Newspaper article The Christian Science Monitor

Hungarian Prime Minister Hits Privatization Brakes

Newspaper article The Christian Science Monitor

Hungarian Prime Minister Hits Privatization Brakes

Article excerpt

THE unexpected resignation of Hungarian Finance Minister Laslo Bekesi last month is sending a signal to investors that the former communist nation's successful privatization program could be in trouble.

Mr. Bekesi, a fiscal conservative who advocated austerity measures to address Hungary's growing debt problem, lost a power struggle with Prime Minister Gyula Horn over control of the government's privatization program.

The Jan. 28 resignation followed weeks of turmoil over Prime Minister Horn's controversial intervention in a hotel privatization deal, and the subsequent resignation of privatization commissioner Ferenc Bartha. After months of negotiations, government privatization authorities agreed to sell the HungarHotels hotel chain to American General Hospitality, a Dallas-based hotel-management firm, for $57.5 million. But Horn personally intervened to cancel the deal, saying the United States company should pay more.

"These decisions were made for political, rather than economic reasons," says Tamas Fabian, chief market analyst for Magyar Daewoo Securities in Budapest. "Any political interference in a privatization deal sends the wrong message to investors."

Bekesi's departure highlights an unannounced slowdown in the privatization process that's occurred in recent months. "We've sold the most attractive enterprises, and for privatization to continue further the government needs to pursue a conscious policy to keep the ball going.... That has not what's happening," says Laszlo Csaba, research director at the Kopint-Datorg, a state-financed economic research institute in Budapest.

Bekesi's downfall also weakens the tenuous coalition between the majority Hungarian Socialist Party, the successors to the Hungarian Communist Party, and the more liberal Alliance of Free Democrats. Bekesi's appointment to the finance ministry was an important factor in the Free Democrats' decision to join the government coalition. …

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