Policy Documentation Center

 
February 2009 1 
BELARUSIAN MONTHLY 
ECONOMIC REVIEW 
• A meeting between the Presidents of Belarus and Ukraine 
took place. 
• Making the regulation of the currency market more rigorous. 
• Deficit in trade with non-CIS countries. 
• Decrease of the international reserves. 
Politics: The meeting between the Presidents of Belarus 
and Ukraine 
In January, the meeting between the Presidents of Belarus 
and Ukraine, A. Lukashenka and V. Yuschenko took place. 
Cooperation in the energy sphere was one of the major top-
ics, and more precisely, the opportunities of establishment of 
the Baltic and Black Sea transport corridor, i.e. providing 
supply of the crude oil through the pipeline Odessa-Brody was 
discussed. Moreover, the parties agreed on reviving the im-
ports of  Ukrainian electrical energy by Belarus that was sus-
pended because of the price differences. 
In February, the sitting of the Supreme Council of the Union 
State of Belarus and Russia took place. During it, the agree-
ment on joint air defense was signed and the parties agreed to 
launch a plan of making Russian Ruble a regional reserve cur-
rency. Furthermore, a principal agreement between parties on 
providing to Belarus a loan in Russian rubles for settlements 
in this currency in bilateral trade was achieved. At the same 
time Russian officials interpreted the latter as the agreement 
on the introduction of the Russian Ruble as the new currency 
by Belarus, which was denied by the Belarusian party. Over-
all, in the beginning of 2009, the actions of the authorities in 
the foreign policy were aimed at the search for the new loans 
and investments at the different geopolitical directions. 
Real sector: A sharp deterioration of the corporate 
finance in the end of 2008 
In 2008, the GDP grew by 10.0%, which is 1.4 percentage 
points more than in 2007. But in the 4th quarter of 2008, the 
growth rate was much lower (7.5% yoy). Lower growth rates 
were driven by lower rates of industrial production growth – 
in 4th quarter of 2008 it grew by 1.8% yoy (13.2% yoy in the 
3rd quarter of 2008). In Nov-Dec, that was the period of unfa-
vourable dynamics of both domestic and foreign demand, the 
industrial production however kept on growing. During this 
month, a sharp decrease of the industrial production deflator 
took place – from 28.6% yoy in October down to 3.2% yoy in 
November and -9.5% yoy in December, which contradicts to 
the dynamics of the producers prices. But if using the deflators 
balanced with the PPI, the result will mean that the industrial 
production dropped in November by 9-14% and by 19-23% in 
December (and grew only by about 7-8% in annual terms). 
The deterioration of the corporate finance became one more 
consequences of the crisis. In Oct-Nov, the profit decreased 
by 2.9% yoy, while profitability by 1.7 percentage points. 
Most radical was the drop of the profit in industrial production 
(by 48.3% yoy), while the ferrous metal production, tractors 
and agricultural machines productions faced net losses. It is 
evident that this dynamics reflects the decrease of the ex-
ports and poses a threat for further investments. 
Structural trends: Making the regulation of the currency 
market more rigorous 
In the end of January, the NBB send a letter that has a status 
of the normative act, which makes some procedures at the 
domestic currency market more rigorous. First, banks are 
 
 
 
No. 2 (77) 
February 2009 
 
 
 
 
 
 
 
 
Population: 9.69 m 
Industry / GDP: 26.7% 
Agriculture / GDP: 7.4% 
Investment / GDP: 26.3% 
Export destination: Russia 37%, EU 44% 
Import origin: Russia 60%, EU 22% 
 
 
 
 
 
 
 
 
 
 
Real GDP growth 
5.8
4.7 5.0
6.8
11.4
9.4 9.9
8.2
10.0
0.0
0
1
2
3
4
5
6
7
8
9
10
11
12
00 01 02 03 04 05 06 07 08 09
% yoy
Source: Ministry of Statistics and Analysis. Forecast 
for 2009: IPM Research Center. 
 
