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Corruption in Hungary

Corruption is a harmful, but widespread phenomenon in Hungary, which is part of the everyday life and the politics. It affects the government’s relationship with the EU, the USA and Russia too. But why is it growing nowadays? What is the role of bribery in Hungary, a country led by the prime minister Viktor Orbán since 2010?

Corruption or “mutyi”- a term recently popularised by the Hungarian media – is no longer considered an outstanding phenomenon in Hungary. With a silent consent of the Hungarian society, bribery became a part of everyday life during the soft dictatorship of the Kádár-era; people still pay additional sums to receive better service in hospitals or faster administration in offices.

Képtalálat a következőre: „Corruption in Hungary”

Continue reading Corruption in Hungary


Hungary erects border fence to plug migrant flow

Hungarian Defence Force prepared to begin border fence construction Photo: Gergely BOTÁR/Prime Minister’s Office

In a dry clearing of woodland in southern Hungary, there is the drone of wood-chippers and rumble of earth movers. Dozens of men are clearing the ground for what Viktor Orban, Hungary’s prime minister, believes will be a solution to the country’s worsening migration crisis: a 175km steel and barbed wire fence along its flank with Serbia.

More than 80,000 migrants have crossed this stretch of land into Hungary — and the EU’s passport-free Schengen zone — so far this year, placing the country on the route of a trail that begins as far away as the fields of Kunduz in Afghanistan and the bombed-out streets of Aleppo in Syria.

But Hungary’s Balkan borderlands are now set to become the choke point for what has become Europe’s most heavily travelled migration route. Many expect the €20m fence — which should be finished by November — to trap thousands in neighbouring countries such as Serbia and Macedonia, where migrants say they face police violence and extortion.

The fence has attracted criticism from migrant rights groups, the UN’s refugee agency and the European Commission. Serbia’s government, which was not notified of the plans in advance, reacted with alarm to the decision to seal the border but has pledged to boost border security co-operation.

“I am not sure whether the fence between Serbia and Hungary will help that country protect itself against mass influx of asylum seekers,” said Nebojsa Stefanovic, Serbia’s minister of the interior. “However, we cannot interfere with decisions of neighbouring countries that are within their exclusive competence.”

Mr Orban, who has linked unmanaged immigration to terrorism, insists border security is a national obligation. But since the plan to build the fence was announced, the numbers detected crossing the border have only increased, sometimes reaching more than 1,500 a day.

Even though the vast majority of those have left to try to reach Germany and other more prosperous countries, daily arrivals are straining Hungary.

The surge has become especially noticeable outside train and bus stations in towns such as Szeged in the country’s south, where city authorities have set up a makeshift help centre complete with fresh water taps, stocks of sandwiches and power sockets for migrants to charge their phones.

But not all are so welcoming. Anti-immigrant vigilantes have begun patrols along the border, in search of migrants who have escaped the attention of border police who use heat-seeking cameras, dogs and sometimes helicopters to monitor the area.

Hungary border fence map Migration
Local police say many of the migrants they round up are reported by local residents and farmers.

Just a few kilometres away, on the other side of the planned fence, dozens of Afghan migrants appear at an abandoned brick factory near the town of Subotica to receive food from Pastor Tibor Varga, who runs the Eastern European Mission, a Christian charity.

“I don’t know what will happen with this fence; I don’t think it will help Hungary stop the situation. It may mean more people being trapped here in Serbia and I don’t know how that will end,” says Pastor Varga.

One of the men at the factory, which migrants call “the jungle”, is Muhammed Bilal, a network engineer, who says he left Kunduz in Afghanistan because of violent attacks by the Islamic State of Iraq and the Levant, known as Isis.

Mr Bilal and his friend Tlha Jan from Jalalabad have travelled for more than a month in the hope of reaching Germany. Mr Jan says Bulgarian police stole his phone and $500 in cash before breaking his ribs and beating his feet with hammers. His toes are black and swollen.

“Now our journey has gotten more dangerous,” says Mr Bilal. “This morning, a person told us the Hungarian government plans to make a fence along the border. But that takes time; we will get across in the next few days.” he adds.

Hungarian ministers say the country has less than 3,000 residential places for asylum seekers, while the number arriving this year alone is more than 20 times that figure.

Very few applications for asylum are completed as most abscond to continue their journey. Lawmakers in Budapest last week approved measures that could see asylum applicants pushed back to neighbouring countries such as Serbia.

But Amnesty International has warned that illegal migrants deported from Hungary face multiple human rights violations in Balkan countries.

