BACKGROUND PAPER ON HUNGARY FOR DCI MEETING WITH THE AMBASSADOR TO BUDAPEST, 2 OCTOBER 1986

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T01017R000404340001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 3
• Document Creation Date: December 22, 2016
• Document Release Date: April 5, 2011
• Sequence Number: 1
• Publication Date: October 1, 1986
• Content Type: MISC

Sanitized Copy Approved for Release 2011/04/05: CIA-RDP86T01017R000404340001-5 25X1
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Party leader Janos Kadar largely succeeded in healing the
wounds of 1956 and made Hungary a model of stability and
prosperity in Eastern Europe. He has done this by forging a
social consensus based on consumerism and relaxed relations
between the party and the people. The consensus is now fraying,
however, largely as a result of economic stresses and an
impending succession.
Background Paper on Hungary for DCI Meeting with the
Ambassador to Budapest, 2 October 1986
Domestic Issues
Hungarian society is permeated by a sense of political
confusion and ideological contradictions. Hungarians complain
openly about drift in policymaking and a lack of leadership.
The 74-year-old Kadar
=remains in charge. He has been gradually cutting back
his routine, day-to-day burdens, however.
25X6
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o I (Kadar is trying to
promote a collective leadership to assure a smooth
transition of power.
o There is no clear ideological consensus on public
policies. Even within the party, opinion is divided over
the doctrinal legitimacy of such things as private
boutiques and prices that are linked to market forces.
Some leaders contend such problems as growing inflation
and income inequalities are products of Hungary's
market-oriented reforms, while others argue that piecemeal
implementation is to blame for the continuing economic
troubles. The leadership appears unable to agree on the
pace and scope of further reform.
Economic Problems
Top economic policymakers have publicly expressed increasing
concern about economic prospects, perhaps in an effort to prepare
the population for hard times ahead.
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o Hungary's economic growth has been among the lowest in
Eastern Europe in recent years and living conditions have
stagnated. Hungary faces the possibility of no growth
this year and planners are scaling down goals for 1987.
o Nevertheless, Budapest continues to have good access to
foreign credit. Although the foreign debt currently
appears manageable, its steady rise has made Budapest
increasingly vulnerable to changes in the lending climate.
o Prospects of reversing the slowdown are clouded by Soviet
trade demands--which may limit resources available for
domestic investment--Hungary's aging industrial base, and
leadership indecision on reform.
Increasing Social Tensions
As economic stresses worsen, popular tensions are likely to
increase, making it more difficult to preserve the social
contract forged by Kadar.
o Urban industrial workers appear particularly resentful.
Unconfirmed reports of strikes have reached the West, and
workers voiced unprecedented criticism of the ailing
economy and feeble union performance at the trade union
congress earlier this year.
o Unusually forceful suppression of youth and dissident
protest this spring reflects regime worry about the
potential for wider unrest and may presage a hardening of
Budapest's internal policies.
Foreign Policy
Budapest has been pursuing its national interests more
assertively since about 1980.
o Budapest contends that small states have a role to play in
finding solutions to East-West problems.
o Moscow is concerned that Hungary not become too dependent
on the West but also endorses some Western ties because of
the access they provide to modern technology and to sow
divisions between Western Europe and the US.
Despite its dialogue with the West, Hungary remains loyal to
the USSR on all major issues.
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I I
Background Paper on Hungary for DCI Meeting with the Ambassador
to Budapest, 2 October 1986
Orig - DCI
1 - DDCI
3 - DCI-DDCI Executive Staff
1 - Executive Registry
1 - DDI
1 - D/EURA
4 - IMC/CB (7G07)
1 - Production Staff
1 - AC/EURA/EE
1 - C/EURA/EE/CE
1 - Analyst for Sourcing
1 - Political Analyst
1 - Economic Analyst
1 - Production
1 - EURA/EE (Chrono)
1 - EURA/EE/CE (Chrono)
Sanitized Copy Approved for Release 2011/04/05: CIA-RDP86T01017R000404340001-5