From hungary-report-owner Sun Sep 24 14:56:45 1995 Received: from localhost (daemon@localhost) (fnord) by nando.yak.net (8.6.5/8.6.5) id OAA00389; Sun, 24 Sep 1995 14:56:45 -0700 Received: from localhost (daemon@localhost) (fnord) by nando.yak.net (8.6.5/8.6.5) id OAA00377; Sun, 24 Sep 1995 14:56:23 -0700 Received: from bruner@isys.hu () via =-=-=-=-=-= for hungary-report@hungary.yak.net (375) Received: from kingzog.isys.hu (KingZog.isys.hu [194.24.160.4]) (fnord) by nando.yak.net (8.6.5/8.6.5) with ESMTP id OAA00365 for ; Sun, 24 Sep 1995 14:55:47 -0700 Received: from [194.24.161.10] (bruner.dial.isys.hu [194.24.161.10]) by kingzog.isys.hu (8.7.Beta.11/8.7.Beta.11) with SMTP id WAA28600 for ; Sun, 24 Sep 1995 22:54:48 +0100 (MET) X-Sender: bruner@mail.isys.hu (Unverified) Message-Id: Mime-Version: 1.0 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Date: Sun, 24 Sep 1995 22:51:28 +0100 To: hungary-report@hungary.yak.net From: bruner@isys.hu (Rick Bruner) Subject: Hungary Report 1.23 (I) Sender: owner-hungary-report@hungary.yak.net Precedence: bulk Reply-To: hungary-report@hungary.yak.net =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D The Hungary Report Direct from Budapest, every week Also available on the World Wide Web (http://www.isys.hu/hrep/) No. 1.23, September 24, 1995 =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SPONSORED BY: iSYS Kft., providing full Internet solutions for companies and individuals in Hungary. For further information, send e-mail to , view our World Wide Web home page (http://www.isys.hu) or call (+36-1) 266-6090. =3D=3D=3D=3D=3D=3D=3D=3D CONTENTS BRIEFS Coalition agreement back on the ropes Constitutional Court rules against Bokros Plan again Government concerned for fate of minority in Vojvodina Signs of economic gains doused by IMF 'No' State Privatization & Holding Co. (APV Rt.) drops $150m deal Fradi among top European football teams Gerbeaud caf=E9 sold at last? 99-year-old 'Little Metro' refurbished Appointment of L=E1szl=F3 P=E1l to MOL Rt stirs political fires GE Captial offers $35m for 51% of Budapest Bank US Defense Secretary William Perry visits with $10m peace grant NY governor, George Pataki, visits politicians & seeks roots Hung=E1ria rock band reunion biggest concert in Magyar history Forint convertibility coming soon Underdog lawyer takes on world financial giants NUMBERS CRUNCHED Projected tourism revenues for 1995 Top price for case of wine Budapest office rents per square meter State budget deficit FEATURE STORY Hungarian Soldiers Celebrate St. Stephen's Day in Louisiana Heat PARLIAMENT WATCH Politicians not winning popularity contests READER UPDATE Good news: We have sponsorship! The Hungary Report is also supported in part by: MTI-Econews, a daily English-language financial news service. For online (fee-based) subscription information, contact the Internet address: . (It's not automated -- write a nice note.) =3D=3D=3D=3D=3D=3D BRIEFS By Rick E. Bruner Copyright (c) 1995 ------------ GENERAL NEWS Coalition agreement back on the ropes Faith in a peaceful resolution to disputes between Hungary two coalition government parties, the Socialists and the Free Democrats (SZDSZ), was short lived. The two parties managed to "agree to disagree" gracefully for only a week, following a near coalition collapse earlier this month. They now appear to be back on collision course. At the center of disagreements remains the Free Democrats' objection to Socialist Prime Minister Gyula Horn's plan to expand and restructure the cabinet. Horn contends his powers are limited and has repeatedly expressed frustration at not having complete control to appoint and fire minister at will. Those who remain beyond his reach include the three SZDSZ cabinet ministers. The SZDSZ has refused the Socialists' request to renegotiate the coalition agreement, which Socialist officials now claim was drafted in haste, despite initial negotiations lasting nearly two months after the May '94 elections. SZDSZ opposes Horn's plans for a new Economics Affairs Minister, a Ministry of Privatization, as well as the appointment of four secretaries of state in the Prime Minister's Office. Committees from the two parties, formed to settle coalition disputes, broke off talks last Tuesday, leaving the fate of the government alliance to conversations between Prime Minister Horn and SZDSZ Interior Minister G=E1bor