European Affairs

Yet, what Bajnai may still be lacking in terms of recognition, he more than makes up in terms of accomplishments. Taking the nation’s helm a year ago, he demanded and obtained assurances from all parties that he would have a free hand in piloting Hungary through the economic crisis. With that authority, he has demonstrated leadership of a quality that is all too rare among the political establishments in all Western democracies, from eastern and central Europe to the United States. Despite the odds against him, he has succeeded in pushing into law a series of tough and unpopular reform measures that have put his country onto a path that promises to lead Hungarians out of a crisis that threatened to engulf the country.

Of course, it was only thanks to an exceptional crisis that he was brought into office at all. In spring 2009, Hungary was in very deep economic trouble – so deep that no political party leader wanted to take office and risk being blamed for the nation’s collapse. As a way out, the politicians turned to an independent technocrat – economist and businessman Gordon Bajnai. Not affiliated with any party, he lacked any political base of his own. That made him acceptable to the politicians, who wanted to be sure that he would not be a serious rival in the 2010 elections. And Bajnai used their need to find someone to run the government for a year as his negotiating leverage to obtain what he wanted: a pledge from all parties not to interfere with his austerity measures as he pulled the country back from the brink.

As he turns the page on his year in office, his success seems as atypical of political life as so much else in his successful career. Nothing seemed to destine him for politics in the early stages of this life. Born in 1968 in Szeged in southern Hungary, Bajnai spent his student years with his eye on a career in business, following in the footsteps of his father, a successful businessman. At Budapest University in the late 1980s at the end of the communist era, he did participate in student organizations and there came into contact with his fellow-student (and future prime minister) Ferenc Gyurcsány: the two young men, according to József Debreczeni in his book The New Prime Minister, bonded over soccer and beer. Years later it would be Gyurcsány who gave him his extraordinary break into the top levels of government. But for the intervening decades Bajnai pursued his ambitions in the private sector.

After graduating in 1991 from the Budapest University of Economic Sciences (now Corvinus University), he started his career with Creditum Financial Consulting Ltd, a small firm in Budapest, where he stayed only two years before taking up an internship with the European Bank for Reconstruction and Development in London. After that stint, he headed back to Hungary to work for his old friend Gyurcsány, as a consultant for the financial group, Eurocorp International Finance. Between 1995 and 2000, he was the managing director and later Deputy Chief Executive Officer of CAIB Securities Co., a consultancy firm that, during Bajnai’s time there, oversaw the privatization of many Hungarian companies after the collapse of communism. His big career move catapulted him in 2000 to the position of CEO of Wallis Rt., a major business empire. Over the next five years, he shaped it into a modern holding company – a success that was not devoid of controversy. Some suppliers still hold him responsible for the bankruptcy of their firms – although Bajnai denies any wrongdoing or legal infractions.

His stellar performance was widely noticed in business circles. By 1999, he was voted one of the thirty most promising Central-Eastern European business executives by the journal Central European Business Review. In 2003, he was named Young Manager of the Year by the Hungarian Federation of Industrialists. Along the way, as pointed out by journalist Balint Szlanko, he worked for key members of the Hungarian financial elite, contacts that would facilitate his subsequent foray into politics.

Indeed, Bajnai’s old friend Gyurcsány gave him his first break into politics. In 2004 Gyurcsány became the leader of the Hungarian Socialist Party and Prime Minister, and then went on to win parliamentary elections in 2006. At that point, he asked Bajnai to join his government as Commissioner for the European nion funds allocated to Hungary. One year later, he became the Minister for Local Administration and Regional Development, before being promoted in May 2008 to the position of Minister of Economics. Bajnai came across as a competent and honest technocrat, a reputation that did not always endear him to other senior political figures: “He [Bajnai] was clean. As an EU funds minister, they could not get him to channel money to this or that constituency,” according to journalist Peter Magyari.

In normal times, the odds of a technocrat such as Bajnai becoming prime minister are extremely low. The unlooked-for opportunity arose out of two inter-related events. One was a scandal that sapped Gyurcsány’s long-term political position. Just before the 2006 elections, he told fellow Socialist party leaders that his government had been lying to the public for the last year and a half about the state of the economy. This admission was made at a closed-door meeting, but his remarks were secretly captured on tape and then leaked to the public in 2007.There was a predictable public outcry in the country, whose public deficit by then had climbed to nine per cent of GDP. Despite the furor, he refused to resign and tried, with some success, to reduce the deficit through austerity measures.

