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Europe

Schröder Promotes Ties with Hungary

German Chancellor Gerhard Schröder has arrived in Hungary for an official two-day state visit. He's accompanied by a delegation of business and science leaders pushing for deeper economic and political ties.

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Germany's chancellor will spend two days in Budapest

Schröder is visiting Hungary on the occasion of the 15th anniversary of the date Hungary opened its borders to East Germans and allowed them to leave to the West -- a development that created an extremely positive new dimension in West Germany's ties with the then-Eastern Bloc nation.

Earlier this year, former German President Johannes Rau spoke of the importance of that development during a visit to Budapest.

"We owe an awful lot to Hungary ... If Hungary hadn't shut off its electrical fence on May 2, 1989, which allowed many from the DDR to come to West Germany, the developments in Prague on Sept. 20 wouldn't have happened and the (Berlin) Wall wouldn't have fallen on Nov. 9," Rau said. "In some respects, the Hungarians were the intiators of German unity."

For a long time, the Magyars would have been thankful for a few handouts from Germany. But the burdens of German unity and the costs of rebuilding the East German infrastructure left little room for German financial aid to the Hungarians.

A visit with new prime minister designate

Still, relations between the two countries have developed positively. There are no major sticking points between the countries, and Schröder can look forward to a relaxing trip aimed at deepening the countries' political, economic and scientific cooperation.

Schröder mit Medgyessy in Ungarn, Staatsbesuch

German Chancellor Gerhard Schröder (right), and outgoing Hungarian Prime Minister Peter Medgyessy

Schröder will be meeting with outgoing Hungarian Prime Minister Peter Medgyessy, who announced his resignation in August following a government coalition crisis, as well as his nominated successor, Ferenc Gyurcsany. The 43-year-old shooting star of the Socialists is expected to be confirmed as prime minister by parliament at the end of the month.

Like the political developments between Germany and Hungary, business ties are also both strong and dynamic. Currently, Germany is Hungary's most-important trading partner -- a position that could further grow with Hungary's European Union membership, which came into effect on May 1.

Germany is also an important foreign investor in Hungary. Since 1989, German companies have invested over €12 billion ($14.6 billion) in Hungary, representing 55 percent of all foreign investment and creating more than 200,000 jobs.

Hungary has an abundance of red tape

Nevertheless, German companies don't shy away from the fact that Hungary has become less attractive for business.

The country has continually failed in efforts to trim red tape, and there is also a lack of educated workers. Additionally, salaries have risen by 50 percent since 2002 and the exchange of Hungary's currency, the forint, has been a roller coaster ride since June 2003.

Worse yet, contradictory statements about the country's currency exchange rates and inflation goals and a lax fiscal policy have engendered considerable uncertainty.

But these facts have not been lost on Gyurcsany, who has said making Hungary more attractive to foreign investors will be a priority.

"In my opinion, it's important that the country's economic policy reflect stability and calm so that Hungary can continue to be a goal for foreign investors," he said.

Despite some tougher times in recent months, most of the 54 German companies active there are satisfied with Hungary as a place for doing business. Indeed, many are planning additional investments -- a good basis for deepening economic ties between the two countries. And on his visit on Wednesday, Schröder will make that his priority.

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