Ferenc Gyurcsany’s announcement that he will step aside as Hungary’s prime minister is not seen by the foreign markets as a negative development, but Hungary has little time left to implement reform measures, London-based market analyst 4cast said in a report on Monday.
Gyurcsany’s announcement will create some short-term jitters on the markets, but any positive developments will considerable reduce the risk of further weakening of the forint, said the report.
Gyurcsany has said he will instigate a constructive vote of no confidence in himself, which involves mustering the support of at least a fifth of parliamentary deputies to oust him out and vote for his successor without a general election.
The Socialists need the support of the liberal Free Democrats, their former coalition partner. The liberals are keen to pick a replacement who would reassure the foreign investors by pushing through the structural reforms and spending cuts which are badly needed to revive Hungary’s sick economy.
4cast said a credible replacement for Gyurcsany and a sound reform programme would form the basis of a recovery, it added.
The Socialists have a track record of resisting even mild reforms promoted by Gyurcsany, and given their huge polling deficit behind Fidesz, the main conservative opposition, negotiations with the liberals on a candidate acceptable to both sides could be fraught with difficulty.
Analysts said it is possible, however, that both parties may come to the conclusion that their respective fortunes could be boosted by reforming their coalition around a politically independent prime minister who enjoys broad social backing.
4cast said that the candidate to head the new Socialist government should have the intellect and respectability to gain parliament’s support, without noting any actual names.
Among the possible candidates to take over from Gyurcsany, Gyorgy Suranyi, 55, who was governor of the Hungarian central bank in the nineties, would have the widest public backing, according to a Median poll. Another being strongly tipped in the media is Ferenc Glatz, 67, a former president of the Hungarian Academy of Sciences who is seen as being politically neutral.
A creditable replacement for Gyurcsany and a sound reform programme would form the basis of a recovery, said 4cast.
The first urgent step is to cut public spending, it said. Whereas the credit line led by the International Monetary Fund could in principle protect the country’s finances without significant spending cuts, “it would be wise” to cut spending and keep IMF financing to a minimum in order to avoid a further worsening of Hungary’s credit rating, it said.
The country’s top priority, however, is not a short-term austerity package, but a credible structural reform programme aimed at eliminating the budget deficit and reducing its national debt, 4cast said.