Hungarian Premier: Reform Is Risky, Painful ... and Vital. INTERVIEW

WHEN Miklos Nemeth was eight years old, his native Hungary tried to opt out of Soviet-style communism. The Soviets answered with tanks. The prime minister, Imre Nagy, was executed. Now, Mr. Nemeth has become prime minister. ``Historical socialism is not practical, not useful for society,'' he said in a Monitor interview. Hungary needs free elections, a multiparty system, a free-market economy. ``We need more pragmatism and less ideology.''

And this time, he is convinced, Moscow will answer not with tanks, but with thanks. Soviet leader Mikhail Gorbachev, says Nemeth, has told him so.

These are heady days in Hungary, even by the standards of perestroika (restructuring) and glasnost (openness). The communist-run parliament has endorsed the idea of multiparty elections: A new constitution, enshrining this and other reforms, is being drawn up. The party has named a committee to take a new look at Hungarian history: One member has already reclassified the 1956 ``counter-revolution'' as a popular uprising, and Nagy's remains will be reburied with honor on June 16, the anniversary of his execution.

Many Hungarians seem to welcome this swirl of political change. One woman says she has long wanted to become a teacher, but can't bring herself to endure the ponderous history courses needed for the degree. Under the present system, she explains, ``they don't dare ask any question more recent than 1956. It's because they're scared of the answers they might get.'' Now, she hopes, that will change.

Kalman Kulcsar is a longtime lawyer and academic who, as Hungarian justice minister, is writing the new constitution. Hungary, he explains, has throughout history been influenced both from the East and West. The Western influence, he says with apparent satisfaction, now seems poised to reassert itself.

THE new law, to be submitted to a popular referendum early next year, will drop the traditional East-bloc provision for a ``leading role'' for the Communist Party, he says. It will provide for a judicial court - and for a system of checks and balances among the various branches of government.

For reformers like Mr. Kulcsar and Nemeth, one catalyst for change is simple pragmatism. The old system has won gradual, grudging acceptance since 1956, but not the grass-roots enthusiasm needed to ensure prosperity and stability. Although economic perestroika (restructuring) began here in the late 1960s, it has had uneven effects. ``Without political reform,'' says Nemeth, ``economic reform was a little bit one-sided.''

Mr. Gorbachev, too, has excellent reason to wish Hungary well. Nemeth has displayed a frank readiness to confront issues of perestroika that most Soviet reformers have dared not address. Of course, Nemeth says, there is the risk of free-market problems, like inflation and unemployment, in any serious move to let the market sort out decades of state-decreed inefficiency. ``We have to live with this ... side-effect,'' he says.

The solution, he suggests, is Western-style social democracy. Will it work here? No one, presumably, will want to know more urgently than Gorbachev. And few people can be more keenly interested in Gorbachev's political longevity than the Hungarians.

Nemeth plays down the link between the pace of Soviet perestroika and the prospects for reform in Hungary. Regardless of what happens in Moscow, he said, there was simply ``no other possibility than to go fast and to take this [reform] route.''

But another senior official, in an informal chat, is more circumspect. He, like Nemeth, suggests that reforms in both the Soviet Union and Hungary have progressed too far to be completely reversible. But, he adds, smiling, ``I wake up every morning wishing that all goes well for Mr. Gorbachev.''