Hungary's PM clings to job after lies provoke riot

His country engulfed in the biggest crisis since the fall of Communism, Hungary's Prime Minister, Ferenc Gyurcsany, was still clinging to his job last night, despite committing one of the cardinal sins of politics.

All leaders are sometimes economical with the truth but very few admit it, let alone say that they "lied morning, noon and night" to win an election.

In Budapest, riot police were preparing for a second night of protests aimed at forcing the 45-year-old millionaire out of office.

The scale of the reaction to the premier's comments has plunged Hungary into turmoil and left the rest of Europe looking on amazed.

On Monday night, a full-scale riot developed after thousands of protesters marched on the headquarters of Hungarian state television. Yesterday more than 150 people were injured, two-thirds of them police officers, one of whom suffered serious head wounds.

As protesters began to gather again in the Hungarian capital yesterday, two questions were being asked. What prompted Mr Gyurcsany's extraordinary candour, and why was the reaction - even to such a blunt admission - so violent?

The root of the problem lies in the management of Hungary's economy, one of the weakest in Europe. Hungary is dependent on its imports of raw goods. But, because it has a large number of multinationals, Hungary also depends for its prosperity on the health of its export markets, particularly in the EU. With the downturn in the French and German economies, Hungary was in trouble.

Mr Gyurcsany's centre-left government knew that telling the truth about the state of the economy would lose them the April election. Yet having lied to the voters, the party faced a problem when it won.

The Hungarian budget deficit is set to rise to 10.1 per cent of gross domestic product, the worst in the EU and more than 7 percentage points greater than the ceiling for countries which (like Hungary) want to join the euro. As one official put it: "The target date for joining was supposed to be 2008, then it was 2009, then 2013 - and now we have simply stopped talking about it."

The only way to bring his party in line behind the dose of austerity which the country needed, Mr Gyurcsany decided, was shock tactics.

At a meeting of colleagues soon after the election, the premier made his now infamous 25-minute speech. "We screwed up, big time," said the Prime Minister. "No country in Europe has been so blatant. We obviously lied throughout the last one and a half to two years. And meanwhile, we didn't do a thing for four years. Nothing."

Then he made his pitch: "Look. The thing is, in the short run there is no choice. ... We can muck around a bit longer, but not much. The moment of truth has come swiftly... Reform or failure. There's nothing else. And when I'm talking about failure, I'm talking about Hungary, the left, and very honestly, myself."

As one of the premier's allies puts it: "If it had been nicely formulated the speech could have been interpreted as a forward-looking declaration designed to energise the party. Unfortunately he used swear words and referred repeatedly to the fact that the party had lied."

Indeed, as the transcript made clear, this was not a question of one or two little white lies or obfuscations, but a whole series of porkies over several years.

The ferocity of Mr Gyurcsany's opponents can be explained by several factors. One is a sense of betrayal. In April the Hungarian electorate was promised tax cuts. Since his re-election Mr Gyurcsany has imposed tax rises and benefit cuts worth $4.6bn (£2.5bn) for 2007.

But Mr Gyurcsany is also a controversial and divisive politician, a hero to his supporters but to his opponents a noxious mixture of former Communist and corrupt capitalist. And if he was part of the old, socialist system, Mr Gyurcsany certainly did well out of its collapse. Property deals struck in the early years of privatisation made him a wealthy man.

Amazingly, though, it seems possible that Mr Gyurcsany could survive, for the short term at least.

By the standards of western European politics Mr Gyurcsany made two fundamental errors. The first is to insult the voters by admitting that they were hoodwinked into supporting his party in April's elections. The second - and more surprising - act of naivety was to trust the colleagues with whom he shared his combustible insights.

Leaked words that led to crisis

* "...we have screwed up. Not a little but a lot. No country in Europe has screwed up as much as we have. We have obviously lied throughout the past 18 to 24 months. It was perfectly clear that what we were saying was not true... in the meantime we did not actually do anything for four years. Nothing."

* "...we lied morning, noon and night. I do not want to carry on with this."

* "...the faith comes from the fact that I am creating history. Not for the history books, I do not give a shit about them. I do not at all care whether we or I personally will be in them. I do not at all care."

* "...the government's work is not constructed nicely, calmly or scrupulously. No. No. It is being prepared at a mad break-neck speed because we could not do it for a while in case it came to light, and now we have to do it so desperately that we are almost at the breaking point."