Background Note: Hungary

PA Source: Office of Public Communication, Bureau of Public Affairs Description: Historical, Political and Economic Overviews of the Countries of the World Date: Dec, 15 199212/15/92 Category: Country Data Region: E/C Europe Country: Hungary Subject: Travel, History, International Organizations, Trade/Economics, Military Affairs, Cultural Exchange, State Department [TEXT]

Official Name:

Republic of Hungary


93,000 sq. km. (36,000 sq. mi.); about the size of Indiana.
Capital--Budapest (est. pop. 2 million); Debrecen (220,000); Miskolc (208,000); Szeged (189,000); Pecs (183,000).
Much of Hungary is flat, with low mountains in the north and northeast and north of Lake Balaton.
Temperate. January average temp. 00C (320F); July 200C (700F).
Noun and adjective--Hungarian(s).
Population (1991 est.):
10 million.
Ethnic groups:
Magyar 92%, Gypsy 3% (est.), German 1%, Slovak 1%, Jews 1%, Southern Slav 1%, others 1%.
Roman Catholic 68%, Calvinist 20%, Lutheran 5%, others, including Jewish, Baptist, Adventist, Pentecostal, Unitarian 5%.
Magyar 98%, other 2%.
Compulsory to age 16. Attendance--96%. Literacy--99%.
Infant mortality rate--15/1,000. Life expectancy--67 yrs. men, 75 yrs. women.
Work force (5 million):
Agriculture--19%. Industry and commerce--49%. Services--27%.Government--5%.
Official language:
Magyar (Hungarian).
Parliamentary democracy.
August 20, 1949. Substantially revised in 1989, amended in 1990.
Executive--Council of Ministers. Legislative-- Hungarian National Assembly (386 members, 4-yr. term). Judicial-- Supreme Court and Constitutional Court.
Administrative regions:
19 counties plus capital region of Budapest.
Principal political parties:
Hungarian Democratic Forum (MDF, center); Alliance of Free Democrats (SZSDZ, center left); Independent Smallholders' Party (FKGP, center right); Socialists (MSZP, reform communists); Federation of Young Democrats (FIDESZ, center left); Christian Democratic People's Party (KDNP, center right).
Three horizontal stripes--red, white, and green.
GDP (1990):
$35 billion.
Annual growth rate (1990):
Per capita income (1990):
Inflation rate (1991):
Natural resources:
Fertile land, bauxite, brown coal. Agriculture/forestry (16% of 1990 GDP): Products--meat, corn, wheat, potatoes, sugar beets, vegetables, fruits, sunflower seeds. Arable land--51%, of which 71% is cultivated.
Industry/construction (40% of 1990 GDP):
Machinery, buses, and other transportation equipment; precision and measuring equipment; textiles; medical instruments; and pharmaceuticals.
Exports--$7 billion: machinery, buses, and other transportation equipment; medical instruments; pharmaceuticals; textiles; other consumer manufactures; and agricultural products. Major markets--Germany, Austria, Czechoslovakia, Italy, US, France, Commonwealth of Independent States. Imports--$6 billion: energy, raw materials, machinery, and transportation equipment. Major suppliers--Germany, Czechoslovakia, Austria, Commonwealth of Independent States.
Official exchange rate (December 1992):
About 83 forints=US$1.


