Mr. Jarai tells us that, “Orban understands economic issues and what needs to be done” but notes that given broader political considerations Orban must take into account, “we still don’t know what he is going to do” on economic policy. Most believe that once in power, FIDESZ will make symbolic gestures like abolishing the new property tax, but that they will continue most of the reforms launched by the Bajnai government. […] Some FIDESZ economists, including Mr. Jarai, advocate for the introduction of a flat tax, which they believe will help simplify the tax system and improve Hungarian economic competitiveness. Jarai tells us that Orban agrees that a flat tax can have economic benefits, but has concerns that it would give the appearance of favoring the wealthy. […] Fidesz-oriented economist Peter Heim notes that there are two main schools of thought among Fidesz economic experts on the proper macroeconomic course for the country. One group, led by Gyorgy Matolcsy, favors substantial and immediate tax cuts to help stimulate the economy, even at the expense of higher budget deficits in the near term. The other view, generally associated with Zsigmond Jarai and others, favor a more fiscally cautious approach, in which tax cuts would be largely matched by cuts in spending. It seems that the gulf between these groups has narrowed recently, with the approach falling somewhere in the middle. We are often reminded by commentators both within and outside the party, however, that regardless of whether there are opposing views internally, ultimate decisions are made by Party President Viktor Orban. […] In private, Fidesz officials praise the IMF and give high marks to the approach the organization is taking in Hungary. Matolcsy and Jarai tell us that a Fidesz government would likely seek a new agreement with the EU and IMF when the current Stand-By Arrangement expires next October [.]

[Chargé d’Affaires] [Jeffrey] Levine, cables and