Kuncze. Those negotiations are scheduled to continue into this coming week. Opposition parties, naturally, are sounding the drums of the government's demise, while right-wing extremist Istv=E1n Csurka is calling for mass rallies against the government to coincide with his favorite holiday, the October 23 anniversary of the 1956 Uprising. Constitutional Court rules against Bokros Plan again In its second ruling against the government's March 12 economic reform plan, the Constitutional Court rejected several more measures in the austerity package as unconstitutional. Opposition parties made the most of the government's bad news, calling it highly inappropriate for the government to have released a statement that criticized the Court's decision. The statement, reportedly co-authored by Finance Minister Lajos Bokros, architect of the austerity reforms, said the Court's rulings "diminish" chances for economic stabilization and suggested the government would had no choice but to raise the already enormous public tax burden if the court blocked spending cuts. The Court's ruling annulled a proposal by which households possessing more than HUF 10 million (US$ 75,000) worth of real estate would have been ineligible for state family benefits, along with other details of the Bokros plan. The ruling will cost the budget between HUF 10-20 billion in projected savings, according to Budapest Week. The Court's ruling against other aspects of the reform package in late June [see Hungary Report 1.14] negated savings of HUF 30-40 billion. The Bokros Plan originally envisaged at total savings of HUF 170 billion from this year's government budget deficit. Government concerned for fate of minority in Vojvodina The Hungarian government has stepped up its public appeals to Belgrade to prevent anti-Magyar ethnic-cleansing in the Vojvodina region of Serbia, across Hungary's southern border. The region is home to some 300,000 ethnic-Hungarians, who are presently facing threats of forced eviction from their homes as a large number of the approximately 150,000 Serb refugees fleeing Croatia's Krajina region look to resettle in Vojvodina, according to Hungarian press reports. Magyar H=EDrlap carried an image of a Serb-language flyer last week calling for all "Croatians, Hungarians and other non-Serb nationalities" to leave the region, or "we will chase you out with force," which was allegedly stuffed in family mailboxes throughout the area. The Horn government sent a stern statement to Belgrade early last week calling for action against the threats, and later in the week Speaker of Parliament Zolt=E1n G=E1l complained about the situation to officials in Germany, while on a trip in Bonn. -------------------- BUSINESS & ECONOMICS Signs of economic gains doused by IMF 'No' Cautious optimism about signs of economic improvement were over-shadowed last week by the government's failure to conclude negotiations with the International Monetary Fund on a $300 million "standby loan" to Hungary. After two weeks of difficult talks, the IMF paid Finance Minster Bokros many compliments for his strong efforts to tackle the country's debt crisis, but in the end said that much more needed to be done and left Bokros with only a handshake. More social spending cuts are still required, according to the IMF, along with welfare and health care reforms and a swift conclusion to privatization, before the Fund will toss Hungary a $300 million bone. Hungary has waited more than three years since the IMF last granted it a similar loan. The country's foreign debt, approximately US$ 30 billion, is the largest per capita in Europe. Negotiations with the Fund will continue in October, but IMF and Finance Ministry officials both say no loan agreement is likely before the end of this year. The news was a big disappointment for the beleaguered finance minister, who the week before received government approval for a 1996 budget plan that would bring the state budget deficit below 4% of gross domestic product, not counting privatization receipts. The deficit this year is targeted at 7% of GDP, down from more than 9% in 1994. The government was pleased, on the other hand, with a report from the Organization of Economic Cooperation and Development (OECD), which complimented the government's touch reform plans. If they are strictly observed, said the OED report, "the Hungarian economy should once