By Marton Dunai
BUDAPEST (Reuters) - Hungarian Prime Minister Viktor Orban's authoritarian ways have alarmed international partners and put off millions of voters, but he is on track for reelection next year due to a standoff between two would-be challengers from the left.
The "peacock dance" within Hungary's leftist opposition has prevented it from capitalizing on deep dissatisfaction in the recession-hit central European country, whose government has been accused of chipping away at European democratic standards.
In a reversal of the usual trend, Hungary's leftists are greater advocates of liberal, free market policies than Orban's conservatives, who have rejected aid from the International Monetary Fund, nationalized pension assets and taxed banks and other large businesses to pay for income tax cuts.
Orban, who has also overseen laws critics say threaten the independence of the media and judiciary, is arguably the strongest incumbent in Hungary's post-Communist history, with a disciplined and well-resourced party machine.
That machine has already begun to move. Seeking to protect its large parliamentary majority in next year's election, Fidesz sent activists out around the country in March to collect signatures in support of a household energy price cut.
The paid activists, some clad in the trademark-orange windbreakers of Orban's center-right Fidesz party, set up stalls and chatted to passers by despite the biting cold. Scores of people queued to ask about the program and sign their support.
"A lot of people come, asking whether the utility price cut will work ... Most of them are aged 60, 70, 80, and they just want the Commies out of here," said Gyorgyi Balogh, working a stall between a subway exit and a market hall in Budapest.
Nothing of that sort is visible on the left, where Attila Mesterhazy, chairman of the Socialist Party which evolved from the communists who ruled Hungary from 1956-1989, is competing for the leadership against former Prime Minister Gordon Bajnai.
"The split is really deep," said Zsuzsanna Panyi, a 65 year-old pensioner from Budapest who bets Orban will win reelection. "Their interests might force them to find common ground before the elections, but they are still far apart I think."
Mesterhazy, a flamboyant 39-year-old, runs the Socialist Party with a similar grip that Orban has on Fidesz, if not quite as firm. He lacks Orban's raw charisma, but got a crowd of 12,000 people to their feet at a party event in March to promote the Socialists, who see themselves as Orban's natural opponents.
Bajnai, 45, has a reputation for a no-nonsense business management style and leads his breakaway leftist party, E14, in a more consensual way. Many E14 supporters consider the Socialists relics of the past whose recent reforms have done little to erase the image of corruption and inefficiency.
Bajnai is a less effective public speaker than Mesterhazy but has credibility from his time as Socialist prime minister between 2009 and 2010, when he introduced painful spending cuts to put Hungary's economy back on a sustainable path.
Since taking power, Orban has struggled to lower Hungary's debt, the region's highest, and used unconventional measures like Europe's heaviest bank tax to keep the deficit under the European Union ceiling of 3 percent of gross domestic product.
With unemployment stuck above 10 percent and the economy in recession, Orban has ignored international complaints about central bank independence, appointing former Economy Minister Gyorgy Matolcsy, a close ally, to lead it and help boost growth.
Although Orban, 49, has yet to outline a clear program for a possible second term, his policies so far suggest he is likely to strengthen state participation in key sectors like banking or energy and focus on productive industries to boost job growth.
The leftist parties plan to introduce a more progressive tax system, gradually undo some of Orban's taxes on large companies and restore democratic checks and balances on government power.
Although neither Mesterhazy nor Bajnai will say it openly, they both want to be prime minister, sources on both sides told Reuters. Their policies are similar, but neither is willing to play second fiddle, and their positions are quickly calcifying.
Former Prime Minister Ferenc Gyurcsany says the left needs a set of rules to choose either Mesterhazy or Bajnai - or face certain defeat by Fidesz. His small center-left Democratic Coalition party will back either, he told Reuters.
"What we have now is tactical warfare, a peacock dance if you like," Gyurcsany said. "There is no tried mechanism that would clarify how things will play out. If we agree on a playbook then it's easy, but both men are in primary mode now."
Csaba Toth, director of the political think tank Republikon Institute agreed the situation could be compared to the U.S. primaries, but with no rules of engagement and no deadline.
