The Transition

By 1988, Kádár was substituted as the general secretary of the Comunist Party. Since that moment, Hungary started the way to the democracy. In 1989, the parlament aproved some policies in order to achieve this objective, as a new electoral law, the release of the liberty of expresion or the modification of the constitution. They wanted to enforce their relations with occidental states of Europe through the European Union by implementing reforms to modify its economy. Due to the the start of a multiparty system, the comunism in Hungary lost the power that they had years ago. In 1989, the Soviet Union signed a treaty where it accepted to remove military forces in Hungary in june of 1991. In october of 1989, the Comunist party convened its last congress and the parlament aproved a direct face-to-face election process, the multiparty elections, a new institutional structure and the warranty of human rights between some other changes. This was the consequence of a new bad situation of the economy taken advantage of by the opposition. It can be considered the beginning of the Transition period.

In economic terms, the new government set up the free market in Hungary, with a good acceptation from their citizens, but the gross domestic product reached by Hungary wasn´t enough to compensate the production consumed by their citizens. This situation supposed the first indebtedness of the new government because of the imports from other countries. With this recession, the hungarian government initated the privatization of the economy and the application of a strict budgetary discipline to fight against the inflation in the state. In 1995, they aproved a law to privatized the telecomunications, the industry, the banks and the gas. Thanks to these measures, Hungary reduced its defict to the 3.1% of the PIB in 1996. It also had efects in the unemployment rate by reducing it from a 10.4% in 1995 to a 10% in 1996.

This consolidation of the economy took place more significantly in the years 1996 and 1997, when they had an increase of the growth from 2.3% to a 11.1% in 1997. The PIB kept growing in the following years and in 1998, the government finished the privatizing of the banking sector. Hungary went form the economic instability in the early years of the transition to a good economic growth during the consolidation of the system.

After the disolution of the Soviet Union, Hungary enforced its links with occident by entering in the OTAN in 1999 and in European Union the first of may of 2004. The joining in the EU supposed not only the suppression of the customs barriers between the member states, they also achieved a new reorganization of the grants thanks to the Common Agricultural Policy (CAP).