 
 
 
 
 
 
 
 
 
IPM Research Center 
 
German Economic Team 
in Belarus  
 
50Б Zakharova St., Minsk 220088, Belarus 
Tel./fax (+375 17) 210 0105 
E-mail: bmer@research.by 
Internet http://research.by/ 
 
 
© IPM Research Center, 2009 
 
Belarusian Monthly Economic Review №2 (77) 
 
 
 
February 2009 2 
recommended to satisfy the demand of the firms just at the 
off-exchange segment of the market. Second, banks now 
must provide a daily reports to the NBB on a net opened 
currency positions and on the reasons that did not allow to 
satisfy the firms demand for the foreign currency at the off-
exchange market. Third, they will have to report about the 
measures undertaken in order to borrow foreign currency 
from abroad. These measures of the NBB are determined by 
banks’ operations directed to purchase hard currency at the 
expense of their own funds during last months when the 
pressure on the exchange peg strengthened. Thus, NBB tries 
with administrative measures to redirect this hard currency 
purchased by banks as an additional source of the supply at 
the domestic market. These measures by the NBB witness 
about increasing constraints at the currency market and 
about further pressure on the exchange rate peg. 
Foreign trade: The deficit in trade with non-CIS 
countries 
In Jan-Nov, the deficit of merchandize trade amounted to 
USD 5.4 bn, having grown by 48.1% yoy (47.0% yoy in Jan-
Oct). During the whole period, the exports grew by 
43.4% yoy, while the imports by 44.1% yoy. However, in No-
vember both the exports and imports declined in comparison 
to the same period of 2007 (by 19.1 and 11.4% yoy corre-
spondingly). The most drastic decrease took place in trade 
with Russia: exports dropped by 28.5% yoy, while imports by 
28.9% yoy. It was driven by both decrease of prices and 
physical volumes of trade. The most severe decrease of de-
mand affected the machine building industry: the supply of 
trucks to Russia in November was at the level of 30.2% in 
comparison to the average supply during Jan-Oct, the supply 
of truck-tractors at 31.6% and tractors at 73.6%. 
At the non-CIS markets, the first drop of exports (by 
12.1% yoy) in 2008 took place as well, which was mainly de-
termined by price dynamics. Substantial decrease of the 
physical volume took place only in trade with potash fertiliz-
ers, which supply was about 51.6% from the average volume 
of Jan-Oct. Imports from non-CIS countries grew in Novem-
ber by 24.7% yoy, though it was lower than in October by 
20.4% mom, which reflected the decrease in imports physical 
volume. Finally, in November the deficit of trade with non-CIS 
countries amounted to USD 11.5 m, though traditionally this 
geographical destination provides a huge proficit of trade. 
Thus, the world crisis led to severe deterioration of the for-
eign trade with non-CIS countries as well. 
Public finance: Approval of the plan of the tax system 
simplification 
In Jan-Nov, the consolidated revenues amounted to 51.1% of 
GDP that is by 1.9 percentage points higher than in Jan-Nov 
2007. The consolidated expenditures decreased in comparison 
to Jan-Nov 2007 by 0.7 percentage points and amounted to 
45.3% of GDP. Finally, the surplus of 5.8% of GDP was 
formed in Jan-Nov 2008 (3.2% of GDP in Jan-Nov 2007). 
The government’s plan on liberalization of the business envi-
ronment also includes reforms of the taxation system. Be-
sides the intention to abolish the tax levy in support of agri-
cultural producers, the government plans to abolish the tax 
on purchasing transport vehicles, sales and services tax, and 
also local special levies that may achieve up to 3% of the 
profit. If these measures have been undertaken, it will lead to 
the reduction of the tax burden in the economy, however, the 
issue about the compensation of the correspondent consoli-
dated revenues will come at the agenda. 
 
GDP and Industrial Output 
0
3
6
9
12
15
Ja
n
.0
7
M
ar
.0
7
M
ay
.0
7
Ju
l.
0
7
S
ep
.0
7
N
o
v.
0
7
Ja
n
.0
8
M
ar
.0
8
M
ay
.0
8
Ju
l.
0
8
S
ep
.0
8
N
o
v.
0
8
real GDP growth
real industrial output growth
% yoy cum.
Source: National Statistical Committee. 
 
