VZCZCXYZ0000
PP RUEHWEB

DE RUEHUP #0537/01 1540930
ZNY CCCCC ZZH
P 020930Z JUN 08
FM AMEMBASSY BUDAPEST
TO SECSTATE WASHDC PRIORITY 2964

C O N F I D E N T I A L BUDAPEST 000537 
 
SIPDIS 
 
DEPARTMENT FOR EUR DAS GARBER AND EUR/NCE 
 
E.O. 12958: DECL: 05/29/2013 
TAGS: PGOV PREL ECON HU
SUBJECT: SCENE-SETTER FOR THE VISIT OF DAS JUDY GARBER 
 
Classified By: P/E COUNSELOR ERIC V. GAUDIOSI; REASONS 1.4 (B) AND (D) 
 
¶1.  (SBU) Your visit comes as the parties run out the clock 
on Parliament's spring session before the long summer 
"cucumber season."  With the dissolution of the MSzP-SzDSz 
coalition following the national referendum on elements of 
Prime Minister Gyurcsany's reform agenda, the government is 
now feeling its way forward without a Parliamentary majority. 
 
 
¶2.  (C) It will do so with a reshuffled cabinet but with 
little political leverage.  With FIDESZ enjoying an enormous 
lead in all recent polling, the government will likely 
restrict its political agenda and reduce the public's 
expectations, reserving its activism for key priorities such 
as the 2009 budget.  They also hold out the hope that the 
SzDSz party elections June 7 will open the door for their 
junior coalition partner to return. 
 
¶3.  (C) Bad news notwithstanding, Gyurcsany's associates 
dismiss calls for early elections and downplay rumors of his 
intention to step down, assuring us that he will be 
"difficult to remove."  The party has demonstrated its 
capability to go on the offensive in the past week with a 
concerted campaign to highlight controversial statements by 
FIDESZ Leader Viktor Orban re the potential suspension of 
public works and reduction of public subsidies.  In sum, the 
Socialists' long-term strategy appears to be to hold on until 
the tide of EU assistance funds lifts all boats. 
 
¶4.  (SBU) That tide cannot come quickly enough for Hungarian 
consumers or foreign investors.  Despite continued progress 
on deficit reduction, growth remains stagnant, transparency 
suspect, and unemployment slowly inching toward eight 
percent.  Higher fuel and food costs have kept inflation over 
six percent, and there is the constant risk that the 
government will revert to form and increase spending as the 
2009 European Parliamentary and 2010 Hungarian national 
elections approach.  Economic uncertainty and political 
gridlock, in turn, have contributed to a climate where 
extreme "solutions" have gained currency and frustration with 
the system itself has gained traction. 
 
¶5.  (SBU) Foreign policy issues remain largely firewalled 
from the domestic political debate, with consensus holding on 
Hungary's engagement in Afghanistan and its (belated) 
recognition of Kosovo.  All parties continue to press for 
closure on arrangements to secure their entry into the Visa 
Waiver Program. 
 
¶6.  (C) That said, Energy Security remains a flashpoint.  The 
government remains defensive over what it persists in 
characterizing as our "misperception" of its Russia policy, 
and can perceive our interest in the issue as an intrusion 
into Hungary's internal affairs.  Although the opposition is 
doubtless eager to burnish its trans-Atlantic credentials, 
FIDESZ officials view the issue in terms of Hungary's 
sovereignty and solidarity with the Euro-Atlantic community. 
The way forward on South Stream is a particular concern, and 
we have seen few details regarding the government's deal with 
Moscow.  We continue to emphasize that the sequencing of 
pipelines does matter, and will look for them to follow 
through on their professed commitment to Nabucco ) 
particularly by concluding a purchase agreement with a 
Central Asian supplier and creating a "Nabucco committee" in 
Parliament. 
 
¶7.  (SBU) Your schedule begins with Fidesz MP and Party Vice 
President Mihaly Varga.  Varga recalls your last discussion 
in December warmly and will look forward to reviewing 
Hungary's political prospects and economic indicators. 
Highly regarded as the opposition's chief economic 
spokesperson and recently named Orban's deputy, Varga has 
moved up steadily in the party's popularity polls as well. 
 
¶8.  (SBU) Your meeting with MFA State Secretary Szent-Ivanyi 
is an opportunity to cover the waterfront.  Recently returned 
from discussions in Washington, Szent-Ivanyi is a former MFA 
spokesperson and is regarded within the Ministry as a capable 
and collegial professional.  He will be interested in your 
thoughts on the region, particularly on Missile Defense.  He 
may also raise the Balkans and Hungary's relations with its 
neighbors ) particularly in light of the cancellation of the 
planned Gyurcsany-Fico meeting. 
 
¶9.  (SBU) In Minister Draskovics' absence, the Ministry of 
Justice and Law Enforcement has suggested that you meet with 
State Secretary Dezso Avarkeszi.  Your schedule allows for 
only a brief meeting, which we believe should focus on 
transparency and on the Ministry's perceptions of intolerance 
and extremism.  After only two weeks as Draskovics' deputy, 
Avarkeszi will be accompanied by subject matter experts on 
these issues and on the VWP. 
 
¶10.  (U) We have made arrangements for a brown bag lunch with 
Embassy staff.  American and local staff will welcome your 
views from Washington on the bilateral relationship and will 
likely have questions on both substantive and management 
issues. 
 
¶11.  (C) You will join Special Envoy Gray, DAS Mann, and 
Ambassador Foley to meet with Foreign Minister Goncz.  Goncz 
seems to have weathered frequent rumors regarding her 
imminent dismissal and has been markedly better staffed ) 
and more assertive - of late.  She will likely press for more 
consultations on Russia in general and energy in particular, 
but we've found Hungarian officials more eager to raise this 
issue than to respond to our invitations.  The Foreign 
Minister may defer on the details to Ambassador Mihaly Bayer, 
the GoH's recently-appointed Nabucco Ambassador, to review 
GoH efforts to secure agreement on an IGA for the project. 
Bayer is an experienced diplomat but not a political player; 
he is operating at a considerable disadvantage both within 
the Hungarian bureaucracy and among EU members who regard 
Budapest as "opaque and untrustworthy." 
 
¶12.  (U) We've asked the MFA's Consular Bureau to arrange a 
follow-on meeting with their staff and interagency 
counterparts to review the state of play on the Visa Waiver 
Program.  We expect that MFA Americas Director Szilveszter 
Bus, Consular Affairs Director Krisztina Bertha, and Ministry 
of Justice and Law Enforcement Petra Jeney will likely attend. 
 
¶13.  (U) We've invited professor and political commentator 
Tamas Magyarics to join you for coffee to conclude the day. 
An expert on the U.S. associated with FIDESZ, Magyarics is a 
close embassy contact and can offer his perspective on the 
full range of foreign and domestic issues. 
 
¶14.  (SBU) Your schedule should allow for some down time 
before the welcome dinner for the CoM Conference. 
 
¶15.  (U) We look forward to welcoming you in person. 
 
Foley