Since its conversion to Western Christianity before 1,000 AD, Hungary has been an integral part of Europe. Although Hungary was a monarchy for nearly 1,000 years, its constitutional system preceded, by several centuries, the establishment of Western-style governments in other European countries. Sharing defeat of the Austro-Hungarian Dual Monarchy (1867-1918) at the end of World War I, Hungary lost two-thirds of its territory and nearly as much of its population. It experienced a brief but bloody communist dictatorship and counter-revolution in 1919, followed by a 25-year regency under Admiral Miklos Horthy. Although Hungary fought in most of World War II as a German ally, following an unsuccessful attempt to switch sides on October 15, 1944, it fell under German military occupation until the end of the war. In January 1945, a provisional government concluded an armistice with the Soviet Union. It also established the Allied Control Commission, under which Soviet, American, and British representatives held complete sovereignty over the country. The Commission's chairman was a member of Stalin's inner circle and exercised absolute control.
Communist Takeover
The provisional government, dominated by the Hungarian Communist Party (HCP), was replaced in November 1945 after elections which gave majority control of a coalition government to the Independent Smallholders' Party. The government instituted a radical land reform and gradually nationalized mines, electric plants, four heavy industries, and some large banks. The communists ultimately undermined the coalition regime through discrediting leaders of rival parties and by terror, blackmail, and framed trials. In elections tainted by fraud in 1947, the leftist bloc gained control of the government; post-war cooperation between the USSR and the West collapsed as the Cold War began. With Soviet support, Moscow-trained Matyas Rakosi began to establish a communist dictatorship. By February 1949, all opposition parties had been forced to merge with the HCP to form the Hungarian Workers' Party. In 1949, the communists held a single-list election and adopted a Soviet-style constitution which created the Hungarian People's Republic. Rakosi became Prime Minister in 1952. Between 1948 and 1953, the Hungarian economy was reorganized according to the Soviet model. In 1949, the country joined the Council for Mutual Economic Assistance (CEMA)--a Soviet-bloc economic organization. All private industrial firms with more than 10 employees were nationalized. Freedom of the press, religion, and assembly were strictly curtailed; the head of the Roman Catholic Church, Cardinal Jozsef Mindszenty, was sentenced to life imprisonment. But the forced industrialization and land collectivization soon led to serious economic difficulties, which reached crisis proportions by mid-1953, the year Stalin died. The new Soviet leaders blamed Rakosi for Hungary's economic situation and began a more flexible policy in Eastern Europe called the "New Course." Imre Nagy replaced Rakosi as prime minister in 1953 and repudiated much of Rakosi's economic program of forced collectivization and heavy industry. He also ended political purges and freed thousands of political prisoners. However, the economic situation continued to deteriorate, and Rakosi succeeded in disrupting the reforms and in forcing Nagy from power in 1955 for "right-wing revisionism." Hungary joined the Soviet-led Warsaw Pact Treaty Organization the same year. Rakosi's attempt to restore Stalinist orthodoxy then foundered as increasing opposition developed within the party and among students and other organizations after Khrushchev's 1956 denunciation of Stalin. Fearing revolution, Moscow replaced Rakosi with his deputy, Erno Gero, in order to contain growing ideological and political ferment.
1956 Revolution
Pressure for change reached a climax on October 23, 1956, when the security forces fired on Budapest students marching in support of Poland's confrontation with the Soviet Union. The ensuing battle quickly grew into a massive popular uprising. Gero called on Soviet troops to restore order on October 24. Fighting did not abate until the Central Committee named Imre Nagy as prime minister on October 25, and the next day Janos Kadar replaced Gero as party first secretary. Nagy dissolved the state security police, abolished the one-party system, promised free elections, and negotiated with the USSR to withdraw its troops. Faced with reports of new Soviet troops pouring into Hungary despite Soviet Ambassador Andropov's assurances to the contrary, on November 1, Nagy announced Hungary's neutrality and withdrawal from the Warsaw Pact. He appealed to the United Nations and the Western powers for protection of its neutrality. Preoccupied with the Suez Crisis, the UN and the West failed to respond. The Soviet Union launched a massive military attack on Hungary on November 3. Some 200,000 Hungarians fled to the West. Nagy and his colleagues took refuge in the Yugoslav Embassy. Janos Kadar, after delivering an impassioned radio address on November 1 in support of "our glorious revolution" and vowing to fight the Russians with his bare hands if they attacked Hungary, defected from the Nagy cabinet; he fled to the Soviet Union and on November 4 announced formation of a new government. He returned to Budapest and, with Soviet support, carried out severe reprisals; thousands of people were executed or imprisoned. Despite a guarantee of safe conduct, Nagy was arrested and deported to Romania. In June 1958, the government announced that Nagy and other former officials had been executed.
Reform Under Kadar
In the early 1960s, Kadar announced a new policy under the motto of "He who is not against us is with us." He declared a general amnesty, gradually curbed some of the excesses of the secret police, and introduced a relatively liberal cultural and economic course aimed at overcoming the post-1956 hostility toward him and his regime. In 1966, the Central Committee approved the "New Economic Mechanism," through which it sought to overcome the inefficiencies of central planning, to increase productivity, to make Hungary more competitive in world markets, and to create prosperity to ensure political stability. However, the reform was not as comprehensive as planned, and basic flaws of central planning continued to stagnate economic growth. Over the next two decades of relative domestic quiet, Kadar's government responded to pressure for political and economic reform and to counter-pressures from reform opponents. By the early 1980s, it had achieved some lasting economic reforms and limited political liberalization and pursued a foreign policy which encouraged more trade with the West. Nevertheless, the New Economic Mechanism led to foreign debt in pursuit of economic stimuli for unprofitable industries.
Transition to Democracy
Hungary's transition to a Western-style parliamentary democracy was the first and the smoothest among the former Soviet bloc, inspired by a nationalism that long had encouraged Hungarians to control their own destiny. By 1987, young activists within the party and bureaucracy and Budapest-based intellectuals were increasing pressure for change; they launched an overt political movement called the Federation of Young Democrats (FIDESZ). The neopopulist national opposition established the Hungarian Democratic Forum. Civic activism intensified to a level not seen since the 1956 revolution. In 1988, Kadar was replaced as prime minister, and FIDESZ leader Imre Pozsgay was admitted to the Politburo. That same year, the parliament adopted a "democracy package," which included trade union pluralism; freedom of press, association, and assembly; a new electoral law; and a radical revision of the constitution, among others. A Central Committee plenum in February 1989 endorsed in principle the multiparty political system and the characterization of the October 1956 revolution as a "popular uprising," in the words of Pozsgay, whose reform movement had been gathering strength as communist party membership declined dramatically. Kadar's major political rivals then cooperated to move the country gradually to democracy. The Soviet Union reduced its involvement by signing an agreement in April 1989 to withdraw Soviet forces by June 1991. National unity culminated in June 1989 as the country reburied Imre Nagy, his associates, and, symbolically, all other victims of the 1956 revolution. In October 1989, the communist party convened its last congress, which ended with a substantial victory for the party's reform faction and a change in name to the Hungarian Socialist Party. In a historic session on October 16-20, 1989, the parliament adopted legislation providing for multiparty parliamentary elections and a direct presidential election. The parliament aimed to transform Hungary from a people's republic into the Republic of Hungary, to protect human and civil rights, and to ensure separation of powers among the judicial, executive, and legislative branches of government. It asserted the "values of bourgeois democracy and democratic socialism" and gave equal status to public and private property as a prerequisite for moving toward a market economy.
Principal Government Officials
President--Arpad GonczPrime Minister--Jozsef Antall (HDF) Minister of Foreign Affairs--Geza Jeszenszky (HDF) Ambassador to the United States--Pal Tar Ambassador to the United Nations--Andre Erdos The Hungarian embassy is located at 3910 Shoemaker St. NW, Washington, DC, 20008.


