Political Rights: 1
Civil Liberties: 2
Status: Free
Population: 10,100,000
GNI/Capita: $4,830
Life Expectancy: 72
Religious Groups: Roman Catholic (67.5 percent), Calvinist (20 percent), Lutheran (5 percent), other (7.5 percent)
Ethnic Groups: Hungarian (90 percent), Roma (4 percent), German (3 percent), other (3 percent)
Capital: Budapest


Overview

In 2003, Hungary continued its progress toward the European Union (EU) by voting in favor of joining that body in an April referendum. The year also witnessed a polarized domestic political landscape in Hungary, which included a complex financial scandal involving embezzlement of public funds at the country's second largest financial institution.

King Stephen I, who ruled from 1001 to 1038, is credited with founding the Hungarian state. In the centuries that followed, Hungarian lands passed through Turkish, Polish, and Austrian hands. In the mid-nineteenth century, Hungary established a liberal, constitutional monarchy under the Austrian Hapsburgs, but two world wars and a Communist dictatorship in the twentieth century forestalled true independence.

In the late 1980s, the country's economy was in sharp decline. The Hungarian Socialist Worker's Party came under intense pressure to accept reforms. Ultimately, the party congress dissolved itself, and Hungary held its first free, multiparty parliamentary election in 1990. Since that time, government control in Hungary has passed freely and fairly between leftand right-leaning parties. The country has followed an aggressive path of reform and pursued the very popular cause of European integration.

The current political landscape reflects the thin margin of power enjoyed by the governing coalition, which came into power on the basis of a closely contested 2002 parliamentary election that was generally free and fair. After two rounds of voting, Prime Minister Viktor Orban's ruling coalition of the Hungarian Civic Party-Hungarian Democratic Forum (Fidesz-MDF) garnered just over 44 percent of the vote (188 mandates) and was unable to retain control of the National Assembly. The Hungarian Socialist Party (MSZP) won 42.8 percent (178 mandates). The Alliance of Free Democrats (SZDSZ) narrowly exceeded the 5 percent threshold (19 mandates). Voters elected one candidate on a joint MSZP-SZDSZ ticket. Following the election, the MSZP formed a majority government in partnership with the SZDSZ. The new Socialist-Liberal government elected Peter Medgyessy as prime minister.

Corruption remains a genuine problem for Hungary, which was hit mid-year by a sensational scandal concerning K & H Equities, the brokerage arm of the country's second largest financial institution. The investigation got under way as part of the routine audit responsibilities of the Hungarian Financial Supervisory Authority's (PSZAF) and was not initiated at the request of opposition parties. Karoly Szasz, the chairman of the PSZAF, was hospitalized after being assaulted by unknown assailants. The attack occurred the day before the PSZAF disclosed an illegal transaction involving shares of the State Highway Management Company (AAK). The subsequent investigation found that K & H Equities, with the knowledge of AAK management, diverted assets from AAK to private accounts through the brokerage. Further revelations showed that AAK was just one of several state-owned firms from which K & H had been diverting public funds. The PSZAF has extended its investigation to other organizations, including the Hungarian Development Bank (MFB) and the Finance Ministry, and the matter is now the subject of an ongoing criminal investigation. Meanwhile, the government has announced plans to reorganize the PSZAF, provoking sharp criticism from the European Commission.

Hungarians voted overwhelmingly in favor of joining the EU, with 84 percent of the supporting membership in the binding referendum that was held in April 2003. Turnout for the national referendum, 45 percent of those eligible to vote did so, was considered a disappointment when compared with the turnout of other EU candidate countries. Hungary, which joined NATO in 1999, is expected to formally become a member of the EU in May 2004.

Along with other countries that have made NATO and EU membership strategic objectives, and that are eager to have solid relations with both the United States and the EU, Hungary has walked a diplomatic tightrope, especially with respect to the war in Iraq. The contentious debate over the Iraq war has generated intense pressure on the countries of Central Europe, which have discovered that, in the era of global terrorism, finding their role within the transatlantic community has not been as easy as expected.

