In light of the opposition’s weakness, the government has chosen to go after new opponents: the working middle-classes. The effective nationalisation of mandatory private pension funds has aroused the ire of even many Fidesz-loyalists in this group, in which the governing party has been popular. Despite the anger, the government can reclaim loyalties in hazard.

What many suspected had been the government’s plan all along finally happened last Wednesday. In what essentially amounts to a privatisation of most of the wealth accumulated in private pensions funds, Minister of the Economy György Matolcsy has announced that those with accounts in the formerly mandatory private pension funds would have to make a choice by the end of January 2011: if they choose retain these accounts, they would lose a significant portion of their state pension entitlements. Alternatively, they could “choose” to put the money in their accounts back into the state’s coffers, in essence consenting to a nationalisation of their private accounts.

To tilt the ease of choice towards those who will decide for the public option, Matolcsy’s plan further provides that this is the default option – in other words those who do not expressly and in person request the opposite will see their private accounts diverted to the state. With so little time, so much uncertainty, and the risk of forfeiting much of their overall pension entitlements, few people will opt to retain their private accounts.

Policy Solutions' analysis on the nationalisation of Hungarian private pension funds can be downloaded from here.