UPDATE 4-Belgium breaks deadlock over EU-Canada free trade pact
* German trade group complains of "political hostage-taking" (Adds Canadian government reaction)
BUDAPEST For Hungarians queuing up to work abroad, the government's promise to achieve a "fairy tale" of national prosperity soon is precisely that - more a fantasy than a realistic possibility.
At least 300,000 Hungarians work in western Europe, according to government estimates, apparently unpersuaded that conservative Prime Minister Viktor Orban's go-it-alone and often unpredictable policies can solve the nation's problems.
Those still in Hungary are convinced neither by Orban's unconventional style of economics and politics, which has led to conflict at home and abroad, nor by a weak opposition. An Ipsos opinion poll last month showed 53 percent of voters - or 4.2 million people - had no party preference whatsoever.
Fiercely independent, Orban has upset at one time or another the European Union, the International Monetary Fund, the government of Armenia and - at least indirectly - NATO. With the domestic opposition he remains constantly at loggerheads.
Miklos Zelko, a 24-year-old unemployed joiner, is one of the many Hungarians who cannot wait to see if Orban's unorthodox attempts to pull the country out of recession and create badly needed jobs will work.
Zelko was among a group of young Hungarians in central Budapest waiting recently to be interviewed for work on the cruise ships which carry mostly wealthy, elderly western European tourists along the continent's great rivers.
"Things don't work where I am from," said Zelko, who comes from the western Hungarian town of Zalaegerszeg.
After failing to find a job at home, he is placing his bets on a better future outside the country. "I'm still young and for a few years I'd like to do this to earn money, to have some financial security," he said before his interview for a job washing dishes on one of the boats plying the Danube and Rhine.
Gabriella Kiss, the owner of job agency KG International, says more and more people aged from 20 to 35 are leaving the country of 10 million for better opportunities abroad.
"Many believe the world is out there waiting for them and they will earn lots of money with little work, but that's not the way things are abroad ... it's important to know that money does not grow on trees (there either)," Kiss said.
A FAIRY TALE TO COME
Orban's government, which does not face national elections for another 1-1/2 years, is trying to press home a message that its policies will bear fruit soon. "The Hungarian fairy tale or the Hungarian example will be a successful one in a year's time," Economy Minister Gyorgy Matolcsy said earlier this year.
A message that Hungary will emerge as a strong nation from the crisis engulfing most of Europe is hard to sell to voters.
On the face of it, Orban has avoided many of the problems that are besetting countries across the EU. The government, dominated by his Fidesz party, has a two-thirds parliamentary majority following a landslide election victory two years ago and is among the most stable in the EU.
While others struggle to control huge budget deficits, Hungary's is due to remain this year below the EU ceiling set at 3 percent of total annual economic output.
Orban, who was also premier from 1998-2002, has achieved this without the outright austerity measures that have toppled a number of EU governments, and has even cut personal income tax.
He has funded this with measures such as a windfall tax on the financial, energy, telecom and retail sectors, and an effective re-nationalization of private pension funds.
But Hungary's economy, largely geared to exporting to western Europe since the fall of communism more than 20 years ago, has slid into recession as demand falls in the euro zone.
Orban's policies such as the extra taxes have undermined investors' confidence and he faces tough talks with the IMF and EU this autumn about a loan deal that would help to cut the country's high borrowing costs.
Combative as ever, he said Hungary needed the loan "to protect itself from the sickness weighing on Europe".
"We can only achieve success if we boost our autonomy, and make our own decisions, in other words if we boost Hungary's room for maneuver," he told parliament last week, making clear he wants a deal with international lenders on his own terms.
Any breakdown of talks could provoke a renewed slump in the forint currency and an outflow of capital from Hungarian bonds, risks which Orban flirted with in January when the state's credit rating was cut to "junk" status.
CLEVER STRATEGIST OR DAREDEVIL?
In bustling Budapest, some businesses are thriving even while the recession bites. At LEVES, a small soup bar set up by two friends last year, long queues form each lunchtime.
But the owners say this success has little to do with government policies. "It was not the economic situation which we considered, our business is too small for that. Any business can thrive that's innovative, finds its place in the market and in which people work with relentless enthusiasm," said Zoltan Horvath and Adam Gogge in a reply to Reuters questions.
Only time will tell if Orban's policies, dismissed by some opponents as "voodoo economics", will achieve their aim of creating many new jobs, reducing tax evasion and eventually boosting consumption.
Orban, a founding member of Fidesz shortly before the fall of communism, divides opinion not only over his economic policies. To his allies and supporters, he is a strong leader with a strategic vision who wants to put Hungary on new foundations to outlast Europe's crisis.
"He does not make ad hoc decisions. He has a long-term idea and he never makes decisions without having a strategy behind them. You just can't always know if it will work out well in the end," said a government source, on condition of anonymity.
Opponents see Orban as a reckless daredevil who is putting Hungary's economy and international standing at risk.