Hungary's first free, multiparty elections in more than 40 years were a milestone in the move toward a parliamentary democracy. In 1990, the Hungarian Democratic Forum (HDF) won 43% of the vote to 24% for the Alliance of Free Democrats (AFD). As a result, the HDF leader, Jozsef Antall, became prime minister and formed a center- right coalition government--with the Independent Smallholders' Party (12%) and the Christian Democratic People's Party (6%)--to command a 60% majority in the parliament. In addition to a small number of independents, the other parties represented in the parliament were the HSP, who gained only 8% despite their reformist credentials, and the Young Democrats (FIDESZ), who received 6%. The Antall coalition government has made substantial strides toward a reasonably well-functioning parliamentary democracy and is laying the foundation for a free market economy. The non- communist government formed by Prime Minister Jozsef Antall in May 1990 has made considerable progress toward transformation of the Hungarian economic system. Its stated objective is a "social market" system, in which the market mechanism would be the basic guide of economic activity and the state would provide an extensive safety net for the needy. The prime minister has full control over his cabinet. Under a checks-and-balances system, each cabinet nominee appears before four parliamentary committees in open hearings. The unicameral Hungarian National Assembly is the highest organ of state authority and initiates and approves legislation sponsored by the Prime Minister. A 15-member constitutional court has power to challenge legislation on grounds of unconstitutionality. There has been a growing sense of disillusionment and frustration among the populace, especially pensioners and the younger citizens, who have been seriously affected by the transition to a free market economy. Declining voter turnouts in the municipal and local elections in September 1990 (from 68% in the first round to 40% in the third) reinforced an appearance of growing apathy. Popular skepticism exists due to the perception that many "reformers" of the ex-communist nomenklatura began placing themselves in top jobs in "spontaneously privatized" state enterprises. Partisan disputes over the nature of transition, rising unemployment, inflation, and growing income disparities also have affected popular opinion. The widening gulf between the political parties and voters has raised fears of a social backlash, such as that sparked by the taxi drivers' civil disobedience action, which paralyzed the country for 3 days in October 1990.


