Jorg Hirsch / Kim Travnor (translation)

Andrew Andersen (map editing for web version)


Longman London and New York 1996






The Transition to Democracy and the Market Economy




On 23 June 1987 the Central Committee announced the new government line-up which was given parliamentary approval two days later. Under the new arrangements the chairman of the Presidium, Pál Losonczi, took 'voluntary' retirement and the acting General Secretary of the MSzMP, Károly Németh, became the de facto head of state. His position was filled by the long-serving prime minister, György Lázár, who in turn was replaced by the powerful Budapest party boss, Károly Grósz. The young economist, Miklós Németh, took over from the Central Committee economics minister, Ferenc Havasi. When the Politburo voted out Losonczi and István Sarlós, their places were taken by the deputy prime minister, Judit Csehák, and the Central Committee Secretary for Agitation and Propaganda, Jáinos Berecz -- a move which increased his chances of succeeding Kádár. It was significant that Imre Pozsgay, the author of the exciting discussion document, 'Reform and Change', which argued for different social groups to share in decision-making and for a gradual move towards pluralism, held on to his relative influential position as General Secretary of the Patriotic Popular Front. These personnel changes demonstrated a desire to shift the economic decision-making process away from the party to the government. At the same time, the MSzMP's monopoly of power was retained in order to avoid arousing the misgivings of other members of the Socialist Bloc. Kádár, who was now ill and proving increasingly incompetent, not to say out of his depth, in economic affairs, had to watch helplessly as more of his closest supporters were forced out of the government to make way for new blood.

The new team acted swiftly. On 2 July 1987 the Central Committee announced a new 'programme for social and economic development' which introduced drastic government spending cuts. At the same time, the government removed state controls over the economy and gave more freedom to former collectives to make their own commercial decisions, thus enabling them to respond more flexibly to market forces. State subsidies were awarded to private businesses and joint ventures. It was hoped that the introduction of income tax and VAT on I January 1988 for Hungary's 4.8 million employees (of whom at least 1.6 million were engaged in the black economy) would significantly reduce the budget deficit. Other measures designed with the same goal in mind included drastic cuts in welfare spending, cutting state subsidies to industry, closing down unprofitable firms, compulsory redundancies and a new export drive. Price rises of between 10 and 14 per cent were seen as necessary to create the investment capital required to modernise the neglected sectors of the economy such as electronics, light industry, machine-tools and foodstuffs. But it was doubtful whether the increasingly anxious and insecure population, which was rapidly losing confidence in the government, would be able to tolerate a policy of such strict austerity unless it were accompanied by political concessions.

On 16 September 1987 Grósz presented parliament with details of his economic recovery plan. With capital and interest repayments on the 16 billion dollar national debt now claiming two-thirds of all foreign exchange revenue and a predicted budget deficit of 35 billion forints, he proposed a future increase from 15 to 25 per cent in VAT on 'luxury items' and an increase in the rate of income tax from 20 to 60 per cent. It was hoped that these measures would help balance the budget by 1990. But when Kádár insisted in the ensuing debate that the humane principles of Socialism now rested on a more solid economic foundation and would remain firmly in place, as would the planned economy and state ownership combined with a degree of private enterprise, many party members felt disappointment and concern for the future. The Central Council of Trade Unions representing almost the whole of the workforce (4.5 million members) took the view that the government's economic measures were acceptable and drew attention to the fact that over 27 billion forints were being allocated to support large families and the elderly.

On 16 December 1987 the government published its annual report on the economy. Although the GDP had grown by almost 2 per cent, losses sustained in the agricultural sector and a rise in the volume of imports beyond planning levels had caused further increases in the balance of trade deficit and the foreign loans debt. The gloomy forecast for 1988 was that private consumption would fall by a further 2.5 per cent and per capita income by an average of 3 per cent. This was because price increases as high as 15 per cent would far outstrip any wage increases which were to be kept below 5 per cent. After a period of panic buying had emptied shop shelves, the national economic plan published on 27 December 1987 envisaged a further rise in prices and a fall in consumer spending in line with government policy. The attempt was also undertaken to improve efficiency and cut administrative costs by restructuring the machinery of government. This was achieved by merging and restaffing ministries, while also shedding a large number of civil service jobs. The powers of the Presidium, which up until now had exercised a legislative function, were substantially curtailed and parliament's participation in decision-making increased. Under the new arrangements parliamentary approval would have to be sought before the government could implement its programme and parliament was also to be given powers to approve the budget, pass new legislation and confirm ministerial appointments. At the same time the new government strengthened the constitutional right to freedom of worship in the belief that the responsible citizen should be allowed to make his or her own ideological choices. Restrictions on the activities of the churches were removed and religious groups given access to the media. Prior to this, however, Grósz placed radio, television and the state news agency, MTI, directly under official government control.

Many Hungarians were deeply upset and depressed at the effects of the strict economies in what some nicknamed the 'happiest barracks in the eastern bloc'. The many new economic and administrative measures which had been introduced caused unimaginable chaos. Cautious estimates put 35 per cent of Hungarians on or below the poverty line. On an average monthly income of 7,000 forints or a pension of 3,600 forints, people could only maintain their standard of living by eating into their savings. Thus few Hungarians were impressed when the Soviet head of state, Andrei Gromyko, praised their country as a 'liberal marketorientated partner' pursuing an economic policy which contained important lessons for the USSR. Nor were they impressed when, during a visit in mid-April, the Soviet prime minister, Ryshkov, delivered a speech criticising Comecon and praising the Hungarian Communists for their courageous economic and political reforms. Large numbers of disillusioned members began to leave the party. In the first three months of 1988 over 45,000 handed in their party card. By the end of May the Communist Youth League had lost over 100,000 members. When upwards of 10,000 demonstrators gathered on 15 March to commemorate the 1848 revolution in the biggest unofficial demonstration since 1956, it was noticeable that the security forces were kept at a discreet distance.

Serious differences of opinion on the causes of Hungary's economic problems and possible future strategies to deal with them led to furious arguments breaking out between reformers and conservatives at a meeting of the Central Committee held on 23-24 March 1988. The only points of agreement were that the centralised political power structure and institutions of the Stalin era were now outdated and that the party should relinquish its monopoly of power so that people would be encouraged to show greater self-reliance in organising and running their own affairs. The setting up of voluntary associations and interest groups should also be actively promoted. It was decided to leave the necessary reform of the party structure and its implications for those in positions of power to the next party conference due to be held in late May. But just how little room for manoeuvre remained could be seen from the party's reaction to a new attack by Pozsgay, who blamed lack of political and social reform for the country's economic problems and the damage this was causing to Socialism. On 10 April 1988 moves were made to expel four of Pozsgay's followers from the party for supporting his demands for a new constitution, elections by secret ballot with a choice of several candidates and more strictly defined and observed 'civil rights'.

Many members now began openly to discuss the desirability, indeed necessity, of finding a replacement for Kádár who was suffering ill-health and showing signs of age. But the General Secretary indicated little desire to quit or change his views. He insisted that Hungary would continue to follow its own 'Socialist path of development'. As far as he was concerned, political pluralism was out of the question. When the Central Committee re-convened on 10 May, no agreement was reached on who should be elected to the important positions in the leadership. On 21 May 1988, Kádár made his opening speech at the first national party congress since 1957 in which he called for the party to carry on with the process of gradual democratisation and reform on the understanding that this would strengthen its leadership role and allow it to continue building a Socialist society and strengthen the power of the masses. This view, which was out of step with the times, was rejected by the majority of speakers including Imre Pozsgay. He, in contrast, pleaded for greater tolerance of conflicting views, improving the rights of the citizen and ending the party's and the bureaucracy's abuse of power. After much heated debate, the theoretical basis and guidelines for reforming the party and social institutions along democratic lines were spelled out in the document 'Change, Reform and Renewal'. It proposed that reforms based on meritocratic principles should continue. At the same time, parliament should be given more independence, the constitution thoroughly revised and the public allowed a greater say in decision-making, for example through referenda. The new Central Committee subsequently removed Kádár from his post as General Secretary and ended his membership of the Politburo, demoting him to the impotent position of honorary chairman. He was succeeded by Károly Grósz, the 58-year-old technocrat who had risen rapidly in the party since 1985 and whose forceful manner, though it had made him few friends, had won him considerable respect.

Few politicians have had such a lasting influence on Hungary's fate as János Kádár who was forced involuntarily into retirement. In terms of his significance in Hungarian history commentators have compared him with the Renaissance ruler Matthias Corvinus or the Emperor Francis Joseph. Initially seen as the 'betrayer' of the 1956 Uprising, he had successfully rid himself of his odious reputation as 'the nation's hangman' and had persevered in winning from the Kremlin Soviet recognition of Hungary's distinctive path to Socialism. His maxim, 'He who is not against us, is with us', and his 'goulash-Communism' had succeeded in reconciling Hungarians to an unpopular and inefficient economic and bureaucratic system. It was, above all, his achievement that economic reforms had been introduced, albeit half-heartedly, which had resulted in fundamental political and social change. But when questioned about his part in 'violating socialist legality' and in the deaths of László Rajk and Imre Nagy he had remained silent. The era over which he presided had probably already come to an end when the second phase of reforms began in 1986, or at the latest when Károly Grósz took over the government in June 1987. Always proud of his proletarian origins, he had basically remained a worker and had persistently avoided a personality cult and the accumulation of privileges. His unpretentious manner and personal integrity won him the deep admiration of his fellow countrymen. His tragedy lay in the fact that he failed to leave the political stage at the right moment: he could neither keep up with nor approve the pace of reform and its consequences for Hungarian society.

Most of Kádár's closest supporters -- K. Németh, G. Lázór, S. Gáspár, F. Havasi, M. Óvóri -- lost their places on the new, smaller 11-man Politburo. The six new members, including Rezső Nyers, Miklós Németh and Imre Pozsgay, were committed to reform, as was the new six-man Central Committee Secretariat. The changes at the top soon percolated down to the middle levels of government. The Soviet Communist leader, Mikhail Gorbachev, forced to defend his own reform plans against growing internal party criticism, greatly welcomed the triumph of the Hungarian reformers. He sent a telegram congratulating the Hungarians on their leadership changes and the infusion of new blood, praising Grósz as 'an acknowledged leader who remains faithful to the principles of Communism'.

Károly Grósz, who had no wish to remain as both party chief and prime minister in the long term, immediately announced more 'major and radical reforms' to cut state subsidies which amounted to 35 per cent of government spending, balance the domestic budget and reduce the country's growing foreign debt. A special parliamentary sitting on 29 June 1988 removed Kádár's protégé, Károly, Németh, 'at his own wish and in recognition of his services' as chairman of the Presidium and chose as his successor the biochemist, Bruno Straub, who was not a member of any party. The election of the radical reformer, Pozsgay, to Secretary of State in the prime minister's office, as well as numerous other changes at ministerial level demonstrated the party's desire to press on with reforming the system.

This desire was also evident at the full meeting of the Central Committee held on 13-14 July which was broadcast live for the first time on television. After delivering a hard-hitting critique of mismanaged economic development resulting from Stalinist centralisation and acknowledging the inadequacy of the remedies -which tackled the symptoms rather than the causes -- the Central Committee Secretary, Miklós Németh, appealed to his countrymen to have the necessary courage to implement radical change. He explained that it would take about seven years to develop a range of products to compete in the international market, expand foreign trade, improve efficiency to cope with the market economy and put an end to subsidising loss-making companies. Since all this meant taking unknown risks and might give rise to social tensions, he recommended that the government should seek a social consensus. The public should be kept fully informed of the true economic situation and the hardships caused by the changes. The reasons for these should be properly explained. The Central Committee then asked the government to draw up an economic plan which would bring about 'rapid structural changes and technical development' and effect 'the opening up of foreign markets' by 1989. It also urged the government to cushion the population against future hardships by creating a new social welfare system.

A subject of even greater interest to most Hungarians was the idea of introducing a law on freedom of assembly and association. In future 'peaceful combination, assembly and demonstrations' would be allowed as long as the aims of the registered groups did not conflict with the constitution, endanger public order, offend morals or harm the rights of others. The fact that a whole variety of movements and social groups had emerged which opposed the party's monopoly of power and control of public opinion meant that it was also necessary to create an 'appropriate framework for the open discussion of alternative views'. These groups wanted political pluralism and the right to engage in political activity. On 3 September 1987 nationalist intellectuals in Lakitelek founded the 'Hungarian Democratic Forum' ( Magyar Demokrata Fórum -- MDF). Appealing to the populist tradition of the inter-war period, its manifesto advocated a multi-party system, privatisation of the economy and the substantial restoration of ' Hungary's damaged national consciousness'. At its first big public meeting on 15 May 1988, held in the Jurta theatre in Budapest, the platform speakers, István Csurka, the playwright, and Sáindor Csoóri, the writer, demanded that one of the government's main priorities should be to rehabilitate Imre Nagy and his policies. In the previous March the more left-wing organisation, 'Network of Independent Citizens' Initiatives', had emerged as a rallying point for several underground organisations. Its spokesmen issued a declaration of principles which demanded a multi-party system, the observance of human and civil rights, independence for Hungary within the Socialist Bloc and the creation of a 'mixed' market economy. Other groups to emerge were a 'Trade Union of Democratic Scientists' independent of state control and an 'Alliance of Young Democrats' (Fiatal Demokraták Szövetsége -FIDESZ). The latter rejected state interference in the economy and demanded recognition of the right to private property and corporate ownership, but, above all, strict observance of the rule of law and the immediate introduction of parliamentary democracy.

Feminists, ecologists, animal rights groups, traditionalists and even the Scout movement all announced their intention to set up their own organisations. This, together with the fact that representatives of the old parties banned in 1949 expressed the desire to become politically active once more, meant that appropriate legislation could no longer be delayed. The form this took was decided by a public debate conducted by the Patriotic Popular Front. It was also the Front that accepted responsibility for an opposition demonstration on 27 June 1988 when over 35,000 people gathered in the main square of Budapest to protest against Ceauşescu's policies against ethnic minorities in Rumania and the destruction of villages to make way for agrarian-industrial cooperatives.

Grósz and his foreign minister, Péter Várkonyi, who had held on to his position after Kádár's departure, tried to enlist sympathy, moral support and concrete help for their reforms not just from Hungary's Socialist partners but from the industrialised West. While the East German, Czech, Bulgarian and Rumanian governments warned the Hungarians against taking incalculable risks and distanced themselves increasingly from Hungary's reforms, the Kremlin gave its full backing. This was because Gorbachev saw the Hungarian experiment as a possible alternative to the social and economic pressures for change he was facing in the Soviet Union.

In contrast, Hungary's relations with Rumania deteriorated considerably when Ceauşescu began implementing his plan for 'systematising villages and towns'. This required the razing of over 13,000 villages to be replaced by 6,000 new settlements clustered round 558 'urban agrarian-industrial complexes' by the year 2000. When the Hungarian government assured the Hungarian minority in Transylvania that the 'mother nation' would support them in their struggle against oppression, attacks on their culture and the violation of their rights, Bucharest responded at the start of 1988 by tightening up its border controls and resettling more Magyars in the region of Tîrgu Mureş (Marosvásárhely). This resulted in an exodus of refugees which grew considerably until well over 17,000 had crossed into Hungary by the beginning of July. Protest declarations published by the Hungarian media contributed to the climate of hostility inside both countries. Following a mass demonstration officially approved by the Hungarian government and the blockading of the Rumanian embassy by protestors in Budapest, the Hungarian consul in Cluj-Napoca was ordered to close his consulate on 1 July. The Hungarian Cultural Institute in Bucharest was also forced to close. At the same time, Rumanian border officials refused to process the passports of Magyars trying to cross the border. Ceauşescu complained in an intransigent speech that Socialist Hungary was conducting a foreign policy reminiscent of the extreme nationalism and chauvinism of the Horthy era. This accusation was rejected by the Hungarian parliament in a sharply formulated resolution of 1 July which in turn criticised Rumania's resettlement procedures as a violation of human and minority rights. After failed attempts at mediation by other countries in the Socialist Bloc there seemed to be no prospect of a settlement of what the Soviet prime minister, Ryshkov, described as an 'abnormal situation'. When Grósz and Ceauşescu met at Arad on 28 August -the first meeting between heads of state since 1977 -- they failed to make any progress in overcoming the 'considerable differences of opinion' which existed between them.

