Ferenc Gyurcsány

Hungarian Prime Minister Ferenc Gyurcsány warned the leaders of western European Union member states not to erect a new Iron Curtain by permitting Eastern European economies to collapse under the pressure of the global financial crisis. „We should not allow that a new Iron Curtain should be set up and divide Europe. In the beginning of the nineties we reunified Europe, now the challenge is whether we will be able to reunify Europe financially”–Gyurcsány observed, while attending the EU’s emergency summit this weekend. The Hungarian Socialist prime minister’s words were significant enough to echo on this side of the Atlantic as well, with the Canadian Broadcasting Corporation (CBC) featuring Gyurcsány’s warning as headline news on its website.

Hungary has led a move on the part of other East/Central European countries–namely Poland and the Czech Republic–to pursuade the EU to provide the region with a massive bail-out package, in order to cushion these struggling economies from the impact of dramatically declining currencies and–particularly in Hungary’s case–crippling national debts and a sizeable deficit. Polish Prime Minister Donald Tusk noted that the West must adopt a „spirit against protectionism and egoism.” Czech Prime Minister Mirek Topolanek echoed his Polish and Hungarian counterparts when he noted that the region does not want „a Europe divided along a North-South or an East-West line” and also observed that a „beggar-thy-neighbour policy is unacceptable.”

Hungary has called on the EU to provide Eastern Europe with a massive €180 billion loan, but it appears as though key western European leaders are hesitant to do this. German Chancellor Angela Merkel rejected the idea of a blanket bail-out for any region, noting instead that the situation is dramatically different in each country and that a one-size-fits-all solution would not make sense. In many ways, Merkel’s assessment is quite accurate. Hungary is in the worst situation, as a liquidity crisis looms over what was once the most prosperous country in the former communist Eastern bloc. Hungary’s national debt now stands at well over 60 percent of the GDP and particularly problematic is the fact that the Hungarian forint’s value has slipped by more than 20 percent over the past months, leaving millions of Hungarians who took up mortgages or car loans in Swiss francs and euros in a bind. Yet widespread defaults and personal bankruptcies in Hungary would send Austria’s economy into a free fall as well, since major Austrian banks dominate Hungary’s banking sector. In fact, were Hungary to effectively declare bankruptcy and default on its national debt, it would likely drag the entire European common market and currency down with it.

It seems doubtful that Gyurcsány will receive all that he asked for. In fact, his request that Hungary’s adoption of the euro be fast-tracked in light of the crisis has already been rejected by Luxembourg’s Prime Minister, Jean-Claude Juncker, who noted that it is impossible to change euro zone accession criteria „overnight.” Additionally, there is a sense that the EU will not provide more aid beyond the €25 billion which was announced last week by the World Bank and the European Investment Bank, which aims to shore up Eastern Europe’s teetering banking sector. This, however, may be too little, too late for Gyurcsány, whose Socialist Party must face a deeply disenchanted electorate on 7 June 2009 for European Parliamentary elections. Hungary is allocated 22 seats in the European Parliament. Most public opinion polls suggest that the Socialists are unlikely to garner more than 6 of these, with the rest going to one or possibly two opposition conservative parties.

Canadian Hungarian Journal