Hungarian foes collude in property deal

HUNGARY'S ruling party and its main rival for power have stunned Hungarians by collaborating in a property deal that has netted each party the equivalent of several million pounds free of tax. The scandal has soured the atmosphere ahead of next year's national elections and may increase public disenchantment with the politicians who have dominated Hungarian public life since the fall of Communism in 1989.

The ruling Hungarian Democratic Forum (HDF) and the Alliance of Young Democrats (AYD), which has led the opinion polls for the last two years, are not exactly ideological bedfellows. Broadly speaking, the HDF is a centre-right party inspired by Christian and traditional Hungarian national values, while the AYD is a party of former anti-Communist student radicals. However, the parties apparently found it convenient to gloss over their differences when looking for ways to increase their bank balances for next year's election campaign.

Early last year, an unpublished government decree granted the HDF and AYD the right to acquire the former Officers' Club on Vaci Utca, the most elegant street in Budapest. The building had belonged to the State Property Agency, but the parties paid no money for it. The legal basis for this arrangement was an agreement, made by Hungary's six biggest political parties after the 1990 elections, under which each party received the right to extra office space.

If ever the HDF and AYD considered using the club's premises for offices, it did not take them long to change their minds. Last September the HDF and AYD sold the Officers' Club for 1.5bn forints ( pounds 10.7m at current rates) to the state-owned Hungarian Foreign Trade Bank. The HDF received 54 per cent of the proceeds and the AYD 46 per cent.

At a stroke, the two parties placed themselves in a position to spend much more money than their opponents on the elections. Other Hungarian parties were outraged. They complained that, even if the property deal was technically within the law, the HDF and AYD had secured their windfalls by selling to the state a formerly state-owned property that had cost them nothing.

Other aspects of the deal looked strange. In their 1992 financial statements, neither the HDF nor the AYD declared the income from the property sale. Both parties defended that decision on the grounds that the official date of sale was January 1993. But only one month previously, parliament had amended its law on political parties so that profits obtained from the sale of buildings were tax-free.

Another startling feature of the deal was that the AYD used part of its profits to set up a luxury car hire service, Jet Car, that specialises in renting out chauffeur-driven limousines. To some Hungarians, this use of money acquired from the state for party political gain smacked too much of Communist-era practices. It remains to be seen whether voters will retaliate either by voting against the HDF and AYD or by abstaining in the next elections.