"They are not fighting over whether to unite to beat Mr. Orban - they are fighting over who should lead this united front, and the two main contestants are Attila Mesterhazy, leader of the Socialists, and Gordon Bajnai."
Both Mesterhazy and Bajnai told Reuters they expected to join forces sometime later this year, after standalone campaigns to boost their own standing with voters first.
If they leave it too long they may be too late: according to the constitution, elections must be held in April or May 2014 and a new one-round electoral system passed earlier this year means only a strong challenger can beat a strong incumbent.
"They must unify because of the way the system is built," Political Capital analyst Attila Juhasz said. "There is no need for any other reason, this alone will force a coalition."
The leftist parties have never recovered from their crushing defeat by Fidesz at the 2010 elections, and their lag has widened in recent opinion polls, even though some three-quarters of the electorate believe the country is on the wrong track. A huge portion of those voters remain undecided.
"Nobody can come to replace Orban," said Margit Kiraly, a 68 year-old retiree who was doing her weekend shopping at a Budapest market hall. "I'm not saying it's all milk and honey but the direction is good, something has begun."
Others agreed the Socialists had been less than perfect but added they were even less happy with Orban.
"I never fully supported the Socialists but they were better than this, and one expects improvement in a democracy, not getting less and less like we do now," said Tibor Farkas, a 45 year-old construction worker, who subsists on odd jobs.
International criticism of the government was necessary, he said, because it would not listen to anyone at home.
"The system we have now looks a lot like a single party state," he said. "These guys are in power, and nobody has a say in what happens. They exclude everyone, even the EU. Why did we join then, I might ask?"
Fidesz easily passed a conservative new constitution and laws that boost its power beyond its mandate, alarming foreign partners about Hungary's democratic commitments.
But street protests launched by the left each time Orban extended his influence over state institutions seemed meek in comparison to massive "peace marches" called by Fidesz to stand up against what it called "colonization" efforts by the West.
DIVIDING THE CAKE
The Socialists watched Bajnai with alarm as he unfurled the flag of a wide opposition alliance at a huge rally on Hungary's October 23 national holiday last year, inviting everyone, including the Socialists, to join.
Several small opposition groups declared their support at once and E14 - not yet a political party - suddenly appeared on track to become the single platform needed to take on Orban.
But instead of joining, the small green-liberal party Politics can be Different (LMP) split over the issue and the Socialists, led by Mesterhazy since 2010, stayed away.
Bajnai and Mesterhazy avoid attacking each other openly, instead seeking the upper hand through competing initiatives.
Mesterhazy responded to Bajnai's invitation to join the E14 umbrella by inviting Bajnai for Socialist-initiated talks on an election program and saying it was a pity Bajnai had not come.
Bajnai said he would take his party's program to voters, calling it premature to talk with the Socialists except on legal and constitutional matters.
When pressed he said he would step back from the top job if Mesterhazy proved he was better suited to lead the alliance. "Competition, personal ambitions, and institutional interests are natural," he said. "But we must not let them prevent us from reaching our final goal."
To secure a better bargaining position, E14 aims to reach about half of the Socialists' support with a national campaign that will ramp up this month, people who know the party's strategy said. It expects to be a junior partner in any coalition but with a strong role in a joint government.
The Socialists are considering a majority role in a coalition, according to conversations with several party insiders, but are also considering going it alone, aware they can claim the protest vote if they far outweigh E14.
Asked about the chance the Socialists may be unable to win on their own, Mesterhazy said: "We don't know that. (But) we are preparing for cooperation."
Tibor Szanyi, a board member of the party and one of only two Socialists MPs who hold a local seat nationwide, said there were several ways to hammer out a deal with Bajnai and E14 and thousands of jobs to hand out in an eventual ruling coalition.
"The cake is quite big, and we can easily divide it into as many slices of various sizes as we want," he said. "It's not a diabolical exercise, and it does not have to be done right now."
(Additional reporting by Krisztina Than; editing by Philippa Fletcher)