Page 6 - CE Outlook Regions 2023

also accentuating tensions in the ruling coalitions, with Estonia’s Prime
Minister Kaja Kallas reconstructing her government in June and the
Slovak coalition being brought down by a vote of no-confidence in
mid-December.

But the risk of a new populist wave in Central Europe is limited, given
that only in Slovakia is there a real danger of populist parties seizing
power this year. Former premier Robert Fico could return to power at
snap elections sometime in the middle of the year, but his left-wing
nationalist Smer party will struggle to find allies.

In Estonia, the radical right-wing EKRE party is expected to do well in
April’s general election, but Kallas’ Reform Party is still far ahead in the
opinion polls.

In Czechia, polls indicate “centrist populist” Andrej Babis would lose the
run-off of this month’s presidential two-round election to either of the
two main government-supported candidates.

Moreover, this cost of living crisis may not necessarily benefit the
existing radical right-wing governments in Hungary and Poland,
precisely because they are the ones that are struggling to cope with it.
Populist governments such as Hungary's were among the worst
performers in the COVID-19 pandemic, and they are now being found
wanting by the current cost of living crisis.

In fact the country facing the gravest economic challenge is Orban’s
Hungary itself, with the forint the worst performing European currency
last year.

Orban is now in a very weak position to protect Hungarians’ living
standards because his pre-election spending spree had already pushed
up inflation and blown out the budget deficit.

According to ING, “high levels of public and net foreign debt, combined
with fiscal and current account deficits potentially raise concerns about
medium-term sustainability, especially in an environment of rising
interest rates”.

Hungary’s future economic stability will now depend on fulfilling the
milestones to release EU funds, the flow of which will narrow the budget
and external deficits and boost the economy and international
confidence in the forint. But if the European Union maintains its
surprisingly tough stance and the milestones actually work properly,
these reforms will also start to undermine Orban’s semi-authoritarian
regime, making the country’s future political ‘stability’ much more
interesting and the next elections potentially much fairer.

6 CE Outlook 2023 www.intellinews.com