again justify the optimism with which it was previously held." In the past weeks, Econews has noted an 8.5% rise in industrial production in the first six months of the year over the same period last year, and a slowing of consumer-price rises to 0.4% in August, the down from 0.9% in July and 1.2% in June. Governor of the National Bank of Hungary, Gy=F6rgy Suranyi, the number-two man in the government's economic "dream team," still projects 1995 year-end inflation will be under 30%, despite doubts from independent analysts. ----------- SHORT TAKES THE STATE PRIVATIZATION AND HOLDING COMPANY (APV RT.) dropped a deal in late August worth US$ 150 million that would have provided 800 jobs and exploited a potential US$ 20 billion worth of natural mineral resources, according to a story last week's Budapest Business Journal. The Central European Resources (CER) company of Canada was all set to buy the abandoned Recsk Ore Mines, in northeastern Hungary, believing the site to be rich in copper and zinc, when APV officials suddenly scrapped the deal due to unsettled differences with the mine's creditors, principally the Tax Office and Social Security Fund. Those left outraged by the deal's collapse includes CER, the mayor of Recsk and other of the mine's creditors, including Postabank. FRADI HAS MADE MAGYARS PROUD OF FOOTBALL once again. Named for Budapest's ninth district, Ferencv=E1ros, the team known to all as "Fradi" qualified for the Champions League last month, entering a battle with Europe's 16 best soccer clubs. The team's first game, against Zurich's Grasshoppers last Wednesday, ended with a Hungary 3-0 victory. This coming Wednesday, Fradi faces one of Europe's greatest teams, Ajax of Amsterdam, immediately followed by another living legend, Real Madrid. THE FAMOUS GERBEAUD COFFEEHOUSE on the well-touristed V=F6r=F6smarty square was set to be sold at last to a German real estate company, the Budapest Week reported in its previous issue. The Week reported "barring any last-minute cancellation" (a common phenomenon in Hungarian privatization), the firm Immo-M=FCller, which also owns the Vaci Street department store Fontana, would pay around HUF 1 billion ($7.7 million) for the classic Habsburg-era cafe. The deal would lay to rest persistent fears of the site's conversion into a car salon, at least for 10 years, during which period the operation is guaranteed to remain a cake and coffee shop. Let's hope they can finally do something about the famously horrible service, as well. BUDAPEST'S 99-YEAR-OLD 'LITTLE METRO' LINE REOPENED last week after months of extensive renovations to its the stations and tunnels. The shortest of Budapest's three metro lines, also known as the "Yellow Metro" for its designated color on maps, is continental Europe's oldest underground. It hasn't been so significantly refurbished since its inauguration for Hungary's millennial celebrations at the turn of last century. Renovations, including the repavement of the entire Andrassy Boulevard above the metro line, cost around HUF 4 billion, according to Econews. Stations indeed look beautiful now, freshly tiled in an elegant combination of modern and turn-of-the-century styles. The trains cramped interiors changed little, unfortunately, other than new seat covers. Trains run more frequently than before, partly to take up overflow from the simultaneously canceled #1 bus line on the streets above. POLITICAL FALLOUT OVER THE APPOINTMENT OF LASZLO PAL, the recently fired minister of trade and industry to serve as chairman of the Hungarian Oil Company (MOL Rt.), has been everything we predicted it would be in the last issue (see 1.22, Wacky As Usual). The government's liberal coalition partners, the Free Democrats (SZDSZ), voiced strong opposition to the move. The final decision on the appointment came from the State Property and Holding Company (APV Rt.), which owns 88% of MOL. The SZDSZ, among others, said P=E1l's appointment was a conflict of interest, since he is still a (Socialist) member of parliament, which violates legal stipulations. P=E1l is seen as a conservative Socialist and was dismissed by Prime Minister Horn precisely because of P=E1l's cautious view on privatizing the energy sector, MOL in particular, to foreign investors, which runs against the Finance Minister Bokros' plan for large energy sector privatization revenues this year. MOL, incidentally, was