Before World War II, Hungary had a predominantly agricultural economy. Following the standard Stalinist pattern, industrialization was forced on Hungary in the post-war period. Under communism, most economic activity was conducted by state-owned enterprises or cooperatives, although various small businesses were allowed to operate. Agriculture was collectivized, undoing the immediate post- war division of large estates among small peasant owners. Today, farms are being privatized, both to small holders and to agribusiness firms. In 1950, more than 50% of the labor force worked on the land; now, slightly less than 20% engages in agricultural activity. Recently, Hungarian agriculture has been generally self-sufficient and an important source of export earnings. Both the agricultural and industrial sectors have suffered from a lack of investment since the late 1970s. In the 1970s and 1980s, Hungary accumulated a huge foreign debt, largely to finance subsidies to consumers and to unprofitable state enterprises. Net foreign debt rose from about $1 billion in 1972 to about $20 billion in 1991, giving Hungary the highest per capita debt in Central Europe. Its repayment record, however, has been excellent. Changes introduced by the communist regime, particularly during its last 2 years, eased the transformation to a market economy. When Antall took office, 150 state enterprises already had been privatized under a "business transformation" law. Private firms had rights equal to those of state enterprises under a law on corporate association. A joint venture law was in place, and foreign companies had begun to invest in Hungary. A little-used bankruptcy law was in place. A value-added tax and a progressive personal income tax had largely replaced the former arbitrary levies on profits of state enterprises. The 1990 budget passed by the communist parliament had slashed the annual deficit by cutting subsidies while raising charges on fuel, cigarettes, and liquor. The Antall Government has encouraged the founding of private businesses and moved forward on privatization of state enterprises, putting most state assets into the hands of a new State Property Agency. Part or all of 429 companies have achieved privatization, perhaps one-fifth of the state enterprises designated for sale to private owners. This has addressed the abuse of the business transformation act by some state enterprise managers who had used it for personal gain. Also, open bidding now is required for any acquisition of a state enterprise. By the end of 1990, more than 15,000 private businesses were operating; 40% were active in construction. In 1990, more than 2,300 foreign firms were doing business in Hungary. The 1991 federal budget held the deficit to $1.1 billion and satisfied requirements for a 3-year program with the International Monetary Fund. The government cut all consumer subsidies and reduced the real value of subsidies to the remaining state enterprises. Subsidy cuts led to increases in the price of medicines, bakery products, sugar, rice, railroad and bus transportation, postage, telephone calls, water and sewerage services, electricity, coal, and gas. Charges on concessionary home mortgages were increased substantially. The deregulation of prices begun under the communist regime has been extended by the Antall Government; more than 90% of prices have been decontrolled. The reform effort incurs painful, immediate costs to achieve more productive use of economic resources and higher income in the longer term. Phasing out uneconomic activities and reducing exports to the former Soviet bloc helped lead to a decline in the gross domestic product (GDP) in 1991 that amounted, in real terms, to 10%. Unemployment rose from 1.7% of the labor force in 1990 to an average of about 12% in 1991.
Foreign Trade
Hungary has shifted much of its trade from its former Soviet-bloc partners to Western countries. In 1991, more than half of Hungary's trade was with Western countries; Germany now is Hungary's principal trading partner, providing only slightly less trade with Hungary than with all of the former Soviet republics. Trade with Russia has been further reduced due to declining oil exports to Hungary. Trade with the United States is increasing; total trade has risen from $52 million in 1990-91 to $120 billion in the first half of 1992, an increase of 128%. The US has extended to Hungary most-favored-nation status, Generalized System of Preferences concessions, Overseas Private Investment Corporation insurance, and access to the Export-Import Bank. The two countries have concluded a bilateral investment treaty and a business and economic treaty. In 1992, more than 400 US firms were operating in Hungary, an increase of 34% from 1991. Foreign concerns have invested about $4 billion in Hungary--more than half of all foreign investment in Central and Eastern Europe. The United States is the largest investor, with about $2 billion invested by mid-1992, followed by Germany and Austria. Foreign capital is attracted by low wages for highly skilled workers, generous tax incentives, favorable geographic location, fertile land, and knowledge of the market of the former Soviet bloc. Any Hungarian person or enterprise may engage in international trade now, and about 90% of imports have been freed from license restrictions.