 
 
Profitability in Industry 
Oct-Nov: 
 
2007 2008 
Change 
Industry 12.7 6.1 -6.6 
Electric power -2.1 0.0 2.1 
Fuel 9.4 13.0 3.6 
Ferrous metallurgy 10.0 -21.2 -31.2 
Chemical and petro-
chemical industry 
24.6 15.5 -9.0 
Machinery and metal-
working 
14.0 3.0 -11.1 
Logging, woodworking, 
pulp and paper 
12.9 5.4 -7.5 
Building materials 12.6 16.8 4.3 
Light 9.7 10.6 1.0 
Food 11.9 -2.4 -14.2 
Note. Change is given in percentage points. 
Source: calculations based on the National Statistical 
Committee. 
 
 
 
Contribution of Aggregate Demand 
Components to GDP Growth 
 
3q 
2008 
4q 
2008 
Change 
GDP 11.2 7.5 -3.7 
Household consumption 11.8 5.3 -6.5 
Fixed capital accumula-
tion 
6.4 9.0 2.6 
Net exports + statistical 
discrepancy 
-8.5 -9.2 -0.7 
Other components 1.5 2.4 0.9 
Note. Change is given in percentage points. 
Source: calculations based on the National Statistical 
Committee. Contribution of components of aggregate 
demand in 4th quarter– estimations by IPM Research 
Centre. 
 
 
 
Merchandise Trade 
1000
1500
2000
2500
3000
3500
4000
4500
Ja
n
.0
7
M
ar
.0
7
M
a
y.
07
Ju
l.
07
S
ep
.0
7
N
ov
.0
7
Ja
n
.0
8
M
a
r.
0
8
M
ay
.0
8
Ju
l.
0
8
S
e
p.
0
8
N
o
v.
0
8
-900
-750
-600
-450
-300
-150
0
150
balance (right axis)
exports
imports
USD m
Source: National Statistical Committee. 
Belarusian Monthly Economic Review №2 (77) 
 
 
 
February 2009 3 
Monetary policy: Drop of the international reserves 
In December, net foreign assets of the monetary authorities 
dropped by 21.3% mom (by USD 867.1 m). Trying to limit 
the pressure at the currency market, the NBB restricted the 
banks’ refinancing and hence its claims on banks reduced by 
37.4% mom. Furthermore, in December a huge decrease of 
the government’s deposits in foreign currency took place (by 
44.0% mom), which resulted in increasing money supply. As 
a result, base money in December grew by 1.5% mom, while 
in annual terms its growth rate amounted to 11.7% yoy 
(41.9% yoy in November). 
A substantially increased demand for foreign currency led to 
further reduction of the liquidity level in the banking system. 
Furthermore, in December banks purchased hard currency for 
their own funds actively, which reflected the devaluation ex-
pectations. In these conditions a further increase of the interest 
rates at both interbank and credit and deposit market took 
place, which was accompanied by credit rationing. Hence, in 
December the deceleration of credit to real sector growth was 
kept on and it amounted to 54.9% yoy (56.1% yoy in Novem-
ber). Cash in circulation decreased by 7.2% mom, while in an-
nual terms its growth rate amounted to 15.4% yoy (33.8% yoy 
in November). Moreover, in December a reduction of house-
holds’ ruble time deposits took place (by 12.6% mom), while 
its annual growth rate reached 13.7% yoy (33.0% yoy in No-
vember). However, decreasing trust to the national currency 
was not equal to the trust to the banking system – the outflow 
of households’ ruble deposits was compensated by inflow of 
their foreign currency deposits, and also enterprises increased 
their deposits. Finally, in December, ruble money grew by 
6.8% mom, while broad money by 8.1% mom. In annual 
terms their growth rates amounted to 28.0 and 30.2% yoy 
correspondingly (31.4 and 28.3% yoy in November). 
Consumer prices in December grew by 1.2% mom and in an-
nual terms inflation amounted to 13.3% yoy (14.7% yoy in 
November). Belarusian ruble in December was devaluated to 
US dollar by 1.9% and as of December, 31 its exchange rate 
was 2200 USD/BYR. Further immediate devaluation of the 
Belarusian ruble led to additional preconditions for growing 
prices in the national economy. 
Banking sector: New recommendations for banks by 
the government and the NBB 
In December, the government adopted a Regulation in which it 
gives tasks for individual banks on providing loans to the real 
sector. In previous years such recommendations were given 
only to the state-owned banks, but now the private banks in-
cluding foreign ones were touched as well. Later, the NBB 
adopted one more Regulation, where it gives recommendations 
to banks on increasing loans, borrowed funds and normative 
capital. The NBB gives a string recommendation to banks to 
increase foreign borrowings, which is needed for forming liabili-
ties and providing foreign currency at the domestic market. 
These recommendations were given at the background of dete-
riorating liquidity stance of the Belarusian banks and decreas-
ing quality of their assets. Hence, these measures may lead to 
spill over of the pressure at the currency market to wider prob-
lems in the whole banking system. Furthermore, these meas-
ures contradict to the agreement signed with IMF. 
Fort solving the problem of the hard currency deficit the gov-
ernment began to sign agreements assuming cooperation in 
the external trade financing with foreign bank itself. Such 
agreements were signed with French bank Societe General 
and Russian Vnesheconombank and Sberbank. 
Consolidated Budget 
30
40
50
60
70
80
Ja
n
.0
7
M
a
r.
0
7
M
a
y.
0
7
Ju
l.
0
7
S
ep
.0
7
N
o
v.
0
7
Ja
n.
0
8
M
ar
.0
8
M
ay
.0
8
Ju
l.
08
S
e
p.
08
N
ov
.0
8
-30
-20
-10
0
10
20
balance (right axis)
revenues
expenditures
% of GDP
Source: calculations based on the National Statistical 
Committee data. 
 