On their visits to western capitals Hungary's politicians were encouraged to continue their reform programme. They expressed their wish 'to be among the first countries to reduce their armed forces and weapons on their territory'. This policy which was adopted mainly for economic reasons resulted in constructive cooperation at the subsequent arms limitations talks in Vienna. After the German Federal President von Weizsäcker made a state visit to Hungary on October 1986, Budapest placed great importance on developing closer relations with West Germany. These were further strengthened when Hungary's foreign minister, Várkonyi, signed an agreement in Bremen on 22 July 1987. The close bilateral cooperation thus established also resulted in the West German government providing Hungary with a financial credit of over a billion marks when Grósz visited Bonn at the beginning of October. It was also agreed to set up cultural exchange institutes in both countries. On 10 March 1988 the West German foreign minister, Genscher, opened a West German Cultural and Information Centre in Budapest, only the second (after Bucharest) that the Germans had established in a Communist country. And it was mainly because of West Germany's support that Hungary was able to sign a wide-ranging economic agreement with the EC in Brussels on 26 September 1988. This extended 'most-favourednation' status to Hungary and greatly opened up trade relations between Hungary and EC members. The EC also agreed to scrap its quota restrictions on Hungarian imports until 1994.

The Grósz government also paid particular attention to re establishing normal diplomatic relations with Israel. These had been broken off in 1967. After delegations had signed an initial trade agreement on 14 September 1987 in Berne, closer relations were established when the Israeli foreign minister, Peres, paid a surprise visit to Budapest on 8 May 1988. This was followed by further visits from Prime Minister Shamir on 14 September and 17 April 1989. On 18 September 1989 it was finally announced that normal diplomatic relations had been restored between the two countries.

But Hungarians were less interested in foreign policy than turbulent events at home where the effects of the government's reforms had resulted in the country's first wildcat strikes. The realisation that Hungary's lame-duck companies could only be saved by injections of foreign capital prompted the autumn session of the Hungarian parliament to pass several new laws between 5 and 7 October 1988 allowing the setting up of free enterprise companies from 1 January onwards. In addition, foreigners were to be allowed to hold shares in Hungarian companies, profits could be freely disposed of and a stock exchange accessible to private citizens was to be established. Despite growing public opposition, parliament voted for work to continue on the controversial Danube power station at Gabčikovo-Nagymaros. Economic issues also dominated at a meeting of the Central Committee held on 1 and 2 November. In his role as party leader, Grósz stipulated only one condition for selling off state enterprises -- the proportion of foreign capital and private shares held by Hungarian citizens was not to exceed '49 per cent of the total shares' which were 'the collectively held property of the Hungarian state'. He went on to blame Hungary's problems on the failed policies of the Kádár government in the 1970s, accusing it of having taken control away from the people and having failed to address adequately the concerns of the country's intelligentsia and youth. As regards the emergence of numerous independent organisations, it was broadly agreed that the party should tolerate 'a pluralistic society but only within the framework of the one-party system' since any loss of power by the MSzMP would result in anarchy. The conservative Central Committee Secretary, Berecz, warned that the party would no longer tolerate those who opposed the system or those who gave too much exposure in the media, especially radio, to critics of the party and the government. The reformers rejected this warning outright, pointing to the need to involve society much more in political life. This discussion revealed the existence of serious differences of opinion between fundamentalists and reformers regarding the pace, extent and nature of further reform.

On 24 November 1988 Grósz kept his word and handed power over to the 40-year-old economist Miklós Németh. Rezső Nyers, the much respected original initiator of the NEM, joined him in the newly created post of Secretary of State for Economic Affairs. Németh, who had been elected Central Committee Secretary in June 1987 and became a member of the Politburo from May 1988 onwards, was regarded as equally committed to reform as the ex-Social Democrat, Nyers, who had been ousted from office at the behest of the Soviets in March 1974. He had early on formed the opinion that Hungary could only adopt western ideas of freedom and democracy if it could rid itself of the legacy of Stalinism and revitalise Socialism by introducing a multi-party system. The radical reformers, led by Imre Pozsgay, felt, on the other hand, that the pace of change preferred by the party's centralisers and fundamentalists was far too slow and inadequate. Now firmly established in government, they were determined to press on with more reforms.

At a full meeting of the Central Committee held on 15 December 1988 the reformers forced a withdrawal of the party conference's May resolution to the effect that Socialism could be realised only within a one-party system. The question as to whether the newly emerged 'alternative organisations' would be allowed to take part in the forthcoming parliamentary elections in the late autumn of 1990 was left open for the time being. It was also decided that new legislation and the drafting of a new constitution should come before parliament in the spring of 1990 after the party had had time to discuss them thoroughly. A lecture which Berecz had delivered on the subject of 'Political pluralism - the relationship of the party to new alternative political organisations' was to be retracted, as were Grósz's pronouncements that the old guard was not prepared to give up Hungary's basic Socialism, the country's firm position in the eastern bloc and Communist political leadership without a fight.

As a result of pressure from the reformers, the Hungarian parliament passed a new law allowing freedom of assembly and combination on 11 January 1989, thus introducing two important democratic measures. Citizens were given the right to form their own independent political parties, organisations, interest groups and trade unions. After registering with the authorities they would be completely free to carry out their activities, hold meetings and rrange demonstrations. The practical framework in which political parties would be allowed to operate was the subject of further legislation which retroactively legalised the 30 parties and organisations which had been founded since 1988. While the orthodox wing of the party complained of 'uncontrolled haste' and warned of the dangers of political fragmentation, the justice minister, K. Kulcsár, announced the government's intention of emulating western European models in developing a society based on the rule of law. It was this attitude which lay behind the demand to create an independent Constitutional Court comprising ten members and a chairman elected by parliament.

The legislation of opposition groups opposed to its monopoly of power hastened the demise of the MSZMP. The Hungarian Democratic Forum (MDF), which with upwards of 10,000 members was the biggest of the so-called 'alternative organisations', FIDESZ and the radical-liberal Alliance of Free Democrats ( Szabad Demokraták Szövetsége - SZDSZ), which had emerged from the 'Network', did not at first see themselves as traditional parties, though they did try to create nationwide organisations. In the meantime, the old traditional parties had also announced their presence. The Independent Smallholders' and Civic Party ( Magyar Független Kisgazda Párt - FKGP), which was reconstituted on 19 November 1988, saw itself as the mouthpiece of not only agricultural workers but small businesses, craftworkers and commerce. Alongside advocating a rebirth of Christian values, its political demands included creating democratic government, protecting the environment and establishing close relations with the EC. On 19 January 1989 the Social Democratic Party (Szociáldemokrata Párt) announced its programme at its first meeting for over 40 years. Its main aims included creating an adequate social welfare system, observing human rights, ending the military alliances of the Cold War, declaring Hungarian political neutrality and obtaining full EC membership. The Hungarian People's Party (Magyar Néppá?rt), formally founded on 11 June 1989, saw itself as the heir of the National Peasants' Party. As well as espousing nationalist values, it called for the creation of a stable economy and the promotion of both private ownership and self-governing cooperatives. The Christian Democratic People's Party (Keresztény Demokarta Párt - KDNP) claimed descent from its predecessor and namesake which had been wound up in 1949. Its pronouncements placed it in the same ideological tradition as western Christian Democratic parties. The employers' organisations which had operated unofficially for some time joined the Democratic Federation of Independent Trade Unions in establishing an umbrella organisation on 19 December 1988, and an independent trade union, calling itself 'Workers' Solidarity', was founded on 25 February 1989. On 20 January representatives of the MSzMP and the MDF met for the first time to discuss arrangements for allowing the new parties to take part in the forthcoming parliamentary elections and how to restructure the country's political institutions at the earliest possible juncture.

Events followed fast and furiously in the weeks to come. Imre Pozsgay deliberately opened the floodgates on 20 January 1989 when, commenting on the findings of an historical commission appointed by the Central Committee, he no longer described the events of the autumn of 1956 as a counter-revolution but spoke of a 'popular uprising'. The MSzMP leader, Grósz, rejected this 'over-hasty categorisation' but said he did not wish to ignore opposition demands to re-open the case of Imre Nagy and his colleagues. Although Prime Minister Németh was used to Pozsgay fielding criticism on his behalf, even he felt obliged to advise his ministerial colleague to be more circumspect. The commission's reappraisal of events in 1956 questioned the whole basis of the Kádár period of government and the Soviets' right to intervene militarily at that time. On 7 February Hungary's 15 biggest opposition groups offered to cooperate with the party in implementing further reforms but only on condition that the 'popular uprising' was no longer referred to as an attempted 'counter-revolution', but rather as an attempt to destroy 'the Stalinist party state'. At the climax of the heated public debate on this issue a compromise was reached at a special meeting of the Central Committee held on 10-11 February. It was announced that it had been 'the leadership's failure to revitalise the system' which had 'resulted in the political explosion of 1956. A genuine popular uprising broke out, though counter-revolutionary activities became more pronounced from the end of October onwards.' It soon became clear that the view of the 'popular uprising' having degenerated into 'counter-revolution' when, on 1 November 1956, Nagy responded to the second Soviet intervention by proclaiming Hungary's departure from the Warsaw Pact, declaring Hungarian political neutrality and announcing the creation of a multi-party system, could simply no longer be sustained. The growing demands for Nagy's complete political rehabilitation inevitably undermined the convenient construction which the party had tried to place on events.

Of even greater significance was the decree by which the Central Committee introduced a multi-party system. Many party members argued that society had been inadequately prepared for the changeover and warned of the danger of destabilising the system. It was therefore necessary in their view that the change should be one of 'gradual transition within a controlled framework'. The leadership made it clear that it was prepared to work with all responsible political groups but would make use of its political power to have 'the final say' in the event of any disagreement. The system could be successfully reformed into an economy based on individual efficiency and mixed ownership, only if it also incorporated a humane social policy based on the principles of social justice, collective solidarity and self-help. Grósz, in his position as General Secretary, stressed that the party was sincere in its efforts to remove the legacy of Stalinism and build a 'Socialist infra-structure' superior to 'bourgeois society'. Hungary would develop 'its own new model of democratic Socialism'.

The radical reformers ignored the call to stick to a single party line for the sake of appearances. Nyers complained about the delaying tactics of the Central Committee's 'secret anti-reform wing' and Németh referred to a split in the Politburo over the nature and pace of reform. Nor did he rule out the possibility that the MSzMP might lose the forthcoming election. Pozsgay boldly tackled the subject of the long-term consequences of Stalinism which he accused of having turned eastern Europe economically into one of the 'longest suffering areas of crisis in the world'. His remark that in his eight years as party leader Mátyás Rákosi had been directly responsible for the deaths of more Communists than the 'fascist dictator' Horthy over a quarter of a century was severely criticised when the full Central Committee met again on 20-21 February 1989. In the last session chaired by Kádar the Committee discussed how the constitution could be revised in keeping with a new spirit of legality, averring that 'the 1949 constitution had been a mere copy of the Soviet constitution'. When those who wished to maintain the party's centralised control insisted that the new constitution should retain the concept of Socialism and define Hungary as a 'free, democratic and Socialist state', a vigorous debate ensued. The shift from the party's monopoly of power and the traditional concept of the MSzMP's 'leadership role' was defined in terms of neither the state nor social institutions or individuals having the right to the exclusive exercise of power nor the right to wrest it by force. The draft made no explicit mention of introducing a multi-party system. Instead of celebrating the 7 November, the anniversary of the 1917 October Revolution, as a national holiday, the 15 March was chosen to commemorate in future the events of 1848 when Hungary revolted against the Habsburg monarchy.

Under pressure from its own pro-reform elements the MSzMP reluctantly relinquished its 40-year-old claim to be the sole political representative of the Hungarian people, a claim which had never been legitimised and freely accepted by Hungarian society. In view of Gorbachev's policy of Perestroika in the Soviet Union, the old guard which was resisting major reform could no longer rely on the intimidating threat that their Soviet Colleagues would not tolerate fundamental changes in Hungary. The fact that the MSzMP's membership was already dwindling rapidly made the radical reformers very conscious of the fact that they were in danger of losing the democratic debate to their newly emerged political opponents. Despite undergoing a process of renewal, the party was being held responsible for earlier crimes, mistakes and idiocies committed in its name. The reformers believed that their only chance of not being excluded at the ballot from playing a further part in shaping their country's future lay in placing themselves at the head of the reform movement and making a credible break with the past .







The dramatic internal political changes failed, however, to distract Hungarians from the worsening economic situation. In 1988 rising prices and an estimated inflation rate of 20 per cent resulted in minimal economic growth. The systematic removal of state subsidies succeeded in reducing the budget deficit by 10 billion forints and a modest surplus was achieved in foreign trade with the West despite a 17.2 billion dollar debt. But the wages of white and blue-collar workers continued to fall in real terms. Even so, on 11 January 1989 further massive price increases came into effect. Food became on average 17 per cent more expensive, the cost of medicine rose by a staggering 80 per cent and public transport by 60 per cent. Németh tried to calm protests from the trade unions and the factories by claiming that the worst was over and that the transition to democracy was being accompanied by 'signs of a healthier economy'. Nevertheless, Hungarians generally expected to have to tighten their belts further. Since the opposition could offer no convincing overall economic strategy that could hold out the prospect of rapid improvement, the only way forward to a market economy lay in making further sacrifices and drastically reducing consumer spending.

The new political groups made good use of their new freedom. On 11-12 March 1989 the MDF held its first national party conference in Budapest which was attended by 700 delegates from 200 constituent organisations. Its newly elected steering committee led by József Antall was asked to investigate the possibility of transforming the Forum into a political party, though delegates initially wanted to remain an organisation which would function as a rallying point for similar minded groups. The different groups which formed the MDF agreed on a basic programme which called for the new constitution to incorporate the concept of pluralism, the rule of law and legal equality for all forms of property and enterprise. This was to be drawn up by a newly elected constituent assembly rather than the existing National Assembly which remained dominated by the MSzMP. An alternative rally held by the 31 opposition groups on 15 March, the anniversary of the 1848 revolution, attracted three times as many participants than that organised by the MSzMP. Several speakers demanded for the first time the withdrawal of Soviet troops from Hungary. There were also calls for cutbacks in the military budget, a declaration of Hungarian neutrality in foreign policy, the restoration of national pride, an end to falsifying Hungarian history and a re-evaluation of the events of 1956. The government, for its part, demonstrated its goodwill by introducing provisionally for a three-year term new forms of public service for conscientious objectors opposing universal conscription. Other gestures included joining the United Nations Commission for Refugees and legalising strike action from 23 March onwards.

On a visit to Moscow on 24 March 1989 Grósz tried to calm the fears of Soviet colleagues who were annoyed by Hungary's decision to allow a multi-party system. He praised the MSzMP's continuing leadership role and its 'alliance with all realistic people as the most important guarantee of political stability and the dynamic development of Socialism'. But his assurances that Hungary would strengthen its economic and military cooperation with the Soviets and foster closer party relations were rejected by the reformers and met with general incomprehension on the part of the Hungarian public. Grósz did, however, succeed in returning with Gorbachev's 'full guarantee' that there would be no repetition of the kind of Soviet military intervention that had occurred in Hungary in 1956 and Czechoslovakia in 1968. The Soviet position was summed up in the statement that 'armed force should not be misused to interfere in the internal affairs of other Socialist countries'.

