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Hungary Paves Way For Elections, Adopts Western-style Economic Reforms

December 21, 1989

BUDAPEST, Hungary (AP) _ Parliament today voted to dissolve itself in March, thus paving the way for the first free elections in the country in more than four decades.

In a roll call vote, 320 deputies voted to end Parliament’s mandate on March 16. There were two abstentions and no votes against.

The house also adopted the government’s budget for 1990 which foresees strict austerity measures recommended by the International Monetary Fund.

Negotiations with the IMF for hard-currency loans necessary to help Hungary service its $20 billion foreign debt and revamp its economy hinged on the adoption of the budget.

No date was immediately set for the first free elections since the Communists took power in 1948. Acting President Matyas Sueros was to announce a date later today or early Friday.

Elections were due in Hungary in June 1990, but there have been increasing calls by the potent pro-democracy movement for them to be moved up.

Hungary is one of at least four East European nations expecting their first free elections since the Communists took power more than 40 years ago in the first half of 1990.

In East Germany, elections are scheduled for May 6. In Bulgaria and Czechoslovakia, plans also have been announced for free elections before the end of June.

Parliament also adopted a budget that incorporates many market-oriented reforms. It is to lead to price rises as subsidies on consumer goods prices are reduced and could contribute to unemployment as unprofitable firms are closed.

The IMF wants to see the country’s budget deficit, which is likely to reach $800 million this year, cut to $156 million in 1990 as a condition to further loans. A crucial $1 billion World Bank loan hinges on the IMF agreement as does a $1.14 billion loan from the European Community.

Hungary is to resume its negotiations with the IMF in January.

In presenting the budget Wednesday, Finance Minister Laszlo Bekesi said there would be a drastic reduction of subsidies to unprofitable companies by $720 million, which in turn could double or even quadruple the number of unemployed, which is now 25,000.

Subsidies on consumer and producer prices are also to be reduced. These will lead to price increases averaging 25 percent on foods starting in January.

Bekesi said the budget was designed to ″avoid economic collapse.″

″(This) is a crisis budget,″ he said.

Lawmakers on Wednesday adopted a new bill on housing which will lead to an increase in average rents by 35 percent starting Feb. 1. It also will levy a tax on home loans.

Bekesi said interest payments alone on the country’s $20 billion foreign debt will amount to $1.5 billion next year and that payment on the principle would be another $1.9 billion.

Future changes include instituting bankruptcy proceedings for money-losing companies, increased private ownership of industry and lifting wage controls.

Update hourly