 
 
 
Monetary Base and СPI 
10
20
30
40
50
60
Ja
n
.0
7
M
a
r.
0
7
M
a
y
.0
7
Ju
l.
0
7
S
e
p
.0
7
N
o
v
.0
7
Ja
n
.0
8
M
a
r.
0
8
M
a
y
.0
8
Ju
l.
0
8
S
e
p
.0
8
N
o
v
.0
8
6
8
10
12
14
16
18
CPI (right axis) monetary base
% yoy eop % yoy
 
Source: calculations based on the National Statistical 
Committee and the NBB data. 
 
 
 
 
Refinancing rate 
8
9
10
11
12
13
Ja
n
.0
7
M
ar
.0
7
M
ay
.0
7
Ju
l.
0
7
S
ep
.0
7
N
o
v.
0
7
Ja
n
.0
8
M
ar
.0
8
M
ay
.0
8
Ju
l.
0
8
S
ep
.0
8
N
o
v.
0
8
-6
-4
-2
0
2
4
real (right axis) nominal
% per annum
Source: calculations based on National Statistical 
Committee and the NBB data. 
 
Belarusian Monthly Economic Review №2 (77) 
 
 
 
February 2009 4 
Economic Trends  Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 
Oct. 
08 
Nov. 
08 
Dec 
08 
GDP growth % yoy 8.4 8.9 8.4 7.3 10.9 10.1 11.2 7.5    
GDP growth % yoy cum. 8.4 8.6 8.4 8.2 10.9 10.4 10.7 10.0 10.7 10.8 10.0 
Industrial Production % yoy cum. 5.9 7.7 8.2 8.5 14.7 13.0 13.1 10.8 12.8 12.7 10.8 
Agricultural Production % yoy cum. 4.4 5.2 5.6 4.1 6.8 5.4 6.9 8.9 8.1 8.9 8.9 
CPI % yoy eop 8.1 7.2 9.0 12.1 13.2 16.0 16.3 13.3 15.7 14.7 13.3 
PPI % yoy eop 11.6 13.6 16.8 17.1 13.5 16.2 18.5 14.2 19.0 18.2 14.2 
Merchandise export (USD)* % yoy 6.3 23.3 18.5 44.4 69.2 56.0 44.9 -- 19.8 -19.1 -- 
Merchandise import (USD)* % yoy 20.8 23.7 23.8 42.4 56.5 55.3 53.1 -- 23.1 -11.4 -- 
Merchandise trade balance 
(NBB data) 
USD m cum. –836 -1563 -2304 -3858 -647 -2049 -3835 -- -4470 -4995 -- 
Current account USD m cum. –641 -1152 -1652 -2944 -433 -1411 -2920 -- -- -- -- 
Current account % GDP cum –7.0 -5.8 -5.1 -6.6 -3.6 -5.5 -6.6 -- -- -- -- 
International reserves USD m eop 1565 2344 2155 4182 4746 4618 4120 3467 4052 3775 3467 
Monetary base % yoy eop 22 29 25 38 59 54 48 12 69 42 12 
Lending rate** % p.a. aop 14 11 12 12 11 10 11 14 12 14 15 
Exchange rate 
(official) 
USD aop 2141 2145 2147 2152 2148 2136 2114 2147 2114 2137 2190 
Exchange rate 
(official) 
EUR aop 2805 2890 2948 3115 3215 3339 3183 2827 2830 2719 2935 
* Growth rates in value terms (source: Ministry of Statistics and Analysis). 
** Nominal rate of commercial banks for new loans for legal entities in national currency. 
Sources: Ministry of Statistics and Analysis, NBB. 
 