When arguments over reform grew more heated at a full Central Committee meeting on 29-30 March and the danger of a split in the MSzMP emerged, the Politburo decided to back down. At a subsequent meeting on 12 April four of the Committee's conservative members - the party's chief ideologue, Berecz, its activist leader, János Lukács, the unpopular health minister, Judit Csehák and the agricultural minister, István Szabó - were ousted to make way for reformers. The move showed that only twelve months after carrying the hopes of the reformers, Grósz's influence as party leader was in terminal decline. He was no longer able to hold together the opposing wings of the party as they gradually drifted apart. His promise to find 'a new unity on controversial issues', to strengthen democracy and debate in a 'phase of renewal', and his attempts to restore lost confidence in the party and reverse its rapidly declining membership failed to end the deep tensions. After the departure of 23,000 more party members from the beginning of 1989 onwards, the MSzMP's membership slumped to 780,000. Since only 8 per cent of these were below the age of 30 the Communist Youth League decided to disband itself on 22 April and create in its place a new federally structured organisation called the Hungarian Democratic Youth League ( DEMISZ).

Although parts of the old power structure tried to resist reform, the pro-reform elements were not deterred from taking further dramatic action. Following an announcement by Nyers on 2 March 1989, work began on removing the 'Iron Curtain' along Hungary's border with Austria on 2 May, despite protests from the East German, Czech, Rumanian and Bulgarian governments whom the Hungarians nicknamed the 'Gang of Four'. When a major cabinet reshuffle took place on 10 May, the ministers of foreign affairs, finance, industry, economic planning, agriculture and education were all replaced by reformers. Németh's announcement that Gyula Horn had been appointed foreign minister brought a seasoned diplomat into his cabinet whose commitment to defending Hungary's reforms was not in doubt both inside and outside the party. His abilities were put to the test a few days later when a government decree of 13 May provisionally stopped work for two months on the Danube power station at Gabčikovo-Nagymaros. Horn was given the task of explaining his government's action to Hungary's angry Socialist partners in Prague and the alienated Austrian authorities.

On 20-21 May about 400 members of the MSzMP representing 110 'pro-reform groups' held a national conference in Szeged. Here they demanded that Imre Nagy and those executed alongside him should be cleared of their alleged crimes. They also called for the speeding up of Hungary's transition to democracy, the holding of a party conference by the following autumn at the latest and a genuine reform of the Communist movement. None of the delegates objected when Pozsgay argued that they should ignore the party's orthodox elements who were opposed to transforming the MSzMP into a western-style social democratic party. While recognising the undesirability of creating 'a dangerous power vacuum', he believed it would not be a catastrophe were the party to split.

In April, following a petition signed by no fewer than 15,000 Hungarians, an official inquiry was begun into the legality of the show trial staged against Nagy and his colleagues in 1958. While this was still underway, the Central Committee, which met between 28 and 30 May, condemned what it called the 'contrived political trial' and 'illegal sentence' against Nagy. On 9 June the judges of the Supreme Court recommended that Nagy and eight others sentenced for their part in events should be pardoned since the authorities of the time had repeatedly abused the laws 'in the most primitive manner'. Despite growing opposition from party fundamentalists who feared the fallout that would result from re-opening the controversy surrounding the trial, the government pronounced innocent those 'individuals sentenced for activities against the state' in 1958. It promised that 'no-one will ever again be sentenced' in Hungary 'for his or her political convictions without due process of law', adding that 'the ideas and democratic, humanitarian and nationalist aspirations of Imre Nagy and his supporters are an integral part of the present government's outlook'. On 16 June, the 31st anniversary of his execution, the mortal remains of Nagy and four of his closest colleagues were laid in state in the presence of 600,000 people in Budapest's main square. After a commemoration service broadcast nationally on television and radio, they were re-interred in the same Budapest cemetery where they had once been unceremoniously dumped into the mass graves of Plot 301. On 6 July 1989 the Supreme Court announced that the judgement in the trial against Nagy and his colleagues had been illegal even according to the law of the time and that all involved were now posthumously pardoned 'because there had been no crime'. This gesture of reconciliation brought to a close a tragic chapter of Hungarian history and signalled the country's return to the rule of law. It also strengthened the reform elements both inside and outside the state apparatus, while at the same time causing a further loss of prestige for the party's orthodox wing.

In the meantime, the MSzMP's attempts at renewal were already being pushed further by the reformers. On 8 May, János Kádár, who was by now seriously ill, lost his seat on the Central Committee and was deprived of his honorary post as party president. He was reduced to a political has-been without the least attempt to honour his previous record of service. The reason behind this dramatic step was doubtless his tearful acceptance of blame at the previous meeting of the Central Committee when he lost control and asked to be punished for his part in the deaths of Rajk and Nagy. He also came out publicly in favour of revealing the blunt truth of what had gone on behind the scenes during the Nagy trial. He saw the 'tragedy of Imre Nagy' as his 'own personal tragedy', believing that their fates had been indissolubly linked by circumstance, a fact which he felt had been more understood in the West than by his own party comrades. By an irony of fate he died on 6 July 1989, the very day on which Imre Nagy was pardoned of all the crimes of which he had been accused.

When the Central Committee met on 24 June in what was described as its 'most open and critical meeting since the end of the Second World War', it took a decision which was to have profound ramifications: it set up a new collective four-man leadership. Although Károly Grósz kept his title of General Secretary and his seat in the new Presidium, most of his responsibilities were transferred to Rezső Nyers, who was styled the new 'President of the Presidium', and to Pozsgay and Németh. Reformers also dominated the new-styled ' Political Executive Committee', the new enlarged 21-man strong Politburo and the new look Central Committee Secretariat. The party dogmatists, who opposed any further development towards democracy and a multi-party system, tried to disguise their aim of restoring the dictatorship of the proletariat and a centralised party, but the reformers responded with a barely concealed threat to expel them from the party, failing which they would found their own new social democratic style party. The decree summoning a party conference on 6 October and nominating Imre Pozsgay for the new office of president was intended to placate the radical reformers.

In mid-April the opposition groups rejected an MSzMP invitation to round-table talks similar to those which had taken place in Poland. Rather than find themselves integrated into the power structure they wanted 'to challenge those in power'. On 13 June 1989, however, party leaders did meet directly with the 'opposition round table' (a loose assortment of nine parties and independent organisations) and a third grouping compromising representatives of seven mass organisations (trade unions, youth organisations, Patriotic Popular Front etc). The party wanted to create a framework for all loyal elements to participate in government to help tackle the country's political and economic problems. For the opposition, on the other hand, the main priority was to bring about a fast and peaceful transition from a dictatorship to a representative democracy. They demanded legalisation of their activities, the holding of free elections and the acceptance of their proposals for revising the constitution. The victory of three candidates closely allied with the Hungarian Democratic Forum in the parliamentary by-elections of 27 July and 4 August - the first opposition deputies to enter parliament for 40 years - had a positive effect on the atmosphere surrounding negotiations. On 27 August the round-table opposition reached agreement with the party on the procedures to be adopted in the national elections due to be held in March 1990. A politically independent commission was given the task of ensuring that the official media, hitherto exclusively controlled by the MSzMP, would provide balanced and neutral election coverage.

The round-table discussions ended on 19 September with agreement on draft legislation to amend the constitution and the criminal law, create a Constitutional Court and regulate the organisation and activities of political parties. But there was still no agreement over the choice of date for the presidential election and the procedure by which the new president should be elected. The opposition thought that this should be decided only after the new parliament had been elected. Although Pozsgay offered the new political parties initial financial assistance of 35 billion forints to help get their organisations off the ground, the MSzMP's refusal to dissolve its 60,000 strong workers' militia or reveal its financial assets meant that there was still general scepticism regarding the credibility of the government negotiators. After parliament met on 26 September 1989, however, a large majority passed some of the measures agreed to in the talks. For example, a new passport law gave Hungarians complete freedom of movement. The citizen's freedom to choose his or her place of permanent or temporary residence was declared a 'fundamental human right' and the new criminal law declared all political activity aimed against nationality or race a criminal act. Any threat to the constitutional system or the independence of the state and its territorial integrity was defined as an 'anti-state activity'. Citizens were free to criticise the system, its institutions or political figures without breaking the law. Thus Hungary's emergent democracy was beginning to assume a tangible form.

At the same time Hungary was going its own way in foreign policy. On an official visit from 11 to 13 July the US president, George Bush, promised that the USA would support Hungary as a 'helping partner'. On 24-25 July Nyers and Grósz addressed the Soviet leadership in the Kremlin. While Hungary's new leader praised Moscow's recent initiatives as a 'poweful catalyst for introducing democracy into political and social life' in his country, he also stressed the need to effect the changes 'not in stages' but 'quickly and decisively'; otherwise they would inevitably sink 'into lethargy'. On 16 August 1989 the government and the MSzMP distanced themselves from the violent events of the 'Prague Spring' 1968 when Hungarian troops had assisted the Soviets in suppressing the Czechs and the Slovaks. Referring also to their own bitter in 1956, they announced their desire to reform the Warsaw Pact with a view to creating 'institutional safeguards against any such actions recurring'. No sooner had angry protests from the Czechoslovak Communists subsided, when Németh's government, at the urging of foreign minister Horn, decided on 11 September to allow all East German citizens who had fled to Hungary to leave freely for West Germany. This measure, which attracted world-wide attention, was furiously condemned by the East German government. When, on 31 October, parliament instructed the government to terminate the agreement with the Czechs to build the power station at Gabčikovo-Nagymaros, relations with the more orthodox Czechoslovak Communists went from bad to worse. The government then broke new ground when it applied for membership of the Council of Europe on 16 November -- the first time any member of the Warsaw Pact had risked breaking away from the military alliance. On 7 November 1990 Hungary became the Council's 24th member state.

In domestic policy the radical reformers were no longer prepared to settle for half-hearted compromises. While Sándor Péter, chairman of the newly founded Marxist-Leninist Party of Hungary, called on his members to defend pure Socialism to the death, and the Ferenc Münnich Society, which for some time had acted as a rallying point for orthodox Communists, warned in exaggerated terms of the consequences of abandoning Socialist policies, the reformers pressed ahead with their second national conference on 2-3 September 1989 in Budapest. On 16 September they founded a new 'movement for a democratic Hungary'. Recognising the need for a 'complete change to the political system and its leadership', together with the need to transform the Communist Party into a modern reform movement, they announced that they were now prepared to break with the party's political fossils'.

At the party conference held between 6 and 9 October 1989, at which General Secretary Grósz announced his departure from active politics, he attacked those of his colleagues 'who believe they have the authority to decide who is a reformer and who is a fundamentalist'. His plea for greater tolerance and more compromise, for slowing down political reform in favour of urgently tackling the economy and improving relations with Hungary's Socialist partners met with little response. In contrast, Nyers as party leader criticised unflinchingly the latter-day consequences of Stalinism and lamented the mistakes the party had made in suspending the NEM reforms in 1972 and failing to implement political reforms alongside the 1985-86 programme for economic growth. His call for the founding of a new party in the social democratic tradition was seconded by Pozsgay who put forward draft proposals for its statutes and programme. After a serious and much interrupted debate, a vote was taken on 7 October. Of the 1,202 delegates in attendance, 1,005 voted to wind up the MSzMP and found a new Hungarian Socialist Party ( Magyar Szocialista Párt -MSZP). Grósz was one of the 159 delegates who voted against. Nyers was elected chairman, Pozsgay and Németh vice-chairmen. A national steering committee compromising 25 members acted as a kind of Politburo. Renouncing the 'Leninist principles' espoused in the past, the new party pledged itself to a new multi-party system and promised to work within the framework of parliamentary democracy. It also accepted the social market with its mixed economy of private and public ownership, both guaranteed equally under the law, and announced its commitment to the ideals of freedom, democracy and humanism. Members of the old guard completely rejected the new party and continued to profess their loyalty to the MSzMP.

Even though the radical reformers had gained a narrow majority with 13 members on the new steering committee they had to take account of other currents which existed within the new party. For example, the Democratic People's Platform, which appeared for the first time at the party conference as a group in its own right, won five seats on the committee. It adopted a classic Marxist position on some issues such as control of the market economy by workers' councils. The Marxist Unity group led by Robert Ribiánszky and supporters of the János Kádár Society, who identified strongly with the political ideas of the long-serving party leader, adopted an even more extreme position. Although only 50,000 of the MSzMP's membership of 720,000 had left to join the new party by the end of October, it was still too early to say whether it was failing to attract the popular support its reforms were intended to create. Committee members repeatedly argued that the MSZP was a 'genuine people's party'. It would not only represent mainly the interest of workers, but also those of professionals, small-time producers and small businesses, and would distance itself from any elements which might seek to misuse democracy in order to promote class interests.

The MSZP's first party conference endorsed the draft legislation from the round-table talks which was voted on when the new parliamentary session began on 18 October 1989. The preamble of the provisional constitution, which was passed with only five votes against and eight abstentions, defined Hungary as a 'republic' based on the values of bourgeois democracy and democratic socialism.

A new law on the activities and financing of the political parties gave the opposition groups the fight to constitute themselves officially. These parties which in future would have to submit their financial accounts to a newly created treasury were to provide the 'institutional framework' in which 'the popular will and the activities of the citizen in political life' would find expression. The MSZP was ordered to hand over to the state all assets belonging to the old MSzMP. These amounted to three-quarters of an estimated total of 10.3 billion forints together with real estate. Although the radical reformers failed to win party conference approval of their proposal to remove politics from the workplace, parliament banned political party activity inside firms and disbanded the workers' militia which was not replaced. The 23 October was declared an official holiday to commemorate the outbreak of the 1956 Uprising. In January 1990 the new Constitutional Court in Esztergom began its work of checking whether Hungary's laws were in harmonywith the constitution and international law. The decision to give the highest office in the state to an individual president meant bolishing the Presidium. Prior to the elections the parliamentary president, Mátyás Szűrös, had carried out the duties of the post. Since no agreement was reached on whether the new president should be directly elected in January 1990 or whether he should be appointed by the new democratic parliament, due to be elected in the late summer, it was decided on 31 October 1989 to hold a referendum which took place on 26 November. A disappointing 58 per cent turn-out gave the opposition a majority of only 6,101 votes for its motion to have the new head of state elected by the new multi-party parliament. This removed the popular MSZP candidate Pozsgay's chances of becoming president of the new republic which he had played a major part in shaping. The laws which were now passed rapidly by deputies who almost all owed their mandates to the old MSzMP were instrumental in developing democracy further but did nothing initially to tackle the country's economic ills. In the first half of 1989 industrial production fell by 0.7 per cent because with inflation running at 18.5 per cent and correspondingly low purchasing power there was reduced demand in the domestic market. Comecon exports stagnated and the figures for trade with the West were disappointing. Despite an export surplus of 500 million dollars, the government faced a balance of trade deficit of around 1.5 million dollars. When the budget proposals for 1990-92 were presented to parliament, Németh had to admit that Hungary's foreign debt now exceeded 20 billion dollars and the internal government debt amounted to 1,100 billion forints. But it was clear on 21 November 1989 that the parliamentary deputies were not prepared to accept the IMF's conditions for granting further loans. The Hungarians were expected to devalue the forint, drastically reduce subsidies on utilities and take immediate steps to close down loss-making companies. Despite Németh announcement that previous governments had been responsible for running up secret external and internal debts of 3 billion dollars and 300 billion forints respectively, deputies went ahead with reducing VAT by 2.4 per cent to 14.5 per cent and personal income from 45 to 40 per cent. When the MSZP leadership failed to push through a demand to raise rents by 50 per cent for a new house building programme, the prime minister resigned angrily from the Presidium and also threatened to resign as head of government if the revised budget proposals were rejected.

