http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=FT&Date=20061002&ID=6066633Hungary PM stands firm after big poll losses
Ferenc Gyurcsany, Hungary's prime minister, suffered a double blow on Sunday night, when Laszlo Solyom, the president, called for his removal. Later, voters in nationwide local elections gave his Socialist party a beating.
Neither Mr Gyurcsany's position nor his newly introduced austerity measures was immediately threatened as his party continued to rally behind him.
However, the prime minister's ability to press forward with long-term plans for difficult public sector reforms may have suffered.
The opposition Fidesz party, along with thousands who have called for his resignation during recent anti-government demonstrations, received a clear boost from the day's events.
Sunday's vote comes two weeks after the revelation that Mr Gyurcsany had admitted lying about state finances to win April parliamentary elections.
With more than 80 per cent of precincts reporting, Fidesz looked headed for victory in 18 of 19 counties and in 19 of 23 cities.
The Socialists' were headed for only one significant victory, in Budapest, where they and their liberal coalition looked likely to retain control of the city council and the mayor's office.
Liberal Gabor Demszky, mayor of Budapest since 1990, narrowly led in his bid to win a fifth consecutive term.
The biggest surprise of the evening, however, was as a stunning blow to Mr Gyurcsany from Laszlo Solyom, Hungary's president.
In a televised address shortly after polls closed, Mr Solyom called on the country's parliament to remove Mr Gyurcsany from office.
Mr Solyom said Hungary was still immersed in a "moral crisis" related to Mr Gyurcsany's admissions to lying.
The president condemned recent street violence in Budapest but praised those who have demonstrated peacefully and called for Mr Gyurcsany's removal.
"The peaceful protests across the country showed the healthy moral sense of the people to me. However, the catharsis and purge have not taken place," he said.
Mr Solyom said public finances represented Hungary's most pressing problem and he would support plans for reform. But, he added, reforms would not succeed without public support.
Mr Solyom said only parliament had the constitutional power to solve the crisis. He said: "The parliament decides on the person of the prime minister. The parliament can restore the required social confidence."
Socialist party members reacted to the speech by angrily attacking Mr Solyom for interfering in party politics and declaring their continued support for Mr Gyurcsany.
The news electrified an anti-government demonstration in front of the downtown parliament building that was estimated at 10,000 people.
On June 17, an audio taped leaked to the press revealed that Mr Gyurcsany, while imploring Socialist MPs to support his plans for reforms, said his party had lied repeatedly about state finances and the need to introduce austerity measures.
The resulting unrest did not significantly unsettle financial markets but caused analysts and investors to worry that Mr Gyurcsany's ability to pursue reforms would be damaged.
Moody's Investors Service and Fitch, the credit rating agencies, signalled they may soon downgrade Hungary's sovereign debt ratings.
Hungary is expected to post a 10.1 per cent budget deficit this year and is under heavy pressure to from investors and the European Union to make significant deficit cuts over the next three years.
Copyright 2006 Financial Times
