Business Hungary

Long the economic leader of the former Eastern Bloc, Hungary suddenly finds itself in the throes of a painful retrenchment while its government beats down suggestions that it is becoming the Mexico of Eastern Europe. Although Hungary has drawn nearly half the foreign investment in the region since 1989, huge foreign debts and a massive budget deficit forced the government on March 12 to announce an immediate 9% currency devaluation and deep cuts in social welfare benefits.

At first, it seemed that something got lost in the translation. When the Bush Administration and Congress set up "enterprise funds" in Hungary, Poland and Czechoslovakia, they envisioned an Eastern European equivalent of venture capital operations, selectively planting investments that would grow into thriving businesses.

This East European nation took a major step along the capitalist road Thursday with a splashy reopening of the Budapest Stock Exchange, where the "big board" can display only five listings and where Hungarian buyers, who have no checkbooks, pay with satchels full of cash. The rebirth of Western-style trading after a 42-year shutdown was highlighted by listing of the state-owned Ibusz travel network, the first major Hungarian enterprise to begin privatization with a public share issue.

A Hungarian proverb holds that when a listing rider attempts to right himself in the saddle, he usually falls off the other side of the horse. And this, liberal politicians say, is what has happened to Hungary's drive to transfer state-run industries to private ownership: First the government gave away the store, and now it is wary of all foreign investment, the key to economic recovery.

A lot of Hungarian companies are looking for foreign partners these days, but probably few are as prosperous as Zoltan Wlassics' Kandelaber Ltd., based in this village a few miles north of Budapest. Unlike many of those other companies, Wlassics has enough of his own money to expand his decorative lamp and cast iron business.

In the bowels of the city, polyester sticks to sweaty skin and buses belch exhaust. But on a hillside patio high above the traffic's din, the afternoon breeze wafts the fragrance of apricots through the air. A servant glides silently, bearing mineral water in crystal pitchers and trays piled high with finger sandwiches.

The champagne bar in one corner of Istvan Kosa's jewelry and crystal shop is a big hit with Austrian men dragged along by their wives on cross-border bargain hunts. "You see, it's good for my business if the women feel they can spend as long as they want trying on different necklaces and rings. But the husbands usually get very bored," explains the private businessman, who opened his dual-purpose boutique along Sopron's main shopping street in late May.

At first, it seemed that something got lost in the translation. When the Bush Administration and Congress set up "enterprise funds" in Hungary, Poland and Czechoslovakia, they envisioned an Eastern European equivalent of venture capital operations, selectively planting investments that would grow into thriving businesses.

The champagne bar in one corner of Istvan Kosa's jewelry and crystal shop is a big hit with Austrian men dragged along by their wives on cross-border bargain hunts. "You see, it's good for my business if the women feel they can spend as long as they want trying on different necklaces and rings. But the husbands usually get very bored," explains the private businessman, who opened his dual-purpose boutique along Sopron's main shopping street in late May.

This East European nation took a major step along the capitalist road Thursday with a splashy reopening of the Budapest Stock Exchange, where the "big board" can display only five listings and where Hungarian buyers, who have no checkbooks, pay with satchels full of cash. The rebirth of Western-style trading after a 42-year shutdown was highlighted by listing of the state-owned Ibusz travel network, the first major Hungarian enterprise to begin privatization with a public share issue.

A Hungarian proverb holds that when a listing rider attempts to right himself in the saddle, he usually falls off the other side of the horse. And this, liberal politicians say, is what has happened to Hungary's drive to transfer state-run industries to private ownership: First the government gave away the store, and now it is wary of all foreign investment, the key to economic recovery.

It smells like medicinal herbs, comes in a round green bottle emblazoned with a red cross and is said to cure everything from hangovers to the malaise that afflicts deal-making Hungarian businessmen after too hearty a lunch of chicken paprikash. It is Unicum, the 84-proof liqueur so hallowed that the Roman Catholic archbishop of Hungary keeps the secret recipe locked up in his basement safe.

It smells like medicinal herbs, comes in a round green bottle emblazoned with a red cross and is said to cure everything from hangovers to the malaise that afflicts deal-making Hungarian businessmen after too hearty a lunch of chicken paprikash. It is Unicum, the 84-proof liqueur so hallowed that the Roman Catholic archbishop of Hungary keeps the secret recipe locked up in his basement safe.

Long the economic leader of the former Eastern Bloc, Hungary suddenly finds itself in the throes of a painful retrenchment while its government beats down suggestions that it is becoming the Mexico of Eastern Europe. Although Hungary has drawn nearly half the foreign investment in the region since 1989, huge foreign debts and a massive budget deficit forced the government on March 12 to announce an immediate 9% currency devaluation and deep cuts in social welfare benefits.

When Hungary's newly elected Parliament convenes for the first time today, it will attempt to set the record straight on 40 years of thwarted history and point the nation on a course that heads directly West. By unanimous agreement among the six main parties represented in Parliament, its first action will be to rewrite history so that the failed 1956 Hungarian uprising against Soviet domination will henceforth be portrayed as a "war of independence."

A lot of Hungarian companies are looking for foreign partners these days, but probably few are as prosperous as Zoltan Wlassics' Kandelaber Ltd., based in this village a few miles north of Budapest. Unlike many of those other companies, Wlassics has enough of his own money to expand his decorative lamp and cast iron business.