Despite drastic reductions in government spending on the army and the administration, and the prospect that at least 50,000 or even 100,000 workers would be made redundant, a large majority of eputies eventually approved the government's economic programme on 19 December and the budget on 21 December. The latter, however, also increased social welfare spending and allocated funds to combat the effects of unemployment. Rents were raised by 35 per cent, food prices were no longer subsidised by 25 per cent on average and deputies accepted an inflation rate of 20 per cent. Németh made no secret of the fact that Hungary could not expect any tangible economic recovery nor any improvement in the standard of living. The fact that the World Bank, the IMF and EC governments were willing to provide generous loans which could help the government achieve a limited measure of economic stability was recognition of Hungary's successful move towards democracy and a market economy. The controversial question of whether the government should raise the 2 billion dollars required for an international exhibition to be held simultaneously in Vienna and Budapest or whether the money would be better spent on an urgently needed housing programme added to an already heated debate.

Despite a demonstration by orthodox Communists who refused to recognise the legality of the 7 October decree winding up the MSzMP and who held their Fourteenth Party Congress attended by 800 delegates representing 100,000 members on 17 December in Budapest, the Hungarian government and parliament continued to pass more measures intended to introduce democracy. The extent to which the rule of law had been achieved was clearly demonstrated when the minister for internal affairs, István Horváth, resigned on 23 January 1990 after accepting responsibility for a bugging scandal involving members of the secret police. On 25 January parliament placed clear restrictions on the activities of the security services whose future role was to deal only with cases where there was a threat to the security or sovereignty of the country and its constitution. They were also to be allowed to open mail and bug telephones, but only in certain narrowly defined circumstances and subject to supervision by the minister of justice. Parliament also declared that the pursuit of private enterprise was now a civil right and passed the required legislation for privatising state-owned concerns, re-opening the stock exchange and allowing farmers to withdraw from cooperative farms or change these into private farms. It also extended the 'fundamental human right' of freedom of worship and conscience, as safeguarded by the new constitution. Every Hungarian was granted the right to practise the religion of his or her choice and it was left to parents to decide whether their children should be given a religious upbringing and whether they should receive religious instruction which was reintroduced into the schools. The churches were explicitly acknowledged as free and independent institutions, and full diplomatic relations with the Vatican were restored on 9 February 1990, when Pope John Paul II promised he would visit Hungary in 1991.

At its last sitting before its dissolution on 14 March 1990, the National Assembly pardoned all of Hungary's citizens who had been unjustly condemned by the courts during the Stalin era. Sentences meted out in trials involving fabricated evidence were declared null and void. Financial compensation was considered for Hungarians taken into Russian captivity after the end of the war and for the German ethnic minority which had long suffered discrimination because of the post- war notion of collective guilt. The preamble to the legislation stated that 'parliament asks for the nation's forgiveness and bows its head before all the victims of illegal acts, for the crimes in question were not committed by citizens of the state but by the Stalinist authorities'. At this time Hungarians were also following the deteriorating situation of their co-nationals in Rumania. From the beginning of December 1989 almost 30,000 of them had fled to Hungary along with 10,000 Rumanians. Németh's government joined the Geneva Convention on Refugees on 24 February 1989 and attempted to put pressure on the Ceauşescu régime by making formal protests and allowing demonstrations to take place outside the Rumanian embassy in Budapest.

When the Rumanian revolution broke out, Hungarian radio, press and television reported in detail the violent clashes in Timisoara (Temesvár) with its considerable Hungarian population. The events of the revolution were closely followed as they unfolded and culminated in Ceauşescu's fall on 22 December 1989. Foreign Minister Horn travelled to Bucharest on 29 December to re-establish friendly relations and secure a guarantee of individual and collective rights for the Hungarian minority. But despite Budapest's raised expectations, the meeting proved disappointing. On 5 January 1990 agreement was reached on easing the flow of cross-border traffic and on 11 January a new trade agreement was signed, but the new Rumanian government, led by Petre Roman, did not translate its promises into action to improve the legal position or extend the cultural independence of the Transylvanian minority. After 8 February rumours that Hungary was seeking a revision of the borders between the two countries sparked off popular protests in Rumania and led to the first outrages against Hungarian citizens and buildings, resulting in a steady increase in the stream of refugees. When the extreme patriotic movement, Vatra Romaneasca, employing nationalist slogans and exploiting growing hatred, instigated clashes which left eight dead and over 300 injured on 19-20 March in Tîrgu Mures ( Marosvásárhely), relations between Budapest and Bucharest reached a new low. Thanks mainly to the level-headed and unequivocal response of the Hungarian government and members of the nationwide Hungarian Democratic Union, the ethnic conlict did not spill over and action was taken after April to limit the damage.

The efforts of the Németh government to hasten the Warsaw Pact's changeover from a military alliance to a purely political alliance and to secure the withdrawal of the 50,000 Soviet soldiers stationed in Hungary aroused considerable public interest. It was openly discussed whether Hungary should declare political neutrality, enjoying a similar status to that of Austria or Finland. It was also seen as vital that Hungary become a full member of the EC in the hope that this would speed up the process of overcoming the economic crisis. This seemed an essential precondition for stabilising the country's new parliamentary democracy. In late November 1989 the cabinet decided to reduce the strength of the armed forces by 35 per cent by the end of 1991, as well as cutting the number of offensive weapons and shortening the length of military service by six months down to twelve. After difficult negotiations, the Soviet Union agreed on 10 March 1990 to the complete withdrawal of Soviet troops, their families and 50,000 civilian employees, as well as complete disarmament by the end of 1991. Although the Soviet foreign minister, Shevardnadze, admitted that this order was 'possibly a bit too late' in coming and believed 'it would have been better if this agreement had been signed earlier', his Hungarian counterpart, Horn, stressed the fact that Hungary wished to remain inside the Warsaw Pact but only if it were radically restructured to bring it into line with political changes taking place in Europe. The early departure of the first Soviet units on 12 March was an event of major public interest and took place in the run-up to the new parliamentary elections.

On 25 March 1990, after a vigorous debate on future government policy and an election campaign noted for its character assassinations, an estimated 7.5 million Hungarians were given the opportunity to vote for 386 deputies in the first free, equal and secret elections to be held in Hungary since 1947. By a complicated system of both direct and proportional representation 176 seats were to be secured by directly elected candidates who won an absolute majority in the first round of voting. A further 152 seats were to be occupied by candidates nominated on regional party lists and 58 seats were allocated to candidates returned by the remaining vote at national level. Those seats were to be occupied by candidates who won the biggest share of the constituency vote after the directly elected members. Each of the ethnic minorities: Croats, Serbs, Slovenes, Slovaks, Rumanians, Germans, Jews and gypsies were guaranteed at least one deputy. In an election turnout of just 65 per cent only 157 seats were secured in the first round. The Hungarian Democratic Forum (MDF) with 24.7 per cent of the vote and the Alliance of Free Democrats (SZDSZ) with 21.4 per cent fared almost equally well with the voters. The Independent Smallholders' and Civic Party (FKGP), the ruling Hungarian Socialist Party (MSZP) and the Alliance of Young Democrats (FIDESZ) each received about ten per cent of the vote, while the Social Democrats, like the old Hungarian Socialist Workers' Party (MSzMP), failed to clear the 4 per cent hurdle with only 3.5 per cent of the vote.

For the second round of voting on 8 April candidates simply required a relative majority of the votes. The MDF and the Christian Democratic People's Party (KDNP) formed an electoral alliance and agreed with the Smallholders to support the better placed candidates. The tactic paid off. In a poor electoral turn out of only 44 per cent the MDF managed to increase its share of the vote to 42.5 per cent. In contrast, the Alliance of Free Democrats (SZDSZ) with their left-liberal programme only managed to expand their share of the vote to 24.1 per cent.

Although the MDF had won 165 seats it had failed to reach the target of 194 seats required to give it an absolute majority. As a result, its leader, József Antall, was obliged to enter into coalition in order to form a government. It was noticeable that the radical reformers, Pozsgay and Horn, whose consistent democratic reforms had made Hungary's first free elections possible, won very little support in their own constituencies. Both reached parliament only via the regional list while Miklós Németh, standing as an independent, won his seat directly in the first round. Well-known spokesmen of the other parties, like I. Csurka and D. Csengey of the MDF, V. Orbán and G. Fodor of FIDESZ, J. Torgyán of the Smallholders, G. M. Tamás, F. Kőszeg and P. Tölgyessy of the Alliance of Free Democrats, also failed to win a direct mandate, whereas Béla Király, a revolutionary hero of 1956 recently returned from the USA, was directly elected without much difficulty.

Miklós Németh's resignation at the inauguration of the new National Assembly on 2-3 May 1990 cleared the way for the election of the 58-year-old historian, József Antall, as prime minister. Ruling out a grand coalition with the Free Democrats from the outset, he held talks with the Christian Democratic People's Party and the Smallholders on their joining the government. Announcing his government's programme on 22 May, Antall referred to the mistakes and missed opportunities of the past. He explained that his cabinet would have four main priorities: to extend legal freedoms and safeguards for the individual while at the same time encouraging the citizen's self-development; to restore lost confidence in the government and the authorities after 43 years of Communist rule; to continue the steady reform of the economic system by introducing a market economy; and to seek Hungary's incorporation in the process of European integration. In its first 100 days in power his government would concentrate on reforming the state apparatus, closing down bankrupt state enterprises -- a measure often threatened in the past but never carried out -privatising the service sector, recruiting foreign investors and balancing the state budget. He also promised to find a way of reducing the costs of the planned international exhibition to be held in Vienna and Budapest, but saw no prospect of halting the expected increase in inflation which it was feared would rise to 20 per cent, nor of bringing it down to under 10 per cent before 1994. After more than 60 deputies spoke in the ensuing debate, 218 voted for the new Democratic Forum-Smallholders-Christian Democrat coalition and its programme, 18 abstained and 126 voted against.

The new government comprised 13 ministers of state and three ministers without portfolio. The MDF not only provided the prime minister, Antall, and the foreign minister, G. Jeszenszky, but also the ministers of the interior, B. Horváth, defence, L. Für, justice, I. Balsai, trade and industry, P. A. Bod, culture and education, B. Andrásfalvy, transport, C. Siklós, and the environment, K. S. Keresztes. The Smallholders provided the ministers of agriculture, J. Nagy, and labour, S. Győriványi, and two ministers without portfolio, J. Gerbovits and G. Kiss. The chairman of the Christian Democrats, L. Surján, took over at the ministry of welfare. Recognised experts who were also independent of party policial ties took over finance, F. Rabár, foreign economic relations, B. Kádár, and supplied one minister without portfolio, F. Mádl. The Hungarian press reacted negatively to the fact that there were no women in the new line-up.

The average age of the country's new leaders -- 53 years -- was also criticised, as was the bias shown towards academics: nine of the ministers were graduates and seven had held posts at universities or the Academy of Sciences. The press also criticised the fact that the creation of two new state secretary posts at each ministry would inflate the government apparatus. Highlighting the fact that there were too many former school colleagues, friends and relations of the premier in the new government, the opposition quickly cast doubt on their competence and accused Antall of allowing too many experts from the old government apparatus to remain in place.

Since negotiations on forming the coalition had failed to reconcile conflicting opinions, the government's programme for tackling its most urgent priority of re-organising the economy remained completely vague. There was no agreement on the extent to which state firms and farmland should be privatised, nor on how much foreign investment should be permitted or how the budget deficit and the foreign debt could be reduced. To guarantee the viability of the government talks were held between the two party leaders of the MDF and SZDSZ, J. Antall and P. Tölgyessy. On 29 April 1990 they concluded an agreement which provided for a state president to be nominated by the opposition and elected by parliament. They also agreed on proper procedures for changing the constitution and introducing a vote of no confidence procedure which would allow parliament to bring down the government. Few of the politicians now responsible for Hungary's future were aware of the scope and complexity of the problems they would have to solve if the country was to continue along the road to becoming a democracy and a market economy.

In contrast to developments in the other former Communist states of eastern Europe, Hungary's process of renewal and democratisation had been carried forward with consistently growing enthusiasm by one wing of the ruling MSZMP in the belief that only political pluralism and the firm rule of law could help solve the impending social and economic crisis. By dismantling the monopoly of power which the Communists had usurped after the Second World War and by allowing a multi-party system and an opening up to the West, the radical reformers consciously accepted that this would result in their being voted out of government and becoming politically isolated. Because they had freely chosen to break radically and irrevocably with the Stalinist past, Hungarians felt increasingly self-confident as they pressed on with setting up a western-style democratic parliamentary state and transforming their planned economy into a market economy. Many expected generous material help and moral encouragement from the rich industrial countries, though this turned out to be unrealistic. Encouraged by a revived patriotism and in the knowledge that the strength of their national solidarity had helped them overcome major crises in the past, the Hungarians set about trying to take their appropriate place in the European Community.






The new parliament began its work amid great enthusiasm, expecting to bring the country's serious economic problems under control. On 23 September 1990 the new government (Kormány) announced a three-year programme of national renewal (A Nemzeti Megújhodás Programja) aimed at introducing a free market economy by continuing the programme of reform, deregulating prices at the earliest opportunity, halving the amount of state subsidies and implementing drastic public spending cuts. The government set up a new 'Committee for Balancing Conflicting Interests' to mediate in social and tariff conflicts between private sector employees and employers who had organised themselves to oppose the direction taken by the government's economic policies. As the executor of run-down state property the government was itself one of the country's biggest employers and therefore an interested party. After extremely careful drafting by the foreign policy and defence committees, a resolution terminating military cooperation with the Warsaw Pact was passed by an overwhelming majority in the Hungarian parliament on 26 June 1990. Antall had already announced in advance that his government would be taking this step when he attended a meeting of the alliance's political advisory committee in Moscow on 7 June. Consequently, the parliamentary vote, which was enthusiastically received in Hungary, was noted without comment in the Soviet press and evidently did not damage relations with the other members of the alliance. There was also widespread agreement on amending the constitution, especially the previous October's definition of the republic as a 'bourgeoisdemocratic and democratic socialist state'. Hungary was now characterised as an 'independent democratic state based on the rule of law' with an economic system described as a pure 'market economy' (Article XL/1990 of 25 June 1990, §2 Section 1 and §9 Section 1).

Harking back to the country's monarchical past, the decision was taken on 11 July 1990 to incorporate the holy crown of St Stephen in the official state emblem, thus signifying recognition of 1100 years of Hungarian statehood and national identity. At the same time, St Stephen's day, the 20 August -- the day on which Hungary's first Christian king, Saint Stephen ( 997-1038), is commemorated -was reinstated as a national holiday after a period of 40 years. But the christian-national government and the liberal opposition were bitterly divided over the government's attempt to push on with the transfer of power at local level through a new local government law and the imposition of official guidelines for privatising state enterprises.

In-depth television and press coverage of parliamentary debates tempted many deputies to grab the limelight by using populist slogans and delivering scathing attacks on their political opponents -- much to the annoyance of the Hungarian public which was feeling insecure about the recent changes and difficult economic situation. The sight of parliamentary parties adopting entrenched positions caused many to lose interest in day-to-day politics. When another referendum on the procedure for electing a president was held on the 29 July only 14 per cent of the voters bothered to turn out. In the first round of the local government elections on 30 September 1990 just 40 per cent of the electorate voted instead of the required 50 per cent, with the result that the election had to be declared void in many areas. During the second round on 14 October, only 29 per cent cast their votes. Although this turn-out produced a legally valid result, it was a clear demonstration of the public's feelings of disillusionment, political fatigue and incomprehension about democratic procedures, duties and rights. The MDF lost a large number of votes while the SZDSZ and FIDESZ opposition parties chalked up successes in the towns. In the countryside success went mainly to independent candidates, including many former Communists and supporters of the old régime.

