The new Republic of Hungary was proclaimed on 23 October 1989, 33 years after Soviet troops intervened in Hungary and installed a Soviet-supported government. Compared to most other countries in Central-Eastern Europe, Hungary had long and stronger economic and political ties with several Western European countries, above all Austria. The economic and the political reform process started early as a result.
In 1989, several new political parties were founded and old parties reconstituted. Among them, the most prominent were the centre-right Hungarian Democratic Forum (MDF), the liberal Alliance of Free Democrats (SzDSz), set up by dissident intellectuals from several unofficial opposition groups, and the Independent Smallholders' Party (FKgP), which had been a dominant party in Hungary's first postwar election of 1947. In addition, the Social Democratic Party (MSzDP), which had merged with the Hungarian Communist Party in 1945 to form the Hungarian Workers' Party, was reconstituted.
As a result of by-elections in July 1989, a member of the opposition party (MDF), who had defeated the candidate of the leading Communist Party (HSWP), entered parliament for the first time since 1947. In three other by-elections MDF candidates had been more successful than HSWP candidates. Faced with these new challenges, the HSWP dissolved the party and created a new Hungarian Socialist Party (MSzP), committed to multiparty democracy and to an efficient market economy.
In October 1989, the national parliament approved an amended Constitution defining Hungary as an independent democratic state based on the rule of law. All powers were to belong to the people, which they would exercise through their elected representatives. The Constitutional Court was also established. The Presidential Council was abolished and was replaced by a president; the speaker of parliament, Matyas Szürös, was appointed as interim president.