Rioters took to the streets again in Budapest yesterday, after police repulsed an earlier attempt by thousands of protesters to storm the state television building. The riots, the worst since the end of communism, were ostensibly sparked by the publication of a leaked tape on Sunday in which Ferenc Gyurcsany, the Prime Minister, was heard saying that he and his Socialist party had lied for four years about Hungary’s budget in order to win a general election in April.

Such brutal honesty is as startling as it is unwise. Mr Gyurcsany, in office for two years, was hoping to shock his party into backing his unpopular economic reforms. These include higher taxes and fees for healthcare and university tuition. The measures have raised a storm of opposition, especially from those most affected, such as students, and have led to a slump in the party’s popularity from 40 per cent at the election to 25 per cent.

In advance of local elections in two weeks’ time, the Socialist party is clearly nervous. One can guess at the motives of those who leaked a tape that would inevitably cause uproar and effectively sabotage the Prime Minister’s effort to rein in government spending. For even if the party was economical with the truth during its campaign, few Hungarians should be surprised at the drastic measures. The country has been living on borrowed economic time for years. Its budget deficit this year will be 10.1 per cent of gross domestic product, the biggest by far in the European Union. The need to stabilise finances and make Hungary eligible to join the euro is urgent, and so, despite campaign promises of tax cuts, the Government has announced tax rises and budget cuts worth £2.4 billion for 2007 alone.

Hungary’s rapid growth in recent years is now being taken for granted. Budapest has become an attractive centre for foreign investment; Western firms, especially German companies, have relocated factories to Hungary; and the country has enjoyed a steady growth in tourism and regional trade. But others are catching up. The Baltic states have seen an even more spectacular advance since their escape from communism, and other Central and Eastern European states are proving competitive in attracting foreign investment. Like many of the new EU entrants, disillusion with Europe has set in, and the need to face economic realities has prompted many to protest at the necessary retrenchment.

By coincidence, the riots come almost exactly half a century since the bloody Soviet suppression of the Hungarian Uprising. To most Hungarians, this is distant history, with little relevance to politics today. Even those who remember the desperate street battles, the “betrayal” by an indifferent West and the subsequent repression, do not fully appreciate the change in freedom that makes the present protests possible. Mr Gyurcsany has defied calls to resign; investors say that his departure could wreck his economic policies and any chance of rescuing the strained finances. He might reflect, however, that honesty remains the best policy.