After a deal was struck between the MDF and SZDSZ on 29 April 1990, the formerly persecuted author and playwright, Árpád Göncz, was elected speaker and acting head of state. On 3 August he was then elected to the highest position in the state, that of president (Köztársasági elnök), when 295 deputies -- including the Socialists -voted for him. Born in 1922 and a founder member of the SZDSZ, he owed his new position not to his popularity or moral authority but to the fact that he appreciated the need for the strongest opposition party to assume the responsibility of participating in government. A lawyer by profession, he had joined the Smallholders' Party after the Second World War. Sentenced to life imprisonment in 1958 for his part in the 1956 Uprising, he had been released as part of an amnesty in 1963, and from 1989 onwards had been chairman of the Writers' Federation. His balanced nature made him appear acceptable to urbane cosmopolitans, populist nationalists and reformed Communists alike. Although the Hungarian president performs all the usual duties of a figurehead, he also exercises considerable influence over legislation, is supreme commander of the armed forces and assumes important powers in times of emergency or in wartime. On a number of occasions Göncz tried to extend his prerogatives and play a much greater part in shaping daily politics. When, at the end of October 1990, he refused to use force by ordering the army to pull down street barricades (erected by taxi and lorry drivers after a petrol price increase) even though traffic was nationally at a standstill, the government faced its first political conflict. After further argument and at the urging of the cabinet the Constitutional Court placed a narrow interpretation on the president's powers and decided in favour of the parliamentary system on 25 September 1991. This did not, however, deter Göncz from occasionally investigating whether laws were in harmony with the constitution. He also refused to endorse government dismissals and appointments. His modesty, pragmatism and success in remaining aloof from party politics, together with his refusal to let party squabbles override the common interest, earned him growing respect both inside and outside Hungary. On 5 August 1990 he was succeeded as speaker by G. Szabad of the MDF, another veteran of the 1956 Uprising.

The government and the opposition were united in their efforts to institutionalise the most important aspects of the political separation of powers and the rule of law. The Constitutional Court (Alkotmánybíróság) which convened for the first time on 1 January 1990 was given the task of ensuring the law was observed. Its ten judges, each of whom was elected for a nine-year term of office, were obliged to monitor the constitutional legality of parliamentary legislation and other statutes. The transition from a former system of 'political' justice to one presided over by an 'independent' judiciary required the departure of politically compromised judges who could not be entrusted with basic reform of the legal system and the process of pardoning former offenders. It also meant appointing lawyers with a clean political record who held no particular party allegiance and who were legally forbidden to engage in any political activity. Efforts to establish the rule of law and hasten the introduction of social and political pluralism mutually reinforced each other. As a result of its members' lack of professionalism, the single-chamber parliament (Országgyűlés) -which passed 77 laws in 1990 alone -- was initially out of its depth in trying hurriedly to formulate new laws to regulate the country's political and social and economic institutions and still find sufficient time to establish control over the government and the administration. Organisational changes and new appointments in all the main departments of government proceeded only very gradually and took place mainly behind the scenes, away from the gaze of public and parliament. Despite gradually losing public support, Antall's strong position, based on his authority within his own party and the coalition, allowed him to pursue his own political preferences without taking too much heed of parliament. He could also rely on not being challenged in cabinet. Although it was agreed that consolidating democracy should be accompanied by the systematic drafting of a new constitution during the first parliamentary session, nothing was done in this respect. Members of the parliamentary parties fully recognised the need to 're-educate' Hungarians to an acceptance of democratic values and develop a political culture of regulated 'conflict and compromise'. They would have to be educated to tolerance and a readiness to compromise if democratic discussion and codes of behaviour resulting from political participation were to be safeguarded. But Hungarians found it difficult at first to accept the role of organised pressure groups in shaping economic and social policy and the importance of these groups being given a say in social and economic policy decisions.

By the beginning of 1990 Hungary had 66 officially registered political parties, as well as 16 unofficial parties and nine voters' associations. Of these, 28 satisfied the necessary criteria to take part in elections and twelve put forward national lists of candidates at the parliamentary elections in March and April. In addition, an explosion in the number of organisations articulating specific interests led to the emergence of over 20 groups advocating specific values, numerous workers' organisations, countless organised pressure groups, three independent trade-union federations and a number of occupational organisations whch became prominent for a time. Nearly 40 youth organisations took the place of the disbanded Communist Youth League. Some were affiliated to political parties, some were above-party or linked to the churches and some, such as the Scout movement, had historic roots. Many of these groups, whose members came overwhelmingly from the urban intelligentsia, lacked a strong organisational basis among the general public. Their memberships fluctuated considerably and, because their objectives and ideologies were unclear, it was often hard to distinguish them from each other. These organisations, the pressure groups and the six parties which sat in parliament suffered internal conflict and splits and experienced amalgamations and dissolution. They consequently did not appear genuinely to represent a broad consensus of public opinion.

During the election the victorious MDF placed its 'populistnationalist' tradition well to the fore, promising a cautious economic and social policy, together with 'controlled' privatisation of state enterprises and Hungary's rapid incorporation into the process of western European integration. As a party which appealed to centrist and right-wing conservative opinion, its leaders repeatedly stressed the Christian-humanist, progressive-national and liberal orientation of their Democratic Forum. But its popularity among the voters dwindled because it could not satisfy the public's unrealistically high expectations of rapid economic improvement. There were also doubts about the competence of some government members who were obviously not up to the job. Above all, the continuing erosion of Antall's authority as prime minister, together with an illness which increasingly sapped his energies, encouraged the growth of 'populist' ideas within the party's inner leadership. This group found its main spokesman in the playwright and party vice-president, István Csurka. The 'populists' were united in rejecting any ideology based on modern values. They glorified the traditional role of the peasantry which was seen as representing the genuine roots of Hungarian society. In contrast to the country's intellectual 'urbanites', who were guided by a rationalist philosophy and modernist ideas, the extreme right-wing nationalist groups barely concealed their antisemitism. Csurka provided them with a platform in his Magyar Fórummagazine. His manifesto, entitled "'Some Thoughts on Two Years of Changing the System'" was published in August 1992. In it he saw the 'real Hungary' encircled by a Judćo-Bolshevistic-International-Plutocratic Conspiracy'. His demand for 'more living space' for a Hungary surrounded by enemies and his call for a new policy to 'promote Hungary's interests' caused a great stir. Antall was relatively cautious in criticising these ideas, while the MDF leadership described the essay which revelled in fascist-cum-National Socialist phraseology as a 'useful contribution to the discussion'. Csurka was supported by the chairman of the World Federation of Hungarians, Sándor Csoóri, who maintained that neither fascism nor antisemitism had ever existed in Hungary -- only a danger of Jewish infiltration. When, on 23 October 1992, President Göncz, whom Csurka described as a 'Jewish-Bolshevistic puppet', paid his respects to the victims of the 1956 Uprising, he was shouted down by right-wing extremists, neoNazis and protestors, some of whom sported uniforms of the Arrow Cross. Csurka leapt to their defence. He attacked the media for blowing up the incident and made Göncz responsible for refusing to sack the controllers of radio and television. While Csurka attracted right-wing radicals and anti-Semites in a new grouping calling itself the 'Hungarian Way', Antall continued to try to prevent a split in the party. At the Sixth Party Congress, held between 22 and 24 January 1993, a large majority re-elected Csurka to the Presidium despite the reservations of the prime minister who had been unanimously confirmed in his post. Nevertheless, Csurka lost his seat on the party's parliamentary committee in March as a result of his increasingly extreme pronouncements. When he opposed the basic treaty signed with the Ukraine on 12 May 1993, which recognised the existing frontier between the two countries, the MDF leadership used this to justify his expulsion from the parliamentary party along with three of his closest supporters. Csurka and his colleagues subsequently founded a new Hungarian Party of Justice on 23 June 1993 which elected him as party leader at its first party conference on 7 November. Although he had to admit that he himself had once been recruited as a secret police informer, he persistently criticised the lack of any real shift in power, arguing that former Communist officials had been allowed to establish themselves in new managerial positions and that the crimes of the past had been overlooked.

The MDF was further weakened when the popular chairman of the Employers' Federation, János Palotás, left to start up a new Party of the Republic on 19 November 1992. This party pursued liberal economic policies and promised to press on with measures to revive the economy, especially fighting inflation, developing modern democratic and administrative institutions and improving the infrastructure.

The government was also hampered in its work by an internal debate within the coalition's second largest partner. During the election the Independent Smallholders and Civic Party (Független Kisgazda, Földmunkás és Polgári Párt -- FKGP) campaigned for the creation of a democracy based on the rule of law and a ruthless settling of accounts with 'national traitors' who had been 'bolshevistic tormentors of the people'. It wanted a new Hungary which would enjoy complete sovereignty, one in which the law would be respected, in which the goals of humanism, peace and freedom would be served and in which the people's sense of national pride would be restored alongside equality of opportunity and adequate social security. Since the interests it represented were dissatisfied with the pace of change dictated by the government, its chairman, József Torgyán, forcefully redistributed land to the farmers in early 1991 to keep one step ahead of new legislation. When Torgyán's long association with the state security service came to light, something he vehemently denied, the parliamentary party on which the government depended for its parliamentary majority removed him as chairman but later had to give way to grass-roots pressure and agree to his return to the party's ruling committee at the end of April 1991. Although most of Hungary's secret police files had been destroyed before the events of 1989-90, a law intended to purge the old bureaucracy was about to throw light on the past activities of about 50,000 Hungarians. Government personnel and parliamentary deputies were to be investigated by a committee formed by: the state president, parliament, the Constitutional Court and the government. The findings were to be treated confidentially as a 'state secret'. Torgyán who, like many others involved, had no reason to fear the outcome of an investigation, responded with even stronger attacks on the Communists and the Socialist reformers. Employing populistnationalist slogans he complained of the dangers facing Hungarian minorities among Hungary's neighbours and questioned the borders imposed on Hungary by the Trianon Treaty after the First World War. His effective use of the media drew attention to these issues and upset the coalition. Following disagreement on choosing ministers, the FKGP's threat to leave the coalition in February 1992 was prevented only when the party split. Most of its 36 deputies, led by the future minister of agriculture, János Szabó, remained in the coalition while Torgyán formed his own parliamentary group of eight deputies.

In contrast, the smaller coalition partner, the Christian Democratic People's Party (Keresztény Demokrata Nemzeti Párt -KDNP) tried to pursue its objectives through unspectacular but constructive work. Ideologically, it subscribed to traditional Christian values, but preferred to campaign independently of the churches in order to give non-religious citizens the opportunity of becoming members. Strongly committed to social and ecological issues, it also rejected an 'unbridled' liberal economic policy, sought the creation of a state based on the rule of law and advocated a broad measure of local self-government. As regards privatisation, the party called for most state property to be sold off and the proceeds allocated to public spending and welfare programmes.

In the strongest opposition party, the Alliance of Free Democrats (Szabad Demokratdk Szövetsége -- SZDSZ) the Budapest intellectuals initially had the main say. They had bravely spoken out against the system in the 1970s and had created a respected platform for their views in the magazine Beszélő. Subscribing to the values and traditions of European and Hungarian liberalism, they opposed the aims of the Social Democrats and the Hungarian democratic populist movement. But recognising historical and social realities, they arrived at a radical democratic position based on the principles of equality and individual rights. They saw it as their duty to oppose the government and ensure the reform of all aspects of political life, even if this meant having to forego parliamentary power. Antall, however, described them as a concealed 'left-wing party hiding behind anti-Communist phraseology'. The Alliance's call for a faster and more thorough programme of privatisation combined with an extremely tight monetarist policy ignored the fears felt by large sections of the population at the effects of such economic shock therapy. The result was that the SZDSZ lost popular support and many of its members. On 15 November 1992, P. Tölgyessy, who took the blame as party leader, was replaced by Iván Pető. Cooperation with the Young Democrats of FIDESZ was also problematical, although an alliance with this group was concluded in the run-up to the elections on 15 July 1993. At first essentially different only in its age structure, FIDESZ stated that it was interested in pursuing constructive politics and rejected the SZDSZ stance as 'fundamentally oppositional'. Indifferent to denominational differences and sceptical of nationalism in any form, the Young Democrats represented in generational terms the sons and grandsons of those who had taken part in the 1956 Uprising and who had no memory of the ensuing brutal reprisals. Advocating a radical-liberal and anti-Communist programme, they sought a rational economic policy to determine the respective roles to be played by private, self-governing and state enterprises in the economy. While demanding equality of opportunity and the unhindered representation of private and group interests, they also pleaded for solidarity and close cooperation with the other nations of eastern Europe. Despite its organisational weaknesses and small membership, FIDESZ was highly respected, not least on account of the professionalism and stimulating speeches of its parliamentary deputies. But it, too, suffered from personal squabbles and in November 1993 many of its members decided to leave. This raised the question as to whether in the emerging political landscape a party based solely on representing the interests of youth could continue to exist in Hungary in the long term.

The newly formed Hungarian Socialist Party (Magyar Szocialista Páirt -- MSZP) found itself in the role of an 'opposition within the opposition'. The last Communist foreign minister, Gyula Horn, took over its leadership from Nyers on 26 May 1990. Initially stigmatised as the heir to the Communist MSzMP, or even as a cover organisation for it, it was supported by those sections of the old party who were willing to learn from experience and were prepared to carry out reform. The Socialists who drew closer to their west European social democratic counterparts opposed attempts to deal with the past in a way that would simply arouse emotions. They also rejected any form of privatising state property, preferring instead to retain the former system of 'collective property' and cooperatives. Growing economic problems, galloping inflation and a sudden rapid rise in unemployment, together with internal disputes within the government, benefited the party and its policy of preserving inherited socio-economic structures. The departure of the defeated radical reformer, Imre Pozsgay, after the election of a new party chairman on 10 November 1990 and his founding of a new National Democratic Front (Nemzeti Demokrata Szövetség), along with the playwright, Zoltán Bíró, on 17 May 1991 failed to stem the rapid growth in support for the Socialists revealed by the opinion polls. It was significant that the old 'party bourgeoisie' of the former Communist system, who had successfully preserved their position and taken their know-how into the new power structure, stayed inside the party, as did its working-class members who had been badly affected by the changes in the economy.

As Hungary moved along the road towards a pluralist society new trade unions also emerged alongside the new political parties. These organisations constituted an extra-parliamentary opposition and were mainly the product of intellectuals such as college lecturers, academics and artists. Some of them joined forces in the Democratic Alliance of Independent Trade Unions (Függtlen Szakszervezetek Demokratikus Ligaja -- FSZDL). They were opposed by the Central Council of Trade Unions (Magyar Szakszervezetek Orszagos Tandcsa -- MSZOT) which had been formed by 19 subsidiary unions in the Kádár period and which at the end of 1990 numbered 2.7 million members. In July 1991 the ruling coalition and the liberal opposition passed new legislation intended to redistribute the assets of the 'old' Trade Union Federation. A legacy of the Communist régime, its property was to be shared out proportionately among the new independent organisations. The MSZP was the only political party which refused to take part in the process. Against a background of growing unemployment the 'new' trade unions pursued a more belligerent policy towards employers and in industrial conflicts often supported spontaneous strike committees and workers' councils against managements and the government. Their demand that employees should be offered a shares package if their enterprise was subject to privatisation was rejected by the government's economic advisers who feared that this would deter potential investors. Consequently this occurred in only a few cases. There was certainly no obvious bias shown towards the employees, even though the Socialists' policy was winning growing support, especially among workers in the traditional areas of heavy industry and among the pensioners and the struggling lower middle class.

