168. Intelligence Assessment Prepared in the Central Intelligence Agency1

Hungary on the Eve of the 12th Party Congress [classification not declassified]

Key Judgments

At the 12th Congress of the Hungarian Socialist Workers Party, scheduled to begin on 24 March, First Secretary Janos Kadar will seek endorsement of current policies rather than undertake new ones.

As Hungary enters the 1980s, Kadar must draw heavily upon the reserves of popular trust he has established during 23 years of rule. Public confidence in Kadar’s leadership, probably unparalleled in other Warsaw Pact countries, rests upon his responsiveness to the demands of Hungarian consumers and to his use of compromise and moderation rather than repression to maintain political control. Compromise and moderation have been particularly evident in Kadar’s handling of intellectuals and, in recent years, in his relations with the Catholic Church.

Major challenges confront Kadar in the area of economic policy. To improve Hungary’s hard currency balance of payments, the regime [Page 503] will continue to curtail economic growth and allow the standard of living to stagnate. It will also continue to implement an economic reform plan that entails relaxation of central controls and greater reliance on market forces. Prices, which are flexible and in many cases market determined, are to be generally responsive to world price changes. Enterprises have received greater freedom to determine wages and discharge workers; they will retain a substantial portion of their profits but will no longer be immune from bankruptcy.

In the conduct of foreign policy, Kadar has managed to secure from Moscow a degree of latitude that surpasses that of any other Warsaw Pact state except Romania. He has done this by adhering closely to the Soviet line on issues the USSR considers most important while cultivating better relations with the West, particularly in the commercial sphere. Kadar appears to retain the confidence of Soviet leader Brezhnev, who said in Budapest last May that recognition of the “specific features” of each country had become the “norm” in Soviet-Hungarian relations.

Notable benefits have come from improved relations with the United States. The Kadar regime gained politically from the US decisions to return the Crown of St. Stephen—the symbol of Hungarian nationhood—and to grant Hungary most-favored-nation trading status.

The months ahead will test Kadar’s ability to maintain both his domestic and foreign policies. Complex economic problems will confront those charged with implementing reform; public apprehension and resentment over stringent economic measures will tax the ability of the regime to maintain popular confidence; if the international situation continues to deteriorate, Kadar may find it increasingly difficult to accommodate Soviet sensitivities while maintaining positive relations with the West.

[1 line not declassified]

[Omitted here is the body of the assessment.]

  1. Source: Central Intelligence Agency, Office of Support Services (DI), Job 81T00208, Production Case Files (1979–1980), Box 2, Folder 24, Hungary on the Eve of the 12th Party Congress. Secret; [handling restriction not declassified]. The assessment was prepared in the Office of Economic Research and coordinated with the Office of Central Reference and the National Intelligence Officer for the USSR and Eastern Europe.