Hongaarse premier Medgyessy treedt af (en)

Hungary's government is in political crisis after Prime Minister Peter Medgyessy stepped down on Thursday (19 August).

Mr Medgyessy is likely to be replaced by Peter Kiss, a former labour minister and a senior figure in the ruling Socialist party, according to Reuters.

Tensions between the two ruling groups in the Hungarian government (Socialists and Liberal Free Democrats) grew in recent weeks and on Wednesday (18 August) the prime minister sacked three ministers, including Economics Minister Istvan Csillag from the junior coalition party, the liberal Free Democrats.

The government has been divided over how to best govern the country after joining the the European Union on 1 May.

In particular, the government's budgetary priorities has been a source of tension.

Speculations are now rife about whether Finance Minister Tibor Draskovics - a close ally of the Prime Minister - will also leave office. The two politicians have been seen as guarantors of the fiscal discipline needed to bring Hungary into the euro zone.

The Socialists lost heavily in June's European Parliament elections and many in the party want to see a more popular economical policy to catch up with the opposition conservatives, poised to win the next election in 2006.

Slim majority

If the Socialists and the Free Democrats manage to keep together, they can count on having a slim 10-seat majority in the vote to approve a new prime minister scheduled for 6 September.

The Socialist party might also be able to continue as a minority government until next elections in 2006. The Free Democrats hold four ministry positions but only 20 seats in the 386-seat parliament.

The conservative Fidesz was recently polled to get 37 per cent of the votes, while the Socialists could get around 20 per cent.