It was generally agreed that establishing a liberal economy, democratic political system and constitutional state in Hungary would be a long-term process which would only succeed if the problems of changing to a market economy and overcoming the inherited structural problems of the old planned economy could be overcome. It was clear to both the government and the opposition parties that far-reaching structural changes, accompanied by inflation, unemployment and a reduced GDP would result in lower living standards, impoverishment and economic hardship for the vast majority of the population, especially as the old Communist social welfare system, which had functioned inadequately, could not be sustained because of a lack of resources. Despite a balance of trade surplus for 1990, the appearance of thousands of new joint-stock companies and generous loans from the IMF, EC and neighbouring states, more and more Hungarians were experiencing hardship owing to a surge in prices caused by rampant inflation and the removal of state subsidies. Nor could people's basic needs be attended to with payments from the inadequately funded state welfare system. In the first year of Antall's government, redundancies resulting from the first round of privatisation caused the unemployment figure to rise from 20,000 to 185,000. The cost of consumer goods increased by 36 per cent and that of industrial products by 37.8 per cent, while the GDP fell by 5 per cent. With inflation hovering aound 35 per cent it was estimated in the spring of 1991 that one million Hungarians, i.e. 10 per cent of the population, were not in receipt of a living wage and that a third were clearly living below the poverty line. Reduced trade with the former Soviet Bloc countries and the end of Comecon, agreed at a meeting in Budapest on 27 June 1991, was not offset by increased trade with the West. There was also little hope of recovering debts in the region of 1.5 billion dollars which had been run up by the government of the disintegrating Soviet Union. The 1991 budget which had to tackle a deficit of approximately 10 billion forints ($110 million) was approved by parliament only at the last minute, at 11 p.m. on 30 December 1990. Despite an existing foreign debt of 21 billion dollars, requiring annual capital and interest repayments of 1.6 billion dollars, the IMF provided Hungary with a new financial credit of 1.5 billion dollars subject to strict conditions on 24 February 1991. At the end of October 1990 widely supported demonstrations by taxi and lorry drivers had forced the government to withdraw petrol price increases. As the year ended more big price increases led to unofficial strikes by railway workers, widespread protests by farmers, and doctors and nurses refusing to work. The government tried to meet some of the demands of these groups by raising the lowest monthly wage from 5,800 to 7,000 forints (from about $63 to $76) and by making social benefit payments of 4,000 forints per month. The average wage at this time was 12,500 forints ($136).

The government did not, however, succeed in halting the downward economic slide. The expectation that up to 90 per cent of Hungary's state enterprises could be sold off to private interests proved unrealistic. Few investors were interested in the country's large-scale enterprises such as loss-making steel and aluminium works, electronics factories or the bus company, Ikarus, with the result that most of the workforce had to be laid off. In contrast, more than a billion dollars of foreign investment flowed into smaller joint ventures and private firms which accounted for 25 per cent of total production by the end of 1991. In all, 627,000 people, 11.6 per cent of the population, were unemployed in October 1992, although many were engaged in some form of secondary employment which was not covered by the statistics. Despite the fact that inflation had been brought down to under 25 per cent and tourism had earned 1 billion dollars, the explosion in social benefits and the small balance of trade surplus meant that the budget for 1992 predicted a deficit of 70 billion forints ($645 million) which eventually grew to 214.7 billion forints, three times that amount. Because Hungary failed to keep to its conditions the IMF held back 600 million dollars from the loan it had agreed to in 1991. The Gross Domestic Product which was down by almost 12 per cent in 1991 had, however, fallen by only a further 4.5 per cent.

The poor budget figures were also partly a result of the growing stream of refugees and asylum seekers who were entering Hungary to escape poor economic conditions in Rumania and the escalating civil war in the disintegrating federation of Yugoslavia. In 1990, 17,380 foreign nationals had sought permanent residence, and in the first half of 1991 a further 8,000 sought asylum. By the end of the year another 50,000 had to be taken in as well as war refugees from Croatia. Subsequently the figures rose so dramatically that on signing the Geneva Convention on Refugees, Hungary insisted on a clause to the effect that citizens of non-European countries had no right to asylum in Hungary. In 1993 only 9,000 applicants, mainly descendants of Hungarian émigrés, were granted the right to residence, whereas 223,000 applicants had their applications rejected.

On 16 December 1991 Hungary signed an agreement by which it became an associate member of the European Community. This agreement, which envisaged the gradual creation of a free trade zone over a period of ten years, was ratified by the Hungarian parliament on 17 November 1992. On 1 February 1993 a free trade agreement was also signed with the seven members of EFTA. This agreement, which came into effect on 1 July, was aimed at removing all trade barriers and promoting industrial and economic cooperation. But neither arrangement led to much improvement in the general economic situation. At the beginning of 1993 the number of unemployed remained steady at 640,000 and price increases hovered around 22.5 per cent. But there was considerable concern that in some regions up to a quarter of those fit for employment had no job, a half of the chronic long-term unemployed were younger than 35 years old and more and more people -- estimated at over two million -- were living below the poverty line. When a Society for Persons Living Below Basic Needs was started up in 1992, it collected in the space of a few days over 170,000 signatures calling for fresh elections. But it was forced to stop its activities after the Constitutional Court declared its petition unconstitutional on 20 January 1993. Antall, already suffering badly from ill-health and being increasingly represented by the acting interior minister, Péter Boross, tried to counter growing criticism of his economic policy with a government reshuffle in December 1990 in which six ministers lost their jobs. The finance minister, Mihály Kupa, who had followed a strict monetarist policy, was replaced by the trade and industry minister, Iván Szabó (MDF). Despite public spending cuts and tax increases, Szabó announced a deficit of 249.9 billion forints (2.72 billion dollars) when he presented the budget for 1994. Figures for 1993 showed that industrial production and the GDP were down to 60 per cent and 80 per cent of their respective levels in 1988. But the belief that the economy had gone a long way towards becoming a market economy, the fact that inflation had been brought down to under 20 per cent for the first time and that the first, admittedly tentative, signs of an upturn in the economy were appearing, gave cause for quiet optimism. The number of unemployed which had peaked at 705,000 in February 1993 (14 per cent), fell to 593,000 (11.8 per cent) in April 1994. The government was proud of the fact that 1993 had ended with 21,485 joint ventures in existence and that foreign investors had committed over 5 billion dollars to the Hungarian economy. In a study published in April 1994 the Hungarian Academy of Sciences concluded that even if privatisation were speeded up and the volume of exports increased, and even if private capital were attracted in bigger amounts and larger investments made strictly according to market criteria, it would be 1997 at the earliest before Hungary would experience any economic recovery. Economic levels reached in the 1980s might only be achieved at the earliest by the year 2005. When Hungary applied for full membership of the European Union on 1 April 1994 -- hoping for acceptance by the year 2000 at the latest -- it did so in the hope that this move would not only strengthen the country's sovereignty and security but, above all, help solve its economic problems quicker.

Although the Antall government tried to minimise the inevitable conflicts which arose from the need to carry out urgently needed reforms and what society was prepared to tolerate, Hungarians expected their government to alleviate the social costs of change which were falling mainly on the poor and the old. Society became polarised in an emotionally heated debate on how the legacy of Communism could be overcome, a discussion which had begun even before the changes took place. Opinions were divided on the key issues of returning private property to its former owners, rehabilitating and compensating those whom the previous régime had found guilty of crimes against the state, and condemning the 'culprits'. It was clear that the process of settling accounts with the past would have to be conducted within a proper legal framework. As early as March 1990 a 'spontaneous action' to transfer state assets into private property was carried out, whereby foreign investors were also considered. At the start of 1991 about 28,000 state-owned companies were still in existence, nominally valued at 2,900 billion forints. These were eventually to be disposed of by a newly created State Property Agency. Up to 15 per cent of their shares were to be held by institutional investors, up to 20 per cent to be sold to foreign purchasers and up to 40 per cent to Hungarian companies. The state would retain ownership of the remaining 25 per cent. The bureaucracy's handling of the privatisation programme and the poor condition of many of the items on offer prolonged the whole procedure. Interest was limited to the service sector and the catering trade. By December 1992 almost a third of former state enterprises had been returned to private ownership. In 1990 alone almost 27,000 new privately owned firms were set up including 7,000 in industry and more than 14,000 in the service and commercial sectors. As family businesses rarely employing a workforce of more than 20 employees, they had little effect in improving the labour market. Agriculture, though it had previously only had to meet the low quality standards required by the Soviet market, was equally badly affected by the changes to the system, especially the reduction in subsidies. Although Hungary had already witnessed the relatively successful integration of small and largescale production with corresponding specialisation and interdependence -- though it was no substitute for full privatisation -- the FKGP (Smallholders) urgently demanded an end to collective farms and an immediate return to traditional structures of peasant ownership.

A compensation law, introduced after several revisions on 26 June 1991, tried to restore a system of properly regulated and clearly demarcated property ownership. It sought to uphold the legal claims of former owners of confiscated or nationalised assets and real estate, but instead of envisaging full restoration of property, offered partial compensation in the form of option rights on state assets earmarked for privatisation. Claims supported by evidence were to be submitted by mid-December. Maximum compensation was set at 5 million forints ($66,000) and former owners were given the right of exercising the first option to purchase. A second compensation law passed on 7 April 1992 dealt with property taken over by the state between 1939 and 1945. While FIDESZ members rejected the whole idea of paying off outstanding debts from the time of their parents' and grandparents' generations and the SZDSZ voted against it on the grounds that all of the country's citizens had suffered under Communism and should thus profit from the privatisation programme, the MZP rejected any restructuring of collective ownership. The price the coalition had to pay as a result of bitter internal disagreement on the extent and degree of privatisation took the form of a split in the FKGP and a consequent reduction in its parliamentary strength.

Another issue which was similarly controversial and gave rise to an emotionally heated public debate was the proposal to extend the statute of limitations. Approved on 4 November 1991, it stipulated that the courts should continue to investigate serious crimes committed between 21 December 1944 and 2 May 1990 which had previously not been pursued for political reasons. These included murder, grievous injury resulting in death and high treason. The choice of date, the 35th anniversary of the Soviet intervention which had savagely crushed the popular uprising, was quite deliberate. While its advocates argued that reconciliation with the past was impossible in cases where justice had been abused and the suffering of the victims had been ignored, its critics contended that a long inquiry into cases involving high treason might result in a witchhunt. They believed it would prove fatal, both politically and morally, to the process of coming successfully to terms with the past if crimes committed decades before were pursued further. At Göncz's request the Constitutional Court ruled the measure unconstitutional on 2 March 1992. The government parties whose roots lay in the pre-Communist tradition obviously found it difficult to make a realistic assessment of the dangers and potential social conflict which would result from reawakening old ways of thinking in trying to come to terms with the past and making a positive contribution to developing a new political culture in eastern central Europe. They introduced a draft bill in November 1992 which tried to ensure that at least crimes committed during the suppression of the 1956 Uprising -- including those committed by foreigners -should be punished. Up to 15 November of that year special squads had executed almost a thousand people. By 31 July 1957, 6,321 people had been condemned by the courts for political crimes; 70 had been executed. In October 1993 the Constitutional Court ruled that the investigation of suspects was constitutional on the grounds that international law on crimes against humanity did not recognise statutory limitation. In the meantime the regular courts had announced numerous legal pardons. A law passed on 13 May 1992 promised compensation to any dependants of victims incarcerated or executed by pro-Nazi governments and the Communist régime for political, religious or racial reasons.

The virulence of traditional anti-democratic thinking could be seen in the government's attempt to control radio and television and discipline critical journalists. Conscious of the possible effect of foreign opinion, the government proceeded cautiously when it introduced legislation to 'reform' the media in July 1990. With its popularity declining and dissatisfaction spreading, it tried to pursue a policy of effecting 'radical changes in the political outlook and attitude of Hungarian radio and television'. But President Göncz, while keeping within the narrow definition of his powers, enlisted the support of the Constitutional Court in refusing to dismiss the controllers of radio and television. In response the right wing of the MDF conducted a propaganda campaign which culminated in the organising of a large demonstration in Budapest on 18 September 1992. Several hundred thousand demonstrators demanded that the 'Hungarian media' should report events in 'a Hungarian spirit' and called for the head of state's resignation. Csurka accused the 'Communists and the mass media' of obstructing reform. A group of intellectuals calling themselves the 'Democratic Charter' responded in turn on 25 September by holding a counterdemonstration in front of the parliament building. This was attended by 70,000 people who demonstrated against nationalism and antisemitism and called for basic democratic values and a tolerant society. After the government accepted responsibility for the budget in December in a highly stylised debate during the 'media war' and insisted on its right to decide on Constitutional Court appointments, the controllers resigned after months of relentless criticism on 7 January 1993. President Göncz, who had defended them on several occasions against right-wing nationalist critics, thanked them for their service in preserving the independence of the media 'despite unparalleled and savage political attacks'. They were replaced by government-appointed commissioners who kept opponents off the screen and ensured that news broadcasts toed the government line. Many editors, however, continued to resist intimidation. On 4 March 1994, two months before the election, 129 radio employees, a quarter of whom worked in programme research, were sacked and banned from re-entering their workplaces. Despite international criticism and a torchlight protest on the eve of the national holiday, the 15 March, the government stuck to its policy which abused the constitutional right of freedom of opinion. In fact, this dubious demonstration of the government's ability to take effective action failed to improve its chances of being re-elected.

Blame for the situation was laid at the door of the new prime minister, Péter Boross, who had succeeded József Antall after the latter's death on 12 December 1993, aged 61. A lawyer and long-time director of a chain of restaurants, Boross had frequently stood in for Antall during his time as minister of the interior when the premier had been ill with leukaemia. Praising Antall's services in restoring Hungarian sovereignty, establishing parliamentary democracy and transforming the economy, he promised to continue his predecessor's economic and foreign policies. In view of widespread popular scepticism concerning the social consequences of the changes and disappointing opinion poll returns which predicted heavy losses for the MDF in the next elections, Boross had little time in which to project a political image of himself as his own man. To distract attention from the failures of the MDF's policies and take the wind out of the sails of right-wing extremist groups the new prime minister made blatant use of nationalist slogans during the election campaign. He complained about the common fate all Hungarians were facing irrespective of borders and accused all those 'who move among us like strangers' of being enemies of Hungary. Thus Boross showed a demagogic eagerness to occupy the political ground which interested many Hungarians: the situation of their co-nationals in neighbouring countries and the legal position of ethnic minorities inside Hungary.

The situation of Rumania's Hungarian minority, which found itself in a very difficult position after Ceauşescu's execution, was especially worrying. Following disturbances instigated by the extreme patriotic Vatra Romaneasca movement in February and March 1990, a conference was held in Hungary in April 1991 to discuss Transylvania. This was roundly condemned as 'revisionist' by the National Salvation Front in Bucharest. Using various diplomatic channels the Rumanian government repeatedly stated its desire to take the European lead on the question of 'realising minority rights'. But this had no effect on silencing the Hungarian monority's complaints about very real grievances and discrimination. In particular, the Rumanian president, Iliescu, made it clear on several occasions that Rumania did not regard itself as a multi-racial state and would not respond to demands for a more federal framework designed to increase regional autonomy and development. Tensions were fuelled further with the setting up of a Transylvanian government-in-exile in Budapest and a manifesto published on 30 September by the Democratic Union of Hungarians in Rumania (UDMR). This called on the Rumanian government to guarantee traditional minority rights and establish necessary institutions to monitor their observance such as a ministry for ethnic minorities. A Rumanian ban on carrying out an opinion poll on the question of autonomy in two electoral districts with an almost 90 per cent Hungarian population was accompanied by new military manoeuvres which again set off alarm bells in Budapest. On 22 November 1991 the Rumanian government reiterated its determination to create racial harmony and combat xenophobia, racism and extremism. But at the same time it also made it clear that it was only interested in protecting the rights of individuals, not the collective rights of minorities. A few days later it banned the UDMR and reduced the amount of Hungarian-language teaching in Rumanian schools. Hungarian politicians of all colours, especially Antall and his foreign minister, Jeszenszky, persistently drew attention to the difficult situation of their co-nationals and sought support for their policies on their trips abroad. In view of the intolerable living conditions which existed in Rumania, more and more members of the Hungarian minority joined the fast growing number of economic refugees who sought asylum and the right of residence in Hungary.

