Danubian Deficit Drama

It's not only Italy that faces a certain drama as it goes to the polls on Sunday.

This will also be the day of the first round of the Hungarian parliamentary elections.

For a long time opposition centre-right Fidesz had a commanding lead in the opinion poll.

But during the election campaign the ruling Socialists - descendents of the old Communists - have gradually improved their standing and the latest opinion polls allowed showed them with an extremely marginal lead.

It was 32 versus 31% - well within any margin of error. And it was more than a week before polling day.

In fact, the outcome might well be decided by which of the minor potential coalition parties that manages to pass the 5% threshold. The Socialists rely on their present coalition partner Free Democrats, and the opposition on the Hungarian Democratic Forum MDF.

If the Italians should be genuinely worried about their deficit situation, the Hungarians should be positively alarmed.

Their budget deficit is now approaching 9% of GDP after an avalanche of spending by the Socialist government. At the same time, it continues to claim that it intends to meet the Maastricht criteria and join the Euro currency by 2010.

That's hardly credible. It would require a very substantial fiscal tightening. And the election campaigns have given no indications of such. Instead the Socialists have promised to raise all wages by 25% during the next four years.

Populism is what such things are normally called. Certainly not responsible politics.

This could spell a rather rough ride for Hungary during the next few years.

If markets lose faith in the Euro possibilities of Hungary, at the same time as money on the international markets will be less cheap, the country might well be heading for a repetition of its 1995 financial crisis.

There are strong reasons to keep a watchful eye on the populist tendencies in the different ongoing elections.

Italy is certainly worrying - but it looks far worse by the Danube.