On Saturday, on the annual meeting of the Socialist Party, the Prime Minister Mr. Gyurcsány resigned from his position, by saying that he is ready to stand aside and hand over crisis management to a new government. Gyurcsány does not plan to give up his political carrier, as he will remain the president of the Hungarian Socialist Party.
Gyurcsány intends to initiate a motion of no confidence vote in the Parliament on April 6. The Socialist Party has 189 seats in Parliament, enough to put forward a motion of no confidence, as this requires a least one-fifth of the total 386 seats. Then, the Parliament could elect a new PM on April 14, which requires 194 votes. Given the fact, that the Socialists are governing in minority now, they would need support for electing the new PM from at least one of the two smaller parties - the Free Democrats (SZDSZ) – which had been the coalition partner of the Socialists until May 2008 - and the Hungarian Democratic Forum (MDF). If they come to an agreement, a new government will be formed by the end of April. Thus, the door is open for the parties now to start discussions on the new PM. As the SZDSZ and the MDF are unlikely now to support a candidate coming from the Socialist party, the „compromise“ person could rather come from the outside.
As far as the biggest opposition (and currently the most popular) party, FIDESZ is concerned, they are unlikely to take part in formation of any government without elections. Instead, they are likely to demand for early elections. It has lower probability, however, as this is absolutely not in the interests of the other three parties, given their low popularity among electors. So they are expected to find a joint candidate for the position of the PM and an expert government could operate until the next elections, due in spring 2010. Early elections could come if Gyurcsány formally resigns and the Parliament fails to approve a candidate within 40 days.
Market reaction: So far, markets have been reacting moderately to the political events, although the fact that investors do not like political uncertainty. The reason could be that the minority Socialist government has been very narrow room of maneuvering, despite the urgent tasks of handling the negative effects of the crisis, managing the budget (as in order to keep the deficit under 3% of GDP, further adjusting measures should come, due to worsening economic prospects) and carrying out deeper reforms. The weekend events may open room for the solution of recent situation; however, the longer run reaction of the markets will strongly depend on the commitment of the new candidate to structural reforms.