Relations between the two countries, though not yet at crisis point, remained tense, as did those with the successor republics of former Yugoslavia. As the conflict there grew from the summer of 1991 onwards the number of ethnic Hungarian refugees rose rapidly, creating serious problems for the Hungarians in terms of providing accommodation, clothing and food. On 18 September Hungary asked the EC to send observers to its border with Croatia. By the end of the year the continued fighting had resulted in approximately 50,000 refugees crossing from Slavonia into Hungary. Afraid that 50,000 ethnic Hungarians living in the Voivodina might be used as hostages by the Serbian authorities, Antall announced on 21 October 1991 that one of the main planks of Hungary's foreign policy would be to protect its co-nationals in Yugoslavia. Changes in the ethnic composition of certain areas, brought about by deliberate 'ethnic cleansing', were seen as a real danger. When ighting across the border intensified the Hungarian government felt obliged to increase the country's state of military readiness, which it did on 8 November. The fact that the Hungarian authorities strictly observed the United Nations and European Community sanctions against Serbia resulted in the Hungarian minority being greatly obstructed in the exercise of its formerly generous political and cultural rights. Many of its members were conscripted and any who tried to act as spokesmen for the minority were expelled to Hungary.

The 650,000 or so Hungarians living in Slovakia also complained about the increasingly nationalistic and hostile environment which had grown up around them since the fall of Communism. The main source of friction was the escalating dispute in the summer of 1991 over work on the power station complex at Gabčikovo-Nagymaros which Hungary wanted stopped for environmental reasons. The plan, conceived as far back as the 1950s, envisaged the creation of an artificial reservoir covering an area of 65 square kilometres, a canal 24 kilometres in length, several high dams and multiple locks which would make diverting the course of the Danube unavoidable. This raised the prospect of the actual river bed and surrounding meadowland drying up. Moreover, the canal, which was to be over 20 metres high in places, cut straight through the Hungarian minority's main area of settlement. As early as 1989 Hungary had unilaterally stopped work on its own territory and had tried to pursuade the Czechs and the Slovaks also to abandon this gargantuan Communist project, despite the fact that 1 billion dollars had already been poured into it. While the central government in Prague thought a peaceful solution would be possible, the largely independent regional government of Slovakia, which emerged when Slovakia was granted federal autonomy in 1990, insisted on rapid completion of building operations in keeping with the original agreement. The Slovakian prime minister, Vladimír Mečiar, blamed 'militant and fascist elements on the Hungarian political scene' for creating opposition to the project and accused Antall's government of 'supporting nationalism, racism and antisemitism'. Attempts at mediation by the EC failed in the autumn of 1992 and on 3 November Slovakia broke the original agreement by unilaterally diverting the Danube, an action which the Hungarian government regarded as highly damaging to relations between the two countries.

Tensions increased still further when Slovakia became an independent republic on 1 January 1993. In a government declaration Mečiar stressed the fact that the interests of ethnic minorities could not be maintained at the expense of the state as a whole. At the same time, he announced his government's intention to redraw Slovakia's administrative borders, one of the results of which would be the abolition of districts in which Hungarians made up the majority of the population. With Soviet arms consignments to Hungary in mind, he also called for the creation of a strong army to defend Slovakia. Resisting growing pressure from within his own party, Antall tried to maintain a policy of restraint. He completely rejected the suggestion, intended to placate the right wing of the MDF, that the transfer of inland waterway traffic to the canal would, according to the borders laid down in the 1920 Trianon treaty, result in a change in Hungary's favour. But Slovakian government measures banning bilingual place-name signs and reducing financial support for Hungarian cultural institutions, together with demagogic speeches by publicity-seeking politicians on both sides, did little to improve diplomatic relations. After the government in Budapest had failed to persuade Slovakia to make concessions to the Hungarian minority, its delegates abstained when the vote was taken on accepting Slovakia as a member of the Council of Europe. In Slovakia, on the other hand, there was a deliberate attempt to whip up fear of Hungarian nationalists and their alleged attempts to create a 'Greater Hungary'. Only when Mečiar's government fell in March 1994 did the new Slovakian prime minister, Jozef Moravčík, re-open a dialogue with the Hungarian minority.

It was the Hungarian parliament's ratification of a basic treaty with the Ukraine in the first half of 1993 which led to further internal disputes within the MDF, culminating in the exclusion of István Csurka's right-wing nationalists and the party splitting. In the eyes of the nationalists Hungary's renunciation of former territorial claims sealed the fate of 200,000 Magyars who lived in the CarpathoUkraine which had belonged to Hungary before 1918, even though the cultural and political rights of this minority had been expressly, guaranteed in the treaty. Its critics, supported by the World Federation of Hungarians, believed that the dropping of revisionist demands would be a precedent for similar agreements about to be signed with Rumania and Slovakia. It was only because all the deputies of the three opposition parties voted for it that the treaty was eventually ratified by the required majority on 12 May 1993. This apparent 'betrayal' of the vital interests of 5 million Magyars outside Hungary's borders was used in later political debates to stir up nationalist feeling and turn voters against the opposition parties.

Hoping that a liberal attitude to its own ethnic minorities would work to the advantage of its co-nationals in neighbouring states, the Hungarian parliament allocated funds to support national minority organisations in Hungary on 12 May 1992. On 9 July 1993 a new law was also passed which placed the members of 13 ethnic groups under the protection of the state. It guaranteed minorities the right to preserve their own cultural identity and traditions and allowed them unrestricted use of their languages. The state agreed to cover any costs involved in guaranteeing the latter. All ethnic minorities were granted the right of local self-government if they made up 30 per cent of the local rural or urban population. A new Office for Minorities was established to ensure that the law was observed and to prevent racial discrimination. However, the parliament of Hungary's 500,000 gypsies, representing 31 member organisations, still complained of 'serious racism', even among high-ranking government officials and bureacrats, and demanded an end to libellous press reports about the rise in 'gypsy crime'. Although the growth of Hungarian nationalism and the revival of authoritarian, antisemitic and pre-war revisionist ideas have not seriously affected community relations with ethnic minorities since 1989, it has proved extremely detrimental to Hungary's efforts to build up good relations with its neighbours.

Hungary's religious communities also had an important role to play in helping to consolidate the new society. Following the removal of administrative-bureaucratic controls on their activities in 1989 they were relatively cautious about exercising their new freedom and avoided any direct involvement in politics. A new law on freedom of opinion and conscience helped bring about a genuine separation of church and state. Churches were allowed to set up their own educational institutions. Religious studies continued to be included as an optional subject in the state school curriculum, but teachers of the subject, appointed by the churches, were still paid by the state. The once richly endowed Catholic Church was one of the main beneficiaries of the return of state property which it deemed necessary for its spiritual, pedagogic and pastoral work. This was officially returned on 10 July 1991. Although two-thirds of the population nominally belonged to the church, only about 12 per cent took part regularly in religious activities. Between 16 and 20 August 1991 Pope John Paul II visited Hungary with the aim of strengthening 'the rebirth of church and nation'. On his very first day in the country he visited the grave of Cardinal Mindszenty whose body had been transferred on 4 May, 16 years after his death, from Mariazell in Austria to Esztergom cathedral. Entirely in keeping with his hosts' wishes, the Pope made several appeals for eastern Europe's post-Communist governments to provide greater protection for their national minorities and allow them the use of their own language and culture as well as the possibility of contact with their homeland. His outright condemnation of abortion as killing 'the living mystery of love' and his appeal to uphold the sanctity of marriage met with reservation and criticism in the Hungarian press, as did his demand for the complete return of nationalised church lands and other pronouncements on current politics. Commenting on the Church's unhappy situation in Hungary and the gulf that existed between the hierarchy and the congregations, the Pope blamed Hungary's relatively aged churchmen who had remained neutral or even been sympathetic towards the system for turning many young believers away from religion. Although many Catholics crossed the border from Hungary's neighbouring countries to see the Pope celebrate mass, the committee responsible for organising his tour had to admit that the number of visitors had been about 30 to 40 per cent fewer than expected.

In his government address delivered on 22 May 1990 Antall had placed particular importance on the need to expand Hungary's education system. Detrimental spending cuts in the 1980s had been instrumental in causing stagnation in higher education. In the autumn of 1990, as part of its attempt to introduce western standards, the government began laying the legal foundations for radical reforms such as the university law which was eventually passed by parliament on 13 July 1993. The difficult financial situation caused a delay in restructuring the overmanned institutes of the Hungarian Academy of Sciences and the attempt to reintegrate research and university teaching which had previously been kept strictly apart. The same was true of improving educational provision in the countryside. This was seen as a major priority if the government hoped to reduce widespread youth unemployment and assist unskilled workers in acquiring qualifications. The complete lack of state subsidies and reduction in grants impoverished Hungary's cultural life and narrowed the scope of artistic activity. The newspaper and magazine industry which had been thoroughly privatised in the meantime adapted itself relatively well to the new circumstances thanks to the involvement of foreign publishers. A whole new variety of publications appeared on the market, although a deterioration in quality compared with previous standards was often evident.

As far as foreign policy was concerned, post-Communist Hungary encountered little difficulty in acquiring international recognition and support. As early as the 1990 election campaign, the MDF projected itself as the credible advocate of European integration. Once in power it consistently pursued the winding up of the Warsaw Pact and Comecon, while avoiding a unilateral withdrawal from these institutions which had outlived their time. It also tried to acquire full membership of the EC and NATO at the earliest possible juncture. Hungary became the first of the eastern European Socialist countries caught up in the great tide of change to become a full member of the Council of Europe on 6 November 1990. This was followed by an affiliation agreement with the EC on 16 December 1991. This so-called 'Europa agreement' came into effect on 1 February 1994 and was important in helping Hungary gain access to the western European market by removing trade and customs barriers. On 1 April 1994 Hungary also became the first post-Communist eastern European country to apply for full membership of the European Union. It also acquired guest status in the North Atlantic Treaty Organisation and on 8 February 1994 joined the 'partnership for freedom' which NATO regarded as a transitional stage towards eventual full membership.

After the agreed dissolution of the Warsaw Pact on 1 April 1991 and the final departure of Soviet troops on 17 June, full sovereignty was restored to Hungary after a period of 47 years. This historic moment was marked on 30 June by festivities, church services and the ringing of church bells for one hour. Hungary announced its desire for further regional cooperation mainly with Austria but also as expressed in the agreement signed by Italy, Austria, Yugoslavia and Hungary in November 1989. This aimed at increasing cooperation and fostering good relations among the five or six countries of the Alpine-Adriatic region. Here the Antall government committed itself to a new strategy of directly pursuing national self-interest and announced that part of its foreign policy would be to continue supporting Hungarians living outside the country's borders.

On the initiative of the Czech president, Václav Havel, the heads of state, prime ministers and foreign ministers of Poland, the Czechoslovak Republic and Hungary met in Bratislava on 9 April 1990 to discuss the creation of a European 'confederation of free and independent states' to replace the former military alliances.

Discussions were dominated by the need to find common solutions to shared problems. These included national security, the political, economic and social problems of the 'quick return to Europe' desired by all parties, ways of dealing with growing nationalism, and the consequent problem of ethnic minorities, the dangers of German reunification and the resurgence of old hatreds in former Yugoslavia and the former Soviet Union. On 15 February 1991 Presidents Havel, Walłęsa and Göncz met in the Hungarian town of Visegrád where they agreed on informal cooperation between their three countries. Following proposals put forward by a mixed commission, the heads of the so-called 'Visegrád countries' met in Cracow on 6 October 1991 where they agreed to promote greater regional cooperation and step up efforts to persuade the EC and NATO to accept their joint application for membership. They recognised the importance of establishing parliamentary democracy, observing human rights and protecting national minorities, as well as extending bilateral trade arrangements and increasing crossborder cooperation on telecommunications, transport and environmental matters.

A further meeting held in Prague on 6 May 1992 was dominated by the issues surrounding affiliation to the EC, the civil war in Yugoslavia and problems arising from the break-up of the Soviet Union. An attempt was made to defuse the dispute over the hydro-electric power station at Gabčikovo-Nagymaros and the diversion of the Danube by calling in EC mediators. The economic ministers succeeded in signing an agreement in Cracow on 21 December 1992 which established a free-trade zone with effect from 1 March 1993. This was intended to speed up an economic revival by removing trade restrictions and customs barriers to goods and services. After the break-up of Czechoslavakia into two independent states, serious disagreement began to emerge, partly because of differences between Hungary and Slovakia but also because the Czech prime minister, Václav Klaus, wanted his country to apply independently to join the EC. These differences surfaced openly in discussions at the beginning of 1994 on whether or not NATO's concept of a 'partnership for peace' should be accepted. Hopes for building on the cooperation achieved by the 'Visegrád countries' began to founder on problems such as whether the association should be expanded to include four members, the economic priorities of its members, and differing and partly self-interested ideas about the political direction it should take, and the growing ethnic conflict between Slovakia and Hungary. In contrast, relations with the Czech and Polish governments developed quietly. Hungary and Poland signed an agreement to cooperate on weapons technology, arms production and officer training.

Despite all the changes to Hungary's political system, Antall acknowledged the continuing importance of the former Soviet superpower when he visited Moscow a few days after taking office. Relations between the two countries were influenced in the next few months by a number of issues: doubts as to whether the agreed departure of Soviet troops from Hungary would take place on schedule, Hungary's desire for a swift end to the Warsaw Pact and Comecon, arguments about the disposal of state assets, the extent of Soviet-Hungarian trade and how future contacts between the two countries might be increased. The attempted coup of Soviet Communist hardliners in August 1991 caused great anxiety in Hungary. After President Gorbachev had regretted the Soviet Union's 'impermissible interference' in Hungary's affairs in October and November 1956, Antall and his foreign minister, Jeszenszky, provisionally signed an agreement in Moscow on 6 December 1991 aimed at establishing good relations and continuing cooperation with the Soviet Union shortly before its break-up. Hungary also signed a basic treaty with its new nuclear neighbour, the Ukraine, on 9 December 1991, establishing diplomatic relations and outlining future cooperation. It was the renunciation of territorial claims in this treaty that sparked off a furious debate within the Hungarian coalition, which resulted in the treaty not being finally ratified by the Hungarian parliament until 12 May 1993.

Further intensive talks with the new Soviet Union successor state, Russia, took place before President Yeltsin was able to make his first state visit to Hungary. Addressing the Hungarian parliament, he condemned the Soviet Intervention of 1956 and proclaimed the dawning of a new era in bilaterial relations which would henceforth be developed 'on the basis of equality and mutual respect'. At his own wish he laid a wreath on the grave of Imre Nagy, the executed prime minister of the revolutionary government of the time and also brought with him records from the KGB and CPSU archives dealing with the suppression of the 1956 Uprising. The controversial agreement on the withdrawal of Russian troops involved no further commitment from either side; neither sought financial gain from the procedure. Any environmental damage caused by the Russians was offset by the installations the Red Army left behind for Hungarian use. Hungary also received a consignment of Russian arms worth about 1.8 billion dollars, the equivalent of the old Soviet Union's Comecon trade debt with Hungary. In addition, over 4,000 works of art confiscated by the Russians after the Second World War were returned. The visit, which was rounded off by the signing of several supplementary agreements dealing with investment protection, tax regulation and the joint protection of minorities was hailed as an historical watershed in Russian-Hungarian relations. After touring areas of Finno-Ugrian settlements in Russia in June and July 1993 and attending a reception by President Yeltsin, Göncz continued to describe relations with Russia as 'unproblematical'. Moscow's warnings to the Hungarians not to join NATO grew louder as 1993 wore on. This, together with the internal power struggle in Russia in October, the outcome of the Russian parliamentary elections and the nationalistic tone struck by government and opposition, aroused public anxiety in Hungary where it was feared that the Russians might be contemplating a return to the Soviet Union's traditional imperialist power policy.

