Other State Department Archive Sites

The State Department web site below is a permanent electronic archive of information released online from January 1, 1997 to January 20, 2001. Please see www.state.gov for current material from the Department of State. Or visit http://2001-2009.state.gov for information from that period. Archive sites are not updated, so external links may no longer function. Contact us with any questions about finding information. NOTE: External links to other Internet sites should not be construed as an endorsement of the views contained therein.

Country Commercial Guides FY 2000: Hungary Report prepared by U.S. Embassy Budapest, released July 1999 Note*

III. POLITICAL ENVIRONMENT

A. Nature of Political Relationship with the United States

Bilateral relations between the United States and Hungary are excellent. Euro-Atlantic integration and Hungary's strong pro-U.S. outlook enjoy solid support among all major political parties and the public as a whole. Hungary's integration with western political, economic and security institutions continues to advance with U.S. support. Hungary became a member of NATO in March 1999. Throughout the Kosovo crisis, it proved itself a steadfast ally, providing important political and logistical support during the conflict. Hungary is contributing to the KFOR peacekeeping mission in Kosovo, as well as several other international peacekeeping or observer missions, including in Cyprus, Georgia, and Bosnia. Hungary has hosted since 1995 an U.S. military base that supports American SFOR troops in Bosnia. Hungary is also an active participant in multilateral force, including serving as the current chairs of the Missile Technology Control Regime and the Chemical Weapons Convention.

The U.S.-Hungarian Mutual Legal Assistance Treaty (MLAT) went into effect in August 1996. Hungary and the U.S. are partners in the creation of the International Law Enforcement Academy (ILEA) located in Budapest to train police officers from the region and to improve cooperation in all areas of law enforcement. Hungary and the U.S. are cooperating actively in the fight against international organized crime. Hungary, along with the United States, is among only eight countries in the world which are party to ten key international conventions for combating terrorism. The United States encouraged Hungary's entry into the OECD (May 1996) and supports Hungary's bid for EU membership.

B. Major Political Issues Affecting the Business Climate

For the third consecutive time since free elections were established in 1990, Hungarians voted incumbents out of office in the May, 1998 general elections. The current governing coalition promised to continue the previous policy of fiscal responsibility, to pursue European integration, and initial ministerial appointments inspired business confidence. Global financial turbulence in the second half of 1998, and the extraordinary events of the first half of 1999 (including three cycles of flooding, and the Kosovo conflict) have made for a very difficult policy-making environment. The central government budget for 2000 will be a key indicator of whether Hungary's coalition government can make some very tough decisions on such contentious issues as tax and health care finance reform. A strong economic recovery in the EU will do much to relieve some of the pressure on Hungary's current account, but markets would welcome some fiscal retrenchment, including a cautious approach to spending and more conservative revenue estimates.

C. Brief Synopsis of the Political System

Hungary is a parliamentary democracy with a freely elected legislative assembly that initiates and approves legislation. The Prime Minister nominates the cabinet, and Parliament approves the choices after open hearings. Viktor Orbán, the leader of the Fidesz - Hungarian Civic Party, heads a center-right coalition government which was formed in June, 1998, with the Hungarian Democratic Forum (MDF) and the Independent Smallholders' Party (FKGP). Fidesz controls 147 of the 386 parliamentary seats, and the coalition as a whole controls 211 seats. The center-left opposition is comprised of the Hungarian Socialist Party (MSZP) and the Alliance of Free Democrats (SZDSZ). Although Hungarian election politics have evolved into a contest between center-right and center-left, in 1998 an extreme right party, the Hungarian Justice and Life Party (MIÉP) earned over 5 percent of the vote nationwide and gained parliamentary representation. MIÉP's influence during its first year in Parliament has been marginal.