Hungary's government suffers big defeat in referendum

By David Chance and Balazs Koranyi
Sunday, March 9, 2008; 5:53 PM

BUDAPEST (Reuters) - Hungary's government suffered an unexpectedly large defeat in an opposition-sponsored referendum on Sunday to strike down health and university fees, but said it would not bow to pressure to quit.

With 94 percent of the votes counted, each of the three questions on the ballot received 82-84 percent support, the national election office OVB said, showing they had passed with a big majority, contrary to the forecasts of most pollsters.

The main opposition Fidesz party said Prime Minister Ferenc Gyurcsany had suffered a "humiliating defeat" but few analysts believed the vote had wider implications for the unpopular government or that it would quit before an election in 2010.

The Socialist-led coalition government moved quickly to say it would respect the outcome of the referendum, which asked voters to strike down fees of 300 forints ($1.72) for doctor and hospital visits as well as small charges for university tuition.

It also dismissed claims that the referendum was a surrogate election or that the government should quit.

"If you look at the original intent of the opposition, to oust the government, then the referendum failed," Gyurcsany told supporters from his Socialist Party after the vote.

The fees were introduced to help cut Hungary's budget deficit, the largest in the European Union, but the income from them is relatively small at just 0.1 percent of gross domestic product so it will not have a material financial impact.


Since winning re-election in 2006, Gyurcsany has introduced hefty tax rises and subsidy cuts to rein in the deficit and opinion poll support for the Socialists has fallen to just 15-17 percent compared with about 40 percent for Fidesz.

Results on Sunday indicated Fidesz managed to reach well beyond its core voter base and attracted traditional Socialist voters as "yes" votes equaled around 3.2 million on Sunday, well ahead of the 2.3 million it polled in the last election.

Most polls had forecast the referendum would scrape through on a small turnout.

"This vote reflects more a general dissatisfaction with the policies of this government than people's opinion on these particular issues," said Gabor Torok, a political analyst with think-tank Vision Consulting.

The referendum comes as Hungary's risky debt has been hit hard by the global credit crisis and economists have warned the result could unnerve the market due to concerns the Socialists could return to their spendthrift ways to rebuild support.

"While the passing of the referendum is unlikely to have a major fiscal impact, it could lead to short-term volatility and weakness given the already poor sentiment," said Lehman Brothers economist Silja Sepping.

(Reporting by Balazs Koranyi; Writing by David Chance; Editing by Jon Boyle)

© 2008 Reuters