But a second event occurred a year later when the global economic crisis hit Hungary with full force in the fall 2008. As the Budapest Times newspaper explained the chain of events, the financial crisis that triggered an economic downturn in the West also in turn caused Hungary to start hemorrhaging jobs. Tax increases and minor tinkering with the budget were no longer enough to keep the deficit low enough to stay on track with the country’s bid to join the euro. Budapest did not have the option of increasing the deficit to finance fiscal-stimulus packages as major Western countries like the Britain and the U.S. were doing: the markets were not prepared to lend Hungary that kind of money. Instead, Hungary had no alternative to becoming the only EU country (at that time) to need an international bailout – €12.5 billion ($16 billion) from the International Monetary Fund and another €7.5 billion ($9 billion) from the EU and the World Bank in October 2008. The economy avoided collapse, but the government did not.

These dire economic developments finally forced Gyurcsány to resign on 21 March 2009, which created an intense political deadlock. The ruling Socialist Party and its coalition partner, the Alliance of Free Democrats, understood the need to avoid early elections as tantamount to political suicide, but they could not agree on a successor for Gyurcsány. The Free Democrats vetoed a number of candidates put forward by the Socialists before the deadlock created the conditions in which Bajnai eventually overcame his reluctance and agreed to take the job. In a savvy move, he demanded, as a precondition for taking on the job of prime minister, that every Socialist and Free Democrat deputy sign a memorandum in support of his tough austerity program to not only tackle the ecession but also to try and seriously reform Hungary.

It is an understatement to say that he faced a very daunting task as he formally took office on 14 April 2009. Yet, rather than being deflated by the situation, Bajnai confronted the economic crisis in his country with a level-headed approach and quiet determination. The keen soccer player surrounded himself with a team of non-party experts for key positions, including Peter Oszko – a 36 year-old tax consultant with no political experience but with a successful career in international accounting firms – who was chosen as his finance minister. In very pragmatic fashion, he refused to simply adopt easy solutions. As he claimed to the Budapest Times, “the crisis does not follow any ideology. It is simply there, and forces one to take appropriate measures.”

Indeed, “crisis manager” Bajnai quickly outlined a series of measures to reduce the country’s deficit and make changes in three key areas: pensions, welfare and taxes. His plan sought to achieve cuts of about 600 billion Forint (or €2 billion) by implementing some of the following measures: scrapping the thirteenth monthly pension payment; ending the “thirteenth month” wages paid to all public sector workers, which effectively cut their wages by around 10%; freezing the salaries of civil servants for 2010; raising the retirement age from 62 to 65; reducing state subsidies for a number of sectors, including public transport and radio and television; and raising VAT by 5 percent to pay for cuts to payroll taxes that came into effect in January.

While naturally preoccupied with domestic economic problems, Bajnai also quietly worked to dispel diplomatic impressions, left by his predecessor, that Budapest was being disingenuous in trying to maintain its west-looking links to the EU and NATO while often working in alignment with Moscow in hopes of obtaining Russian favors. Under Bajnai, according to U.S. government officials, Hungary has pursued much a much clearer diplomatic program reflecting the country’s westward ties.

After the April elections, Bajnai will leave office with the satisfaction that his measures and crisis management saved Hungary from the worst of the economic crisis. Granted, recovery will take more time. 2009 was still a very tough year for Hungary, with the economy projected to shrink by nearly seven per cent and unemployment in double digits. Yet the measures passed by his government have helped to contain the country’s deficit – and shifted perceptions so that far from being an EU black sheep one year ago Hungary now has one of the lowest deficits amongst EU member states – and to restore investors’ confidence in Hungary’s markets. Moreover, it is likely that the center-right Fidesz, heavily favored to win the upcoming elections, will have no choice but to follow the austerity program (and the foreign policy) set out by the current government.

As for Bajnai, his future remains unclear. In an interview with the Budapest Times, he claimed that politics was not everything, and that he wanted to spend more time with his family. But one thing seems certain. This is not the last we will hear from him.

Garret Martin has been an Assistant Professorial Lecturer at George Washington University, specializing in International History, and is editor at large at European Affairs.