When Antall made some early visits abroad to Austria, West Germany and France at the end of June 1990 he discussed not only economic affairs, but the possibility of receiving concrete aid to help Hungary with the process of changing its political system. The infringement of Hungarian minority rights in Rumania was also discussed. Despite disagreement with the Austrian government over arranging the 1996 international exhibition -- the Hungarian parliament decided to go ahead with the project on its own on 5 December 1991 -- and despite Austrian irritation at Hungary's termination of the agreement with the Czechs on the Gabčikovo-Nagymaros power station, announced on 25 May 1992, the process of improving already well-established political and economic relations was not adversely affected. No obvious problems resulted from attempts to establish 'model relations' between the two countries which were praised as a perfect example of cooperation between neighbouring states. On 6 July 1991 a new treaty of friendship and cooperation was signed with Italy, aimed at developing further traditionally good relations. Frequent talks with Bonn culminated in the signing of a Treaty of Friendly Cooperation and Partnership in Europe on 6 February 1992. Germany supported Hungary's application to join the EC, stating that this should happen as soon as appropriate 'economic and political criteria' were met. An agreement on military cooperation, concluded on 5 April 1993, committed both governments to a regular exchange of information and views. The visit to Hungary of the Israeli president, Chaim Herzog, from 17 to 19 June 1991 was seen as an event of profound moral importance.

The growing crisis in neighbouring Yugoslavia, the break-up of the federation and the spread of the conflict there was watched with growing anxiety by Budapest, not least because the government was aware of the dangers these events posed for Hungary's co-nationals. Although the Antall government admitted on 10 February 1991 to having delivered 10,000 machine pistols to Croatia, it pursued an extremely cautious policy thereafter by withholding recognition from the vairous successor republics, observing United Nations and European Community sanctions and trying to prevent an escalation of the conflict.

Although the Hungarian government's rash nationalistic pronouncements and bold intervention on behalf of Hungarian minorities incurred some disapproval and blame, its calculated, constructive foreign policy generally won international respect and recognition.



As the National Assembly came to the end of its first legislative period, parliamentary activity became more hectic and politicians grew increasingly hostile to each other. From mid-1993 onwards the pollsters predicted heavy losses for the considerably fragmented government parties, especially the MDF. Early on they forecast that the much reviled and politically ostracised reform Communists would be the likely winners in the May 1994 elections. Hungarians were growing increasingly fed up with politics, faced as they were by high unemployment following the loss of approximately 1 million jobs, rampant inflation and a falling standard of living. But instead of blaming the situation on the MZP, who had been the true architects of their misfortune, they held the middle-class parties responsible. Having promised so much after the fall of Communism, the coalition had obviously underestimated the problems involved in changing from a planned to a free market economy. The government appeared increasingly incapable of dealing with the social consequences of the reforms and was accused of incompetence, nepotism and indecision. In the fight against inflation and the attempt to reduce public spending the conservative coalition took all the necessary decisions, but failed to follow a clear policy on privatising the country's run-down state enterprises. It also appeared incapable of opening a dialogue with the trade unions and opposition and was unwilling to respect the division of powers between the government, parliament and the president. By evoking Hungary's past greatness, indulging in irredentist dreams and demonising his opponents, the reform Communists, Antall threw away the chance of winning back the support he had lost. His successor, Boross, also failed to build on the coalition's existing support in the remaining six months before the elections, despite his extravagant promises and use of nationalist slogans. After electing defence minister, Lájos Für, as its chairman in February 1994, the MDF projected itself as a party which could guarantee political stability in contrast to the situation in the other post-Communist states of eastern Europe. It also presented itself as a bulwark against the return of Socialism and the only alternative to a new MSZP-led post-Communist government. The MDF warned that a Socialist election victory would jeopardise Hungary's chances of joining the West, arguing also that a generous redistribution of wealth would undermine the country's economic progress thus far. It also maintained that the old apparatchicks would re-occupy their former positions and insist on the return of their lost privileges. But these arguments had little impact on the voters.

The electorate was more prepared to trust Gyula Horn to bring about a rapid improvement in living conditions. Although he had loyally served the Communist state for decades, he had become a well-recognised international figure since being appointed foreign minister in 1989 and had successfully projected himself as a reformer, coming across in parliamentary debates as a competent, level-headed, pragmatic and efficient politician. The accusation that he had been a member of the militia which had helped crush the 1956 Uprising did nothing to dent his popularity. Even the régime's former opponents preferred to trust a politician who represented the MSZP's social democratic traditions rather than the Right. True, the Socialists had no new coherent ideas to offer on reform, but they did promise to revive their economic policy of the 1980s whereby the changeover to a market economy would proceed at a slower and socially more acceptable pace, while institutions of proven value would be retained. Large-scale enterprises would still be centrally managed, successful agricultural cooperatives would receive government assistance and investment capital would be made available for new ventures. The government's priority would be to reduce the budget deficit through a programme of spending cuts, while at the same time tackling inflation and unemployment as well as offering tax incentives to foreign and home investors in the hope of bringing about sustained economic growth.

In the SZDSZ, led by former dissidents, there was serious internal disagreement over whether it would be right to join the former Communists in government and whether this would make any sense if the latter gained an absolute majority. Should they merely help the MSZP to drum up a majority? Should they help morally to legitimise the MSZP and take responsibility for guaranteeing the continuing reform of the system in keeping with their own ideas? After dubious compromises with the conservative government had caused a number of internal crises, the party, which saw itself as liberal in the economic sense with left-of-centre tendencies, did not wish to shirk holding power. Members certainly enjoyed rumours that the chairman of the parliamentary party, Gábor Kuncze, would be a likely choice for prime minister, since Horn seemed to be content to perform the duties of foreign minister. There was also little to choose from between the party's economic programme and that of the government coalition. The SZDSZ advocated limiting the role of the state. While the government would still lay down the general framework for economic development, voters were promised that priority would be given to tackling social problems and introducing a more open privatisation policy. It would also undertake a stronger export drive, cut company and personal taxes and improve the efficiency of the civil service. It also strongly supported the need for the earliest possible integration of Hungary into the political and economic structures of the West. FIDESZ, on the other hand, having been carried along by a wave of support for almost three years and registering 40 per cent in the polls, lost much of its electoral credibility when it ruled out raising pensions and its involvement in dubious real estate deals became known. Despite a belated attempt to occupy the right-of-centre ground vacated by the MDF, it failed to make any headway with the voters.

The pundits' predictions were largely borne out by the results of the parliamentary elections held on 8 and 29 May 1994. The figures showed that 68.94 per cent of the electorate voted in the first ballot and 55.3 per cent in the second ballot. In the first round the MSZP won 33 per cent of the vote, coming first in 152 of the 174 contested constituencies. After the second round, Socialist candidates, including some who stood as independents, trade unionists and representatives of the Democratic Youth League, won 209 of the 386 parliamentary seats (54.1 per cent). The Alliance of Free Democrats ( SZDSZ) won 70 seats (18.1 per cent). This meant that the prospective coalition could count on a comfortable two-thirds majority. The MDF failed to achieve the breakthrough it had hoped for, managing to return only 37 deputies (9.5 per cent). While the FKGP and the KDNP had to settle for 26 (6.7 per cent) and 22 (5.7 per cent) of the seats, FIDESZ, expecting large gains, had its hopes dashed when only 20 of its candidates won seats (5.1 per cent). Two independent candidates were returned. Only 139 deputies, about a third of the total, were returned for a second term. The virulent antisemite, István Csurka, and his right-wing nationalist party, Hungarian Truth and Life, picked up only 1.43 per cent of the vote while the former Communists of the MSzMP received only 3.27 per cent. Many commentators interpreted the failure of the radical splinter parties to clear the 5 per cent hurdle and the outright defeat of the extremists as proof of the Hungarian electorate's political maturity and sense of responsibility. It also indicated that the new constellation of political parties in Hungary was beginning to enter a period of consolidation. As in most of the former Socialist Bloc countries, the ex-Communists had regained power constitutionally after a brief interlude of middle-class government. Whereas the support for their directly returned candidates lay in the major urban working-class districts, the rural districts of the south and east and the areas of heavy industry where unemployment was high, the MDF's four successful direct candidates won exclusively in the middle-class suburbs of Budapest. The SZDSZ candidates won 17 seats directly, mainly in the west of the country where the population was economically better situated thanks to the existence of a small-scale cross-border trade resulting from its proximity to Austria.

Aware of the problems facing a new government, President Göncz called for the formation of a government of national consensus on 31 May. During the final phase of the election Gyula Horn had been badly injured in a traffic accident. On 4 June an extraordinary MSZP party conference voted overwhelmingly (431 to 19) to nominate him as its candidate for the premiership. Horn ruled out any return to the Communist social order and spoke in favour of a market economy and a liberal economic policy. Promising to work for national reconciliation he invited the liberals to form a coalition. With the Socialists in an absolute majority, the SZDSZ initially showed little desire to accept an invitation to discuss a coalition, but the detractors of the MSZP within the SZDSZ, led by Péter Tölgyessy, failed to prevail over the pragmatists led by the party leader, Ivén Pető. The latter were seriously prepared to participate in the new government on two conditions: that they were guaranteed an equal say in formulating and implementing future policy and that the recommendations of the MSZP's economic advisers and former finance minister, László Békesi, were accepted as a basis for economic recovery. A round of tough negotiations followed which culminated in the signing of a new coalition agreement on 24 June. Running to 150 pages, it laid down the common principles of government policy and guidelines on government appointments. The MSZP also demanded stricter party discipline since several factions among the Socialists could not be relied on to give full support to drastic spending cuts. Only four of the 432 Socialist delegates to the extraordinary party conference voted against the agreement. Under its terms the SZDSZ was to be given three ministries including the important interior ministry. The office of vice-premier was to go to the former leader of the parliamentary party, Gábor Kuncze, along with five state secretary posts. It was also agreed that only commonly agreed legislation would be placed before parliament. Although the SZDSZ chairman, Pető, passionately defended the coalition terms at a special party conference, over a fifth of the delegates rejected them by 106 votes against to 479 for.

When parliament resumed on 28 June Zoltán Gál of the MSZP was elected speaker despite his long Communist party career and earlier membership of the Central Committee. The former MDF prime minister, Boross, was chosen as its main deputy and decisions were taken on the composition of committees. Announcing his government programme on 14 July, Horn appealed for national reconciliation and unity to overcome the country's problems, arguing that Hungary could only flourish if widespread feelings of resentment against the former Communist system could be dispelled. The new government was prepared to enter into a dialogue with any social group in a spirit 'devoid of arrogance'. 'Hungarians have had enough of hatred, enmity and continual mistrust', he maintained, 'They expect the government to find solutions, not indulge in fruitless debate.' But the new prime minister held out little prospect of rapid prosperity. Alongside drastic spending cuts to reduce the budget deficit, the government would be forced to implement unpopular measures in the months to come, such as raising taxes on consumer goods and energy consumption, reducing the number of civil servants and withdrawing state subsidies. The urgent sale of state enterprises would hasten the expansion of a market economy 'based predominantly on private property'. 'I would be satisfied', he continued, 'if after four years in office I can say that our government prevented another economic recession and created more tolerable living conditions'. He said that his government's overriding priority would be to achieve Hungary's closer integration with western Europe and the European Union. A referendum would be held on the question of joining NATO. He also promised to conclude basic treaties with neighbouring countries which had Hungarian minorities, promising that Hungary would in return agree to respect the inviolability of existing frontiers and the rights of their co-nationals inside Hungary. On 15 July 265 deputies pledged support for Horn and his new government team. When a vote was taken on the new programme only 93 voted against.

As well as providing the minister of the interior in the new, smaller 14-man cabinet, the SZDSZ also supplied the ministers of education and culture ( Gábor Fodor) and transport ( Károly Lotz). Long-serving former MSzMP officials took over key ministries: László Békesi was made minister for finance and the economy and László Kovács took over at the foreign ministry. György Keleti, a professional soldier, became minister of defence, Pál Vastagh became the new minister of justice and Béla Katona took over national security. At least one woman managed to secure a seat in the new cabinet: Magda Kovács-Kósa, who was put in charge of labour affairs. Six of the new ministers had studied economics, four were lawyers and two were engineers. The opposition and the press slammed the close ties the Socialist ministers had had for years with the Kádár régime. It had been during his period in government that they had made their careers and acquired their administrative experience. The suspicion was frequently voiced that former Communists who had been forced to quit four years previously had regained their positions of power and influence by the back door and would jeopardise the transition to democracy. Observers saw problems ahead for the new parliamentary majority, not so much because of disagreements which could be expected within a Socialist-Liberal coalition but because the MSZP was split between a reformist wing and a strong faction dominated by a Communist and Socialist trade unionist outlook. The latter appeared reluctant to share responsibility for the rigorous policy of cutbacks being demanded by the World Bank and the IMF because it feared these would cause a further fall in living standards.

The new government's first political actions at home met with a mixed reception. The conservative controllers of radio and television were dismissed, diplomats recalled and bureaucrats removed from their posts. A law intended to ban former Communists from the civil service was revoked. The government also withdrew from the planned 1996 international exhibition on grounds of cost and attempted to curb investigations into the events of Hungary's past. In contrast, the government's foreign policy measures proved very popular. On 18 July 1994 Horn made an early visit to Bonn to secure Germany's support for Hungary's efforts to join the EU. His new cabinet also placed great weight on normalising relations with neighbouring states in which Hungarians formed a significant minority. This intitiative coincided with similar intentions on the part of the Moravčík government which had come to power in Slovakia in March 1994. Since that time it had redressed several of the main grievances of Slovakia's ethnic Hungarians and had indicated its interest in signing a treaty with Hungary. The two presidents, Göncz and Michal Kováč, expressed their desire for better relations and closer cooperation when they were received jointly as guests of US President Clinton on 22 June. At talks held in Bratislava on 5 August 1994 the two prime ministers agreed to sign a future treaty aimed at creating an appropriate framework for establishing good relations between neighbouring states. Hungary announced it would be prepared to recognise the inviolability of the Slovakian border in return for ethnic Hungarians in south Slovakia being granted all the rights normally accorded to Europe's ethnic minorities. In the case of Rumania, however, there was no sign of differences being overcome. The Rumanian prime minister, Nicolae Vacaroiu, invited Horn to Bucharest and a meeting of the two foreign ministers was arranged for September 1994. However, hopes of any rapid reconciliation suffered a major setback when the extreme nationalist National Unity Party (PUNR) joined the Rumanian government on 19 August.

Hungarians still appear convinced that the only way out of their country's unsatisfactory and worrying economic situation with its accompanying signs of social crisis lies in a pluralistic system and a state based on the rule of law. But a more realistic view of what has been achieved in the first four years of democracy and a free market economy has begun to prevail. Indeed, many feel disappointed, and this disappointment is likely to increase as the new government's drastic spending cuts take effect. Hungarians were initially proud of the fact that they had by their own efforts coped with the great changes that had taken place in Hungary in 1988-89 and, indeed, that they had exercised a decisive influence on developments throughout the whole of eastern Europe. But this gave way to a feeling of disillusionment when they gradually began to realise that, although they had, economically speaking, one of the best starting positions of all the former Socialist Bloc countries, Poland and the Czech Republic had in the meantime taken far better advantage of the opportunities that opened up. Despite signs of a genuine economic recovery and the fact that investments and industrial production were up by 30 per cent and 9.4 per cent respectively in the first quarter of 1994, the long-term decline in the Gross Domestic Product will at best be halted in the coming years and inflation may well cross the 20 per cent mark again. Hopes of joining the EU in the near future and receiving more substantial help from abroad have gradually evaporated. But strengthened by a revived patriotism, an ingrained sense of realism and the knowledge that national solidarity has helped them overcome worse crises in the past, Hungarians are earnestly attempting to overcome the difficult problems of the present so that they can take their rightful place in the much-heralded new Europe.