September of 2011 proved to be the most difficult and worst managed month of the second Orbán-government. The politically significant developments of the next months, or, potentially, the next years will no longer be determined by the prearranged agenda of Fidesz but by external factors. This signals a major change for the government. Up until now, Fidesz did not have to face external challenges serious enough to question the wisdom of the government's economic policy and the calculations on which the policy was based. The decisions the party made in the autumn of 2010 - the nationalisation of the private pension funds or the introduction of sectoral taxes - resulted not from external pressures but from the determination of the government to lower taxes. These decisions by themselves would not have resulted in serious economic problems; foreign investors and international organisations are used to and thus accept that any new government has different priorities from its predecessors and tries to emphasize these differences with policy decisions early on.
However, problems arose from the process in which such policy decisions were made; the way in which these decisions were implemented and from the communication that was used to justify them. The new measures seemed to imply that the government can, without warning and compensation, overtax profitable enterprises or financial service providers. This implication created an atmosphere of uncertainty: investors found it more and more difficult to predict the environment in which they operated and consequently started to leave the country. In the meantime, the growth the government expected failed to materialise.
All this created a vicious circle: the government declared the reduction of the deficit to be a major goal, but with investors leaving, employment decreasing and growth stalling, the revenues were insufficient for the planned reductions. As a result, the government was forced to introduce new austerity measures and cut back on social spending. Consequently, the original strategy of the government, which had the declared goal of stimulating growth ,was replaced by an austerity package, characterised by tax increases and rising unemployment.
On the surface, these problems might appear to be economic in nature but are in fact caused by underlying political factors: the notion of 'political government.' Every government attempts to introduce politically important priorities to its economic policies. The Orbán-government, however, went farther than this: it made specific economic decisions based not on economic, but on short-term political considerations, thus creating a huge problem of credibility and predictability.
The internal disputes of the Socialist Party unexpectedly intensified in September following the determination of former prime minister Ferenc Gyurcsány to strengthen his position within the party: Gyurcsány increased the number of his media appearances and his platform was also more active than in the previous months. However, his initiative that all parliamentary group members of MSZP return their mandates for a new intra-party election backfired for several reasons. On the one hand, unlike his previous attempts to generate conflict between his platform and the party chairman, this time he found himself opposed by virtually all Socialist MPs. Additionally, Gyurcsány did not predict that chairman Mesterházy might respond in kind; he did not have a 'plan B' for a counter-attack.
As a result of this conflict, the possibility of the Socialist Party splitting in two was never as likely as now. The supporters of Gyurcsány talk more and more openly about the necessity, in fact, the desirability of a split. The relative position of both Mesterházy and Gyurcsány also makes such a split more likely. Mesterházy will never be in a better position to try to rid himself of Gyurcsány and his platform. For Gyurcsány as well, a split is increasingly the lesser of two evils: staying within the party - and losing all consecutive intra-party elections - seems more and more an hazardous option. This is not to say that leaving MSZP would be definitely benefit Gyurcsány: there is no precedent in Hungarian politics for a successfully managed party split.
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