Except for the short-lived neutrality declared by Imre Nagy in November 1956, Hungary's foreign policy generally followed the Soviet lead from 1947-89. During 1948-49, Hungary maintained treaties of friendship, cooperation, and mutual assistance with the former Soviet Union, Poland, Czechoslovakia, Romania, and Bulgaria. In 1950, it concluded a friendship treaty with the then-German Democratic Republic. It was one of the founding members of the Soviet-led Warsaw Pact and CEMA, and it was the first Central European country to withdraw from those organizations, both now defunct. Along with other European associates of the former Soviet Union, Hungary has been participating in East-West cooperation agreed upon at the 1975 Helsinki Conference on Security and Cooperation in Europe (CSCE). It has signed all of the CSCE follow-on documents since 1989. Hungary's record of implementing CSCE Helsinki Final Act provisions, including those on reunification of divided families, remains among the best in Eastern Europe. Relations with Romania, however, have deteriorated in recent years over charges of human rights violations against the ethnic Hungarian minority in Transylvania. Hungary has been a member of the United Nations since December 1955 and is a member of the 1992-93 Security Council. It is committed to strengthening ties with the West and with Japan and the newly industrialized countries of Asia. Prime Minister Antall also has expressed interest in joining the European Community. Early in his Administration, he visited Austria, France, Germany, Israel, Italy, Japan, United Kingdom, and the United States.


Hungary spearheaded the move leading to the dissolution of the Warsaw Pact Treaty Organization by its 17% reduction of defense expenditures and the demobilization of 9% of its force of 100,000 in January 1989. Renamed the Hungarian Home Defense Forces of Honvedseg, the military has undergone major restructuring in organization, orientation, and training. The services include the army, which is the largest, followed by the air force and a small naval contingent that patrols the Danube River. Young men become eligible at age 18 for 12 months of military service; 16-month alternate service in non-military institutions is available for conscientious objectors. On March 11, 1989, Hungary and the Soviet Union concluded an agreement under which the latter withdrew all 65,000 troops from the country in June 1991 and asked that Hungary compensate the former Soviets for the military bases they relinquished. Hungarian counter-claims charge that some of the bases were built without permission and do not conform to Hungarian building codes. Toxic wastes and other Soviet materials left behind at these bases constitute a serious environmental hazard and are the basis of another contentious issue with Moscow.


