principal 
factions.  Although Orban commented that "there will always 
be criticism," he concluded that only his own leadership can 
unite FIDESZ's "many branches." 
 
RITES OF SPRING 
 
¶7.  (C) Orban did not preclude renewed confrontation with the 
government.  He predicts the upcoming FIDESZ convention will 
be a "defining event," and will respond to PM Gyurcsany's 
"state of the union" address in a public speech the week of 
February 12.  He promised to publish a rival governing 
program in March, and FIDESZ parliamentary faction leader 
Tibor Navracsics told an AmCham audience last week that the 
party will form a shadow cabinet in the spring to better 
present its policy recommendations.  Orban also remarked that 
calls for new elections should be expected in the near term, 
and remarked that Gyurcsany "might not be able to survive" 
either the March commemoration of the 1848 revolution or the 
public referenda on elements of the government's austerity 
package possible in the fall. 
 
WHAT MAKES VIKTOR RUN? 
 
¶8.  (C) Comment: This was a vintage Orban performance: 
confident, in command of the facts, and calibrated to his 
audience.  He has gradually recognized that reform is 
necessary, but is now deftly focusing the debate on the 
government's commitment and its competence.  With equivocal 
signals from the PM on the timing of future steps and a 
faltering start on health care reform, FIDESZ officials 
foresee a "third wave" of opposition to the government. 
Orban's comments also reflect his latest (if not his last) 
attempt to find a resonant theme, this time by melding 
populism and trans-Atlanticism into a coherent - or at least 
marketable - message.  The challenge will be presenting 
solutions to the problems he is (rightly) highlighting. 
FIDESZ is professing its desire to engage substantively on 
the issues, and Parliamentary Speaker Katalin Szili tells us 
she is working to encourage bipartisan cooperation in 
Parliament.  By contrast, MDF leader Ibolya David tells us 
FIDESZ is already hard at work preparing to "make March worse 
than October."  FIDESZ has the opportunity to take a step 
back toward the constitutional fold and perhaps take an 
important step toward Hungary's next elections if they are 
prepared to serve their revenge cold.  Although Orban noted 
at one point that he "sometimes wishes I could just turn down 
the volume (of Hungarian politics)," he later admitted that 
it is still "the pressure that makes me run."  Under 
criticism within his own party but still intent on opposing 
Gyurcsany at every turn, he will continue to respond to 
pressure - and to generate it - in the months ahead.  End 
Comment. 
 
FOLEY