Elections to the European Parliament are scheduled for 2004 and, in 2006, parliamentary and municipal elections are scheduled for April and October, respectively.

Political Rights and Civil Liberties

Citizens of Hungary can change their government democratically. Voters elect representatives to the 386-seat unicameral National Assembly under a mixed system of proportional and direct representation. The Hungarian parliament elects both the president and the prime minister.

Post-Communist elections in Hungary have been generally free and fair, although some problems persist. During the heated 2002 parliamentary elections, few parties respected campaign spending caps. The OSCE observed that state media coverage frequently favored the ruling Fidesz party and that government-sponsored "voter education" advertisements appeared to mirror Fidesz-sponsored campaign ads. The results of a local-level by-election in October 2003 were annulled by the courts, which cited illegal election-day mobilization, and the Central Election Commission issued a formal finding in fall 2003. In response to complaints related to the 2002 parliamentary elections, the law now prohibits the use of the voter registry for election-day mobilization. Prior to the 2002 election, Fidesz and Lundo Lungo Drom, a national Roma (Gypsy) party, concluded a political cooperation agreement. Despite this development, only four Roma candidates were elected to the National Assembly, the same number as in the previous election. Toward the end of 2002, the European Commission reported that Hungary was not meeting its constitutional obligation to ensure direct parliamentary representation of minorities.

Freedom of speech is respected, and independent media operate freely in Hungary, although within a highly polarized atmosphere. However, political controversy continues to trouble state television and radio. A 1996 media law requires both ruling and opposition parties to share appointments to state media oversight boards. Left-leaning opposition parties had previously accused the Fidesz party of stacking the oversight boards with supporters. After losing power in the parliamentary elections, Fidesz leaders have accused the new Socialist-Liberal government of attempting to inappropriately influence state television and radio. Both the Medgyessy government and the opposition have pledged to amend the current media law, but neither side possesses the two-thirds parliamentary majority necessary to pass the legislation.

The constitution guarantees religious freedom and provides for the separation of church and state. While all religions are generally free to worship in their own manner, the state provides financial support and tax breaks to large or traditional religions such as the Roman Catholic Church. Some critics have charged that these practices effectively discriminate against smaller denominations.

The Hungarian constitution provides for freedom of assembly and the government respects these rights in practice. The government also respects citizens' rights to form associations, strike, and petition public authorities. Trade unions account for less than 30 percent of the workforce.

Hungary has a three-tiered independent judiciary in addition to the Supreme Court and a constitutional court. The constitution guarantees equality before the law, and courts are generally fair, yet limited budget resources leave the system vulnerable to outside influence. While challenges still remain, previous and current governments have taken measures to reform the civil service, introduce stronger penalties for bribery, and implement a long-term anticorruption strategy.

The constitution guarantees national and ethnic minorities the right to form self-governing bodies. All 13 recognized minorities have exercised this right. In 2001, Hungary implemented a legal rights protection network to provide legal aid to the Roma community. The government also created the Roma Coordination Council, appointed special commissioners in the Ministry of Education and Employment and the Ministry of Labor to specifically oversee Roma issues, and named a minister-without-portfolio in the prime minister's office to promote equal opportunity. However, the Roma population continues to face widespread discrimination in many respects. In 2003, the Hungarian government agreed to pay compensation to the relatives of Hungarian Jews who died in the Holocaust. The compensation is to be provided to remaining family members of Hungarian Jews who perished in Nazi death camps or died during forced labor, as well as those persecuted under anti-Semitic laws in Hungary before the Holocaust began.

In 2001, parliament passed the controversial Status Law granting special health and educational benefits to ethnic Hungarians residing outside the country. The governments of Romania and Slovakia expressed deep concern over the discriminatory nature of the law. In 2003, Hungary came to an agreement with Slovakia and Romania on the application of the Status Law, which was modified to meet objections from the EU and neighboring lands.

Women possess the same legal rights as men, although they face hiring and pay discrimination and tend to be under-represented in senior-level business and governmental positions. Hungary is a primarily a transit point, but is also a source and destination country for trafficked persons.

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