once again in the number-one position for the annual list of top 200 companies, by the Figyel=F6 business magazine. It's also the country's top exporter. GE CAPITAL OFFERED US$ 35M FOR 51% OF BUDAPEST BANK last Wednesday. The Dutch bank ING is said to be still interested in a stake, after having withdrawn a previous offer in the spring. The bid by the investment arm of the US giant General Electric is presumably the "big surprise" for the bank which Finance Minister Bokros mentioned recently to the press. The deal may have to wait for the conclusion of an investigation by the State Audit Office into a HUF 12 billion capital reserve transfer the government made to the bank this February in hopes of attracting a larger foreign investment. The Audit Office suspects the transfer violated the audit law. Finance Minister Bokros was the bank's CEO at the time of the transfer, before taking his new cabinet position this spring. US DEFENSE SECRETARY WILLIAM PERRY was in Budapest last Wednesday and Thursday, meeting with Prime Minister Horn, President of the Republic Arp=E1d G=F6ncz, Defense Minister Gy=F6rgy Keleti and other government officials. Perry announced US government plans to grant Hungary $10 million as part of a $100 million package to countries of the region to help support their participation in the NATO prep-course, Partnership for Peace. Perry discussed the Yugoslav crisis with leaders here and congratulated Hungary on its reforms towards NATO membership, while urging a signing of a basic treaty with Romania. GEORGE PATAKI, GOVERNOR OF NEW YORK, was due in Hungary this weekend, on his first semi-official visit abroad since assume office last year. The governor, of Hungarian ancestry, was scheduled to meet with Prime Minister Horn and President G=F6ncz, and then to visit eastern Hungary in search of family relations, with wife and son in tow. THE HUNGARIA REUNION CONCERT broke all records for audience turnout for any spectacle in Hungary the previous weekend. More than 70,000 fans turned out for the show, more than for the Rolling Stones a few weeks earlier, proving beyond a doubt what a mania Hungarians have for '50s-style music, which is the band's trademark. FORINT CONVERTIBILITY MAY BE JUST AROUND THE CORNER. A bill currently being debated in Parliament would free individuals and companies to change the currency for "hard currencies" without current strict limitations. NUMBERS CRUNCHED * Projected tourism revenues for 1995, up 15% on last year (National Tourism Office): US$ 1.6 billion * Price paid for a case of 1964 Egri Leanyka at the 4th Budapest Wine Festival (Econews): HUF 105,000 (US$ 800) * Stable average monthly price for Budapest office real estate, per square meter (DTZ Hungary, real estate consultants): DM 38-40 * State budget deficit for first eight months of 1995 (Finance Ministry): HUF 206.2 billion (US$ 1.6 bn) ------------- EXCHANGE RATE September 21, 1995 (National Bank of Hungary) US dollar - 132.88 (buying), 135.30 (selling) Deutschemark - 90.92 (buying), 92.70 (selling) -------------- WACKY AS USUAL Everyman versus the IMF Throughout the developing world, it's an old refrain: our country is under the conspiracy-like control of huge international financial institutions. Well, one 72-year-old Hungarian-Australian has decided to do more than complain -- he's fighting back with court cases to sue the pants off of the International Monetary Fund and the World Bank. Nobody at the august financial institutions has cracked under the pressure just yet, but lawyer Antal Endrey, Q.C., is vigorously pursuing his cases. His cases include one against the head of the IMF personally, Michael Camdessus, already filed in a Budapest court, as well as a planned class action suit in the US against both the IMF and the World Bank. Endrey maintains the institutions have badly advised Hungary during its period of economic reform, and the burden for that now being borne by Hungary's poor should be shared by those responsible. "They have sent fourth- and fifth-rate economists to give advice; that was negligent," he told Budapest Week. Endrey has launched his campaign on behalf of all Hungarians, but press reports didn't note how much he was seeking, or to whom any penalty would be awarded. Endrey claims to have received thousands of letters of support, including pledges for financial backing. [MORE, Next message]