Relations between the United States and Hungary following World War II were affected by Soviet armed forces' occupation of Hungary. Full diplomatic relations were established at the legation level on October 12, 1945, before the signing of the Hungarian peace treaty on February 10, 1947. After the communist takeover in 1947-48, relations with Hungary were increasingly strained by the nationalization of US-owned property, unacceptable treatment of US citizens and personnel, and restrictions on the operations of the American Legation. During the difficult period following the Hungarian national uprising in 1956, relations continued to erode. Embassies were opened in 1966, and bilateral relations slowly but steadily improved after ambassadors were exchanged. In 1972, a consular convention was concluded to provide consular protection to US citizens in Hungary. In 1973, a bilateral agreement was reached under which Hungary settled the nationalization claims of American citizens. In 1976, Hungary paid its debt arrearages to the US Government in full, including those dating back to the post-World War I era. In 1977, an agreement on exchanges and cooperation in culture, education, science, and technology was concluded. In January 1978, the United States returned to the people of Hungary the historic Crown of Saint Stephen and other Hungarian coronation regalia that had been safeguarded by the United States since the end of World War II. Symbolically and actually, this event marked the beginning of excellent relationships between the two countries. A 1978 bilateral trade agreement included extension of most-favored- nation status. Cultural and scientific exchanges were expanded. Major US official cultural exhibits have been well received. In 1989, the United States and Hungary renewed a civil air agreement providing for direct service between New York and Budapest. Then, as Hungary began to pull away from the links forged by Soviet communism, the United States offered assistance and expertise to help establish a constitution, a democratic political system, and a plan for a free market economy. Between 1989 and 1992, the Support for East European Democracy (SEED) Act, provided more than $121 million for economic restructuring and private sector development. The Hungarian-American Enterprise Fund, capitalized at $65 million, offers loans, equity capital, and technical assistance to promote private sector development Hungarian-American joint ventures. Additional US assistance includes a $10-million energy sector grant and other technical assistance. Grants to the International Executive Service Corps, MBA Enterprise Corps (composed of recent recipients of Master of Business Administration degrees), and the Center for International Private Enterprise helps these non- governmental organizations provide expertise directly to private enterprises. The US Environmental Protection Agency and the Environmental Law Institute assist the Ministry of Environment and the Hungarian Parliament in drafting the country's first environmental legislation. Other issues receiving attention include health care, employment, housing, education, and small business development. About 120 Peace Corps volunteers throughout Hungary work to improve English language training and environmental awareness.
Principal US Officials
Ambassador--Charles H. ThomasDeputy Chief of Mission--Richard L. Baltimore IIIPress/Cultural Affairs--Donna CulpepperPolitical-- Thomas B. RobertsonEconomic--Charles EnglishCommercial--Gary GallagherScience Attache--Lawrence CohenAdministrative--Mary Jane Thomas Consul--Arnold Haskin CampbellDefense Attache--Col. John ConcannonAID Director --David Cowles The US embassy in Hungary is located at Szabadsag Ter 12, Budapest (tel. 112-6450). Further InformationAmerican University. Area Handbook for Hungary. Available from the Superintendent of Documents, US Government Printing Office, Washington, DC 20402: For information on economic trends, commercial development, production, trade regulations, and tariff rates, contact the International Trade Administration, US Department of Commerce, Washington, DC, 20230, or any Commerce Department district office. For information on business opportunities, call the Commerce Department's East European Business Information Center at (202) 377-2645.


No visa is required for visits up to 90 days. Visitors are encouraged to register at the US Embassy. There is no limit on the amount of hard currency that may be brought into Hungary. However, travelers are required to declare upon entry any foreign funds in their possession to facilitate re-export of the funds upon departure. Immunization requirements are generally those of Western Europe.
Climate and clothing:
Budapest's climate is temperate, with seasons of almost equal length.
Services and medications are widely available and generally adequate, although of a different standard from that in the United States. Tapwater is potable. Raw fruits and vegetables are safe to eat. Avoid unpasteurized milk.
Telephone and telegraph services are readily available at standard international rates. Hungary is 6 hours ahead of Eastern Standard Time.
Tourist attractions:
Budapest is the country's leading tourist attraction, especially for its museums, historic houses and buildings of the "Var" (Royal Castle) area overlooking the Danube River. Roman ruins are located at Aquincum in suburban Budapest and other parts of Transdanubia (Pannonia). The remains of the Renaissance palace of the Hungarian kings at Visegrad on the Danube bend are of great historic and cultural interest. Many Europeans visit Lake Balaton, Central Europe's largest lake, for fishing, swimming and sunbathing. Thermal baths are located throughout the country. The Hungarian Puszta or "Great Plain" in the east is interesting for its wildlife.
National holidays:
Businesses and the US Embassy may be closed on the following Hungarian holidays: New Year's Day--January 1--Commemoration of 1848-49 Revolution--March 15--Easter Monday-- date variesLabor Day--May 1--National Day (St. Stephen's Day--August 20--Commemoration of 1956 Revolution--October 23Christmas Day-- December 25--Boxing Day--December 26


Published by the United States Department of State -- Bureau of Public Affairs -- Office of Public Communication -- Washington, DC Editor: Joan Bigge -- Managing Editor: Peter Knecht Department of State Publication 7915 Background Notes Series -- This material is in the public domain and may be reprinted without permission; citation of this source is appreciated. For sale by the Superintendent of Documents, US Government Printing Office, Washington, DC 20402. Contents of this publication are not copyrighted unless indicated. If not copyrighted, the material may be reproduced without consent; citation of the publication as the source is appreciated. Permission to reproduce any copyrighted material (including graphics) must be obtained from the original source. (###)