Key Economic Indicators 2002 2003 2004 2005 2006 2007 2008 
Nominal GDP* BYR trn 26.613 36.565 49.991 65.067 79.231 96.047 128.828 
Nominal GDP** USD bn 14.5 17.7 23.1 30.2 36.9 44.8 60.3 
GDP Growth % yoy 5.0 7.0 11.4 9.4 9.9 8.6 10.0 
Industrial production % yoy 4.5 7.1 15.9 10.5 11.3 8.7 10.8 
Agricultural production % yoy 0.7 6.6 12.6 1.7 6.1 4.4 8.9 
CPI % yoy aop 42.6 28.4 18.1 10.3 7.0 8.4 14.8 
CPI % yoy eop 34.8 25.4 14.4 8.0 6.6 12.1 13.3 
PPI % yoy aop 41.4 37.5 24.1 12.1 8.3 16.2 15.6 
PPI % yoy eop 42.7 28.1 18.8 10.0 8.5 17.1 14.2 
Exports (gs, USD) % yoy 9.8 24.4 35.5 15.9 22.3 24.0 -- 
Imports (gs, USD) % yoy 9.0 25.0 40.4 3.8 33.2 28.0 -- 
Current account USD m –334 –426 –1193 436 –1448 –3060 -- 
Current account % GDP –2.3 –2.4 –5.2 1.4 –3.9 –6.8 -- 
FDI (net) USD m 453 170 163 303 351 1770 -- 
International reserves USD m 457 474 770 1297 1383 4182 3467 
Fiscal balance % GDP –0.2 –1.6 0.0 –0.6 2.2 0.6 -- 
Domestic public debt % GDP eop 5.4 5.5 5.7 5.8 6.5 6.4 -- 
External debt (total) % GDP eop 27.0 23.7 21.4 17.9 18.6 28.4 -- 
Monetary base % yoy eop 32 50 42 74 20 38 12 
Exchange rate (official)* USD aop 1784 2075 2160 2154 2145 2146 2136 
Exchange rate (official)* USD eop 1920 2156 2170 2152 2140 2150 2200 
Spread*** % aop 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
Spread*** % eop 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
Exchange rate (official)* EUR aop 1690 2353 2684 2681 2692 2937 3135 
Exchange rate (official)* EUR eop 1989 2695 2956 2550 2817 3167 3077 
* On January 1, 2000 the Belarusian ruble was denominated 1:1000. All figures for 1999 are given in ‘new’ Belarusian rubles. 
** For the period of 1999–2000, GDP in USD is calculated by using the market (unofficial) exchange rate (source: IPM Re-
search Center). 
*** Spread between the black market and official (NBB) exchange rates (source: IPM Research Center). 
Sources: Ministry of Statistics and Analysis, Ministry of Finance, NBB, IPM Research Center. 
 
