These developments brought about the terms for starting to transform the system of political institutions and the economy, terms which were conceived by the "reform communists" who dismissed Kádár in May 1988 after his resistance to any further change and who still thought they could maintain control of events. Shortly afterwards opposition groups that had operated for years organized themselves into political parties; their activities received ever greater publicity and in 1988 and 1989 encouraged mass demonstrations throughout a reviving civil society. The Hungarian Democratic Forum (MDF) came forward with a program criticizing the communist system on the basis of national traditions, and from the autumn of 1987 it organized public debates on the state of the country. The "democratic opposition" that had operated an underground press ("Samizdat") since the early 1980s established the Alliance of Free Democrats (SZDSZ), while the independent organization of university students, the Federation of Young Democrats (FIDESZ), also defined itself as a liberal party. At the end of 1988, beginning of 1989, parties defining the democratic era immediately after World War II were revived, thus the Independent Smallholders' Party (FKGP), the Christian Democratic People's Party (KDNP) and the Social Democratic Party (SZDP). The frameworks for a peaceful change of regime were established at the "trilateral negotiations" comprising the Opposition Round Table, the mass organizations, and the party-state leaders in March 1989. An agreement and codification of the agreement laying the basis of a constitutional state ruled by law took place in the autumn of 1989, and shortly afterwards the Republic of Hungary was proclaimed on October 23, 1989, changing the country's official old name (Hungarian People's Republic), a move which symbolically expressed the essence of the change of regime: the regaining of the country's sovereignty, and the replacement of the central plan command management and state-party system with a market economy and a multi-party democracy.

Reformers in the Hungarian Socialist Workers' Party contributed as catalysts in this process, but it was only in the last stage that they decided, by drawing the consequences of events, to formally dissolve the state-party and together with other left-wing partners form a new party under the name Hungarian Socialist Party (MSZP) with a social democratic program. At the turning point of 1989 and 1990, when the country burned in the fever of the first free elections in Hungary for decades, the political battle lines were drawn not only between the socialists and the opposition that had more or less united against them - there was a clear division between the right wing and left wing, the Christian Democratic, national, liberal and socialist forces.

As a result of the 1990 elections, the MDF became the most powerful party in Parliament, and in coalition with the two other center-right parties, the FKGP and the KDNP, the president of the winning party, József Antall, formed a government. The opposition was formed by the SZDSZ, FIDESZ and MSZP. The center-fight coalition completed its four year election cycle, the only one among the regime-changing cabinets in Central-Eastern Europe. Árpád Göncz, who had been sentenced to death for his activities in 1956, was voted president of the republic, and received a further five-year vote of confidence from Parliament in 1995.

The MSZP, which gained in strength toward the end of the previous parliamentary cycle, won the elections in 1994. The SZDSZ, which once again finished second in the elections, took a place in the coalition government of party president Gyula Horn.

Apart from tackling the difficulties of the change of regime, both governments had to face the fact that the overwhelming majority of society had reckoned on a smoother transition. Workplaces that were terminated by the collapse of the socialist economy simply could not be replaced from one day to the other by the fast pace of privatization. The considerable achievements in establishing a democratic state governed by the rule of law, and the spectacular improvement in macro-economic indices after the stabilization program was set in motion in March 1995, couldn't compensate everyone for the wide differences apparent in society, regional differences and the stagnation of living standards.

Nevertheless, the stability of domestic politics was never threatened by isolated extremist forces, despite a changeable public mood. Occasional domestic disputes have never jeopardized the operability of any of the governing coalitions. As a further sign of the consolidation of the democratic parliamentary institutional system, following the elections in 1998 the previous parliamentary cycle's opposition was able to form a government again, this time under the leadership of Viktor Orbán, president of the centre-right Fidesz - Hungarian Civic Party, with the participation of the FKGP and MDF. This makes Hungary a predictable, reliable partner for both investors and international politics. Incoming foreign capital took a lion's share in the successes of privatization; and visits by key figures from global politics, and in return their readiness to receive Hungarians, have contributed to the opening in Hungarian foreign policy (which started in the era of the last cabinet prior to the change of regime). In formulating key foreign policy aims there was general consensus between those political parties which had argued with each other over the previous decade. As a result, relations with neighboring countries have improved in a number of areas, and the development of contacts is helped along on the one hand by basic treaties, and on the other by Hungary's role in organizations of regional cooperation (CEFTA, Central European Initiative). Progress concerning Hungary's European integration aspirations is indicated by its membership in the Council of Europe, the OECD, and its associate membership in the European Union; in managing and preventing crises as host of the CSCE in 1994, and later as chair of the OSCE, and its cooperation with NATO in the framework of the Partnership for Peace project; and its active contribution to the peace process (IFOR) following the end of the Balkan war. All this has facilitated Hungary's membership in NATO, which by now can be considered as all but an accomplished fact. From May 2004 Hungary belongs to the European Union.

During the 1100 years that have elapsed since Hungarian tribes settled down in the Carpathian Basin, Hungary has on several occasions felt that its adjustment and catching up were successful. Today, meeting the strict demands of economic growth, stabilization and European integration, the country once again trusts that its "re-entry" into the community of European countries will prove to be final this time.

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