<P> In 1966, the Central Committee approved the "New Economic Mechanism", through which it sought to rebuild the economy, increase productivity, make Hungary more competitive in world markets, and create prosperity to ensure political stability . Over the next two decades of relative domestic quiet, Kádár's government responded alternately to pressures for minor political and economic reforms as well as to counter-pressures from reform opponents . By the early 1980s, it had achieved some lasting economic reforms and limited political liberalization and pursued a foreign policy that encouraged more trade with the West . Nevertheless, the New Economic Mechanism led to mounting foreign debt that was incurred in order to shore up unprofitable industries . </P> <P> Hungary's transition to a Western - style democracy was one of the smoothest among the former Soviet bloc . By late 1988, activists within the party and bureaucracy and Budapest - based intellectuals were increasing pressure for change . Some of these became reform socialists, while others began movements which were to develop into parties . Young liberals formed the Federation of Young Democrats (Fidesz); a core from the so - called Democratic Opposition formed the Alliance of Free Democrats (SZDSZ), and the national opposition established the Hungarian Democratic Forum (MDF). Civic activism intensified to a level not seen since the 1956 revolution . </P> <P> In 1988, Kádár was replaced as General Secretary of the Communist Party, and reform Communist leader Imre Pozsgay was admitted to the Politburo . In 1989, the Parliament adopted a "democracy package" that included trade - union pluralism; freedom of association, assembly, and the press; a new electoral law; and in October 1989 a radical revision of the constitution, among others . Since then, Hungary has reformed its economy and increased its connections with western Europe . It became a member of the European Union in 2004 . </P> <P> A Central Committee plenum in February 1989 endorsed in principle the multiparty political system and the characterisation of the October 1956 revolution as a "popular uprising", in the words of Pozsgay, whose reform movement had been gathering strength as Communist Party membership declined dramatically . Kádár's major political rivals then cooperated to move the country gradually to democracy . The Soviet Union reduced its involvement by signing an agreement in April 1989 to withdraw Soviet forces by June 1991 . </P>

When did hungary became part of the eu