Notes: 
aop average of period gs goods and services 
avg average trn trillion 
bn Billion NBB National Bank of Belarus 
cum. cumulative p.a. per annum 
eop end of period yoy year-on-year 
m million ytd year-to-date 
 


Belarusian Monthly Economic Review, \u21162(77), February 2009

Labour cost in Hungary, 2007 (Statistical reflections)

Statistical Report 1/2009

Changes in visa policies of the EU member states

Electronic Newsletter "Bell". Issue 6 (6)

English

Welfare-to-Work programmes in the UK and lessons for Other countries

Political Capital
Policy Research and Consulting Institute
H-1037 Budapest, Bokor utca 1-3-5.
Phone and Fax: +36 1 242 2913
Email: info@politicalcapital.hu
Hungary: wHat’s next?
a prognosis on tHe aftermatH of
tHe prime minister’s resignation
political capital risk forecast Division
23 marcH, 2009 
- 2 -
23 march, 2009 
•	 Following	de	facto	resignation	of	the	Prime	Minister	of	Hungary	there	are	two	likely		
	 scenarios:	1)	early	elections	or	2)	a	new	government	supported	by	the	socialist		 	
	 MSZP	and	the	liberal	SZDSZ	appears	to	be	the	most	likely	scenario.	
•	 If	a	new	government	is	formed,	a	„technocrat”	Prime	Minister	can	be	the	successor.
•	 To	guarantee	the	majority	in	the	parliament	MSZP	will	have	to	accept	further		 	
	 austerity	measures	and	reforms.	
•	 The	replacement	of	the	current	Prime	Minister	or	early	elections	will	result	in	 	
	 stronger	political	and	economic	stability	in	the	short	term.
•	 Long	term	risks	of	public	discontent	and	the	failure	of	crisis	management	still	exist.
Summary
On	March	21	Ferenc	Gyurcsány	announced	that	he	initiates	a	no-confidence	vote	against	
himself	to	find	his	successor.	He	explained	his	decision	with	the	loss	of	credibility,	and	
lack	of	social	and	political	support.	The	PM	said	that	the	socialist	party	should	find	a	new	
candidate	for	Prime	Minister	within	2	weeks,	and	hold	an	extraordinary	party	congress	
to	elect	the	candidate.	
The	decision	was	a	logical	move	that	may	guarantee	the	political	survival	of	Mr.	Gyurcsány	
as	a	party	politician	(after	his	declaration,	he	was	re-elected	as	president	of	MSZP	with	an	
overwhelming	majority,	85%	at	the	party	congress).	As	a	strong	party	president	Ferenc	
Gyurcsány	can	take	control	of	the	whole	process	of	his	replacement	and	the	selection	of	
his	successor.	
Political	scenarios	after	the	Prime	Minister’s	decision
1)	 Successful	vote	of	no	confidence,	a	new	government	is	formed
	 (50%	chance)	
If	MSZP	is	able	to	come	to	terms	with	at	least	one	more	party	on	the	crisis	management	
program	of	the	new	government	and	the	person	of	the	Prime	Minister,	a	new	government	
can	be	formed	within	a	month	with	the	support	of	the	majority	of	the	MPs	(193	votes)	in	
Background
- 3 -
23 march, 2009 
the	parliament.	Since	Fidesz	rejected	the	call	for	supporting	a	new	government	and	initiated	
the	dissolution	of	the	parliament,	three	possibilities	have	remained:
a)	 A	government	supported	by	MSZP	and	SZDSZ.	 In	the	present	situation,	forming	a	new	
government	with	 the	 participation	 of	 the	 former	 coalition	 parties	 seems	 to	 be	 the	most	
likely	 scenario,	 although	 the	 fact	 that	 candidate	names	are	being	 informally	 circulated	by	
the	Socialists	proves	that	the	party	still	does	not	understand	the	seriousness	of	the	financial	
crisis	and	rather	tries	to	save	its	depressed	voter	base.	SZDSZ	will	support	a	government	that	
handles	the	crisis	by	cutting	expenditures	and	implementing	structural	reforms.	A	compromise	
between	 the	 two	 parties	 may	 put	 a	 non-party-politician,	 an	 “outsider”,	 technocrat-type	