With a firm hand, Orban has solidified the power of Fidesz - which began as a radical student group before shifting over the years to the right - in ways that critics say have eroded democratic checks and balances.
The government has consistently rejected such charges, but the passing of a media law which critics say could be used to curb press freedom provoked a dispute with the European Commission.
Curbs on the Constitutional Court's jurisdiction have also proved contentious, while tens of thousands of Hungarians rallied in January to call for the removal of the man they called the "Viktator" after the constitution had been rewritten.
A few weeks later a pro-government rally attracted 100,000 people, showing Orban remains popular among his core supporters.
Changes to the central bank law caused another row with the EU and IMF, which said it hurt the Hungarian National Bank's independence. Amendments resolved the standoff only after it had held up the talks on IMF/EU financing for months.
Under Orban, Hungary has even become involved in disputes as far away as the south Caucasus where tensions are high between Azerbaijan and Armenia. Last month, Hungary stirred a storm when it sent home an Azeri soldier who had murdered an Armenian officer with an axe during NATO training in Budapest in 2004.
The soldier, Ramil Safarov, was pardoned and celebrated as a hero when he got home. Armenia instantly broke diplomatic ties with Hungary, and NATO Secretary General Anders Fogh Rasmussen said he was "deeply concerned" by the pardon.
Orban has defended the decision, saying it was in line with international law. He even said that Hungary acted knowing the move could spark a diplomatic backlash.
"His ways may be risky and you can't always know where it leads," said one source familiar with Orban's thinking, who wished to remain unnamed. "But even if you do not agree with him, within his own logical framework he has a well-grounded answer to each question."
Despite government denials, opposition parties say it let Safarov return to Azerbaijan in the hope of economic favors in return from the energy producer. The Socialists, who beat Orban in the elections of 2002 and 2006, have called on him to resign over the decision, but they remain electorally weak.
TWEAKING THE SYSTEM
In another controversial proposal, Fidesz wants legislation to make voters register at least 15 days before the next election, including those who are already on the electoral list.
Critics say this would help Fidesz by keeping away many hesitant people, who make up their minds on whether and how to vote only at the last minute after hearing all the arguments.
The Ipsos poll put support for Fidesz at only 17 percent, but the party has a good record on getting it supporters to turn out, whereas the hesitant form a huge group.
Former Socialist Prime Minister Ferenc Gyurcsany, who now leads the small Democratic Coalition, staged a week-long hunger strike outside parliament this month to protest about the plan.
Gyurcsany, who earned infamy with a leaked speech admitting that he had lied about the economy to defeat Orban in 2006, said the measures' only aim was to help Fidesz get re-elected.
"Behind the concept of registration we are talking about how the government, even though many want to see it go to hell for destroying their lives, is trying to remain in power," he said.
Janos Lazar, Orban's chief of staff, says the change is needed to take account of at least a million new voters who could take part in the next election due in 2014.
The newcomers include hundreds of thousands of ethnic Hungarians in countries such as Romania, Slovakia and Serbia, who were made eligible for Hungarian citizenship in one of Orban's first acts after taking power in 2010.
"Our goal is for as many people to take part in the vote as possible and make a responsible decision," Lazar said. "There should also be a campaign for democracy so that, apart from mud-slinging, parties should also urge people to go to vote."
Robert Laszlo, an electoral expert at the Political Capital think tank, said Fidesz is pushing for a solution to a problem that does not exist. Hungary already has an up-to-date register of domestic voters, he noted, and other changes such as easing requirements for candidates to stand for election could make it harder for opposition groups to beat the incumbent party, unless they joined forces.
Laszlo said the last two weeks are critical in any election, with many deciding at the last moment, such as in 2010 when voters tired by years of austerity rejected the Socialists.
Gabriella Hantos is typical of the hesitant. "With registration or without it, I think nobody knows how to vote when the elections come," said Hantos, 57, who has been out of a job for years.
Laszlo said it was precisely this group of disillusioned people, whose ranks he estimates at 1.5 million, that could turn around an election in 2014.
"Contrary to popular belief, it is not the committed voters but the undecided who can determine an election," Laszlo said. "Unless an economic miracle happens in the meantime, they are unlikely to back the ruling party with a last-minute decision."
(Writing by Krisztina Than, additional reporting by Marton Dunai and Sandor Peto; editing by David Stamp)
* German trade group complains of "political hostage-taking" (Adds Canadian government reaction)
ISTANBUL Five members of Turkey's security forces and five Kurdish militants were killed on Thursday in clashes in the southeast, where unrest has flared since the arrest this week of two popular mayors.
SOUTH OF MOSUL, Iraq The Iraqi army was trying on Thursday to reach a town south of Mosul where Islamic State has reportedly executed dozens to deter the population against any attempt to support the U.S.-led offensive on the jihadists' last major city stronghold in Iraq.