Fidesz picks another fight

“HUNGARY is transfixed by an unprecedented political battle. In one corner, the constitutional court, the highest legal body in the land. In the other, the centre-right Fidesz government, which has enjoyed virtually unlimited political power since it won a two-thirds parliamentary majority at a general election in April. Or at least it did until Tuesday morning, when the court threw out a law that would apply a 98% tax to all public-sector severance payments over 2m forints ($10,000), backdated to January 1st 2010. The court argued, reasonably enough, that such retroactive legislation would breach employee contracts and was unconstitutional.

Round one to the court. But Fidesz reacted with fury. By Tuesday afternoon János Lázár, the leader of Fidesz in parliament, had drafted legislation to remove the court’s jurisdiction over the state budget, taxes and other financial matters. Fidesz’s huge majority would ensure a smooth passage for the new law, which probably would have passed within a few days. Round two to Fidesz.

Or, perhaps, not, for it seems this time the party may have overreached itself. If the court refuses to back down, Hungary could lurch into a constitutional crisis. […]

But perhaps the most worrying aspect of the government’s move is the way it fits a pattern of arbitrary decision-making set by the government since its election. There seems little room for the opposition in Fidesz’s relentless pursuit of what it describes as national unity and co-operation. Earlier this month the government announced a crisis tax on the energy, telecommunications and retail industries, all of which have substantial foreign holdings. Together with a new bank tax, this package should raise $2.67 billion a year for three years, helping pay for the government’s planned cuts in income and corporation tax. In fact the government’s real fear, says Krisztian Szabados of Political Capital, a think-tank, is that the constitutional court will throw out the crisis taxes, tearing a massive hole in the budget.

Bashing foreign investors is usually popular in Hungary and these extra business taxes will not dent the government’s popularity. There are few votes in reminding the electorate that it was foreign capital which kickstarted Hungary’s moribund economy in the early 1990s, which has brought tens of thousands of jobs and which has nurtured Hungary’s nascent middle class. But Hungary needs more of it—and these latest shenanigans are unlikely to help.” http://www.economist.com/blogs/easternapproaches/2010/10/hungarian_politics