politician	to	lead	the	government,	who	is	acceptable	for	the	international	business	community.	
One	year	 in	power	 is	 not	enough	 for	 a	 government	 to	 implement	 structural	 reforms,	but	
can	be	 sufficient	 to	give	 some	definite	answers	 to	 the	economic	 crisis	 (e.g.	 cutting	public	
expenditures)	in	order	to	restore	the	confidence	in	the	Hungarian	economy.
b)	 A	government	 supported	by	MSZP	and	MDF.	Forging	coalition	with	 the	Socialist	Party	
seems	 to	 be	 unacceptable	 for	 the	 smaller	 conservative	 party.	MDF	 favors	 former	 finance	
minister	 Lajos	 Bokros	whose	 famous	 austerity	 package	 helped	Hungary	 to	 get	 out	 of	 the	
crisis	in	1995.	At	this	moment	MSZP	is	not	willing	to	accept	Mr	Bokros	as	Prime	Minister,	thus	
this	scenario	has	the	least	chance.	Forming	a	government	with	the	socialists	is	against	the	
interests	of	MDF,	but	if	a	reform	government	is	established,	the	party	(that	does	not	have	a	
faction	at	this	moment)	can	support	some	of	the	initiatives	of	the	new	government.	
c)	A	government	supported	by	MSZP,	SZDSZ	and	MDF.	Since	MSZP	and	SZDSZ	can	produce	a	
majority	in	the	parliament,	MDF’s	support	would	be	unnecessary	to	form	a	new	government.	
Balancing	between	the	 interests	of	the	three	different	parties	could	make	the	governance	
difficult	and	inefficient	amid	the	economic	and	financial	crisis,	and	the	three	parties	would	
face	difficulties	to	distinguish	themselves	from	each	other.	Thus	none	of	the	parties	could	
benefit	politically	from	a	coalition.	Taking	these	into	consideration,	there	is	just	a	slight	chance	
that	all	the	three	parties	will	vote	for	the	new	government.	
2) Unsuccessful	vote	of	no	confidence
	 (5%	chance) 
Ferenc Gyurcsány stays as the Prime Minister
If	the	vote	of	no	confidence	fails,	Ferenc	Gyurcsány	will	remain	the	Prime	Minister	according	
to	 the	Constitution.	 In	 this	case	Mr.	Gyurcsány	has	no	other	option	but	 to	resign	officially	
- 4 -
23 march, 2009 
otherwise	he	will	 have	 to	 face	political	 outrage.	 Then	 the	only	outcome	 can	be	early	
elections.	
3)	Early	elections		(45%	chance)
The	aim	of	the	“constructive	vote	of	no	confidence”	was	to	prevent	the	dissolution	of	the	
parliament	and	exclude	President	László	Sólyom	from	the	political	process	of	finding	a	
new	Prime	Minister.	It	is	obvious	that	both	MSZP	and	SZDSZ	want	to	avoid	early	elections	
because	both	have	low	public	support	and	the	personal	financial	interest	of	the	MPs	is	
to	 stay	 in	 the	Parliament	 for	 one	more	 year	 (corruption	has	 skyrocketed	 recently).	 In	
this	aspect,	early	elections	as	a	possibility	have	lower	chances	at	the	moment,	but	if	the	
two	parties	cannot	agree	on	a	joint	PM	candidate	they	may	finally	decide	to	risk	early	
elections.	
•	 23	MPs	from	the	socialist	faction	with	Fidesz-KDNP	and	ex-MDF	faction	members		
	 can	be	enough	to	form	a	majority	to	dissolve	the	parliament,	
•	 if	the	PM	resigns,	and	László	Sólyom	gets	the	possibility	to	nominate	a	new	PM,	he		
	 has	the	right	to	dissolve	the	parliament	if	the	factions	cannot	find	a	PM	within	40		
	 days	after	naming	the	first	candidate.	
Factions	in	the	Hungarian	Parliament
Faction Number	of	MPs
MSZP	(socialist	party) 189
Fidesz+KDNP	(right-wing	opposition	party) 161
SZDSZ	(liberal	party) 19
Independent	(including	ex-MDF	MPs) 15
Overall 384
The	number	of	votes	necessary	for	a	successful	no-confidence	
vote
193


Hungary: what's next?

Deja vu or the legislative initiative by Victor Yushchenko

National democracy is still in demand

Political Risks and Political Stability in Ukraine / UCIPR Document on Political Risk Assessment (October 2009) / Issue 3. Impact of political corruption on the political process