wh y w e l o s t
38
munist era.
4
Extensive reforms could only have been carried out with the support of the
opposition. But the opposition parties made it clear at the beginning of the term that they
would not take part in any institutional reforms.
5
Due to these legal constraints, the gov-
ernment decided to emphasize economic growth and improving living standards instead
of institutional reform.
The Orbán cabinet divided the four-year term into two parts. A moderately restrictive
fiscal policy replaced the initial policy of dynamic expenditures which stemmed from the
effort to fulfill electoral promises.
6
Stagnating income growth and restrained national in-
vestment plagued the first half of the government’s term.
An increase in incomes, controlled inflation (with limited use of regulated prices), growing
national investments and support for certain sectors of the economy (i.e. construction and
tourism) characterized the second half of the term. The government attempted to balance
the unfavorable foreign economic situation by stimulating domestic demand. To do this the
government initiated the so-called Széchenyi Plan in 2001.
7
The aim of the program was
to use the benefits of the robust and stable economic boom that began in 1997 to improve
living standards and dissipate regional inequalities. The program, aimed mainly at small- to
mid-sized entrepreneurs and local authorities, was unique in the sense that not since the
regime change had such an intense effort been put forth to boost the economy. As of 2000
the emphasis was on a housing policy that reached broad sections of society.
Similar to the New Deal in the United States in the 1930s, the Széchenyi Plan offered a
chance for Hungarian employment to move closer to the European standard, while trying
to reduce unemployment. As a result of broad national investments and support for in-
vestments starting in the second half of the term, employment rose by 4% (approximately
150,000 people),
8
with unemployment falling by 2% as a consequence, the rate of eco-
nomic growth rate was 4 – 5%, among the highest in the region even with sluggish growth
in the European economy.
It was widely expected that the government could achieve economic growth without cut-
ting back on social policy. In order to live up to this expectation, a real increase in purchas-
ing power had to be accomplished with the help of a radical decrease in inflation and a rise
in wages. While incomes were stagnant throughout the first half of the term, they began
to grow in 2000. The government ambitiously sought to double the real value of the mini-
mum wage in two phases.
9
While the purchasing power of wages per person and the real
rate of retirement funds had reached the 1990 level, income per person still remained ten
percent lower than in 1990. Raising the minimum wage had a positive effect on the 27%
4
There is a total of 34 subjects of legislation that need amajority of two thirds of MPs to change a law, such as armed
forces and their duties, local authorities and their basic rights, public and commercial TV and radio stations, etc.
5
The proposal of Fidesz to subordinate the prosecutor to the government, similar toWestern European practice,
was turned down by theMSzP. A similar disagreement obstructed the reformof the electoral law and the attempt
to reduce the number of MPs.
6
About three quarters of the promises from the initial 40 points were carried out, mostly those implying direct
financial help to voters.
7
The project was named after one of themost famousHungarian personalities of the 19
th
century, Count Széchenyi,
who offered all his personal fortune and talent to help Hungary to flourish.
8
Source:
9
From the previous €100 to approximately €200 per month.