Although the new rules and the planned fence have yet to stem the flow of migrants, observers say the government’s rhetoric has hardened the public’s attitude towards migrants.

A recent poll commissioned by conservative magazine Heti Válasz, showed 63 per cent of respondents believe immigration poses a threat to Hungary’s security.

Opinion polls also indicate another trend: since Mr Orban announced the planned border fence, support levels for his governing Fidesz party have risen at the expense of the radical rightwing Jobbik party, ending an eight-month trend of declining approval ratings.

Hungary challenged on nuclear choice with Russia

Artist's impression of how the new reactors at the Paks nuclear plant would look like
An artist’s impression shows what the new reactors at the Paks nuclear plant would look like

Environmentalists in Hungary are hoping the European Commission will scupper a €12.5bn (£9bn) Hungarian-Russian deal to build two new 1,200 megawatt (MW) reactors at the Paks nuclear power station on the River Danube.

The expansion, they argue, will produce expensive energy, far beyond market prices, plunge Hungary into debt, and deepen dependence on Russia.

Viktor Orban’s Fidesz government insists the reactors are necessary to cover growing energy demand, and will actually increase the country’s energy independence.

The government also defends its decision to make the contracts for the new reactors secret for 30 years.

The existing four reactors at Paks generate 1,900 MW and cover 40% of Hungary’s electricity needs.

Mr Orban based his 2014 election victory on promises to keep utility prices low.

Months earlier he struck a deal with Russian President Vladimir Putin that saw Russia agree to loan Hungary around 80% of the estimated construction cost of the new reactors at Paks. Hungary will pay Russia back from the electricity generated.

By the time Hungary has to start paying for this next generation of reactors, in 2025, Mr Orban should be in comfortable retirement.

Nevertheless, the decision to sign a deal with Russia took even his own Fidesz party by surprise.

Built by the Soviet Union in the 1980s, the working life of the four existing reactors at Paks will run out between 2032 and 2037.

That means that no new decision on replacing them would actually be necessary until 2020 at the earliest.

Russian President Vladimir Putin (left) listens to Hungarian Prime Minister Viktor Orban before a joint news conference in Budapest in February 2015
Russian President Vladimir Putin met Hungarian Prime Minister Viktor Orban in Budapest in February

Experts are also concerned that the overlap period, when old and new reactors are operating, will overstrain the Hungarian grid, and drive renewable and conventional energy producers from a market distorted by what they see as the overproduction of nuclear energy.

“Hungary is denying itself the opportunity to take into consideration at least six years’ scientific development” by opting for nuclear expansion now, the Universities Student Committee established to debate the Paks expansion has just concluded.

Map of Paks in Hungary

The falling cost of renewable energy sources could make the cost solar energy comparable with that from nuclear and fossil fuels very soon, opponents of Paks expansion believe.

“Hungary’s energy needs can be supplied in 2030 without the ‘Paks2’ reactors,” says Zsuzsanna Koritar of Energieaklub, a Budapest-based think tank.

“Nonsense,” counters Attila Aszodi, the nuclear ‘tsar’ appointed by the Orban government, who says the expansion decision is both sensible and timely.

Attila Aszodi
Attila Aszodi rejects claims that the decision to expand the power station was made largely in secret

Hungary’s electricity demands can be expected to grow by 1% each year, he says. And 7,300 MW of the current 9,000 MW capacity of the country’s 18 power stations will need replacing by 2030.

Meanwhile his own figures suggest that electricity from Paks would be 10 to 15% cheaper than solar.

Repaying Russia

Balazs Felsmann of the Corvinus University Research Centre says electricity prices would need to triple on the European market to make the new reactors economically feasible.

Greenpeace protest banner in central Budapest (30 January 2014)
Protests were held in Budapest in the lead-up to the parliamentary vote over the Paks nuclear plant

And there are concerns that the project deadline might slip, meaning Hungary would have to start paying interest on the €10bn loan to Russia from 2025, while the project is still a building site.

Mr Aszodi says there are agreements in place to stop this happening, and he rejects claims that the decision to expand the power station was made largely in secret.

“The expansion of Paks was debated and agreed in the Hungarian parliament many times,” he says.

His opponents hope the European Commission will rule that Hungary’s 20% share of the construction costs will be judged to be a direct subsidy, which is illegal under competition rules.

A decision is expected in October.

Does extremism threaten Hungary’s standing in Europe?

Activist and sympathizers of the far-right party Jobbik, in white, show up at a campaign event of the Hungarian left-wing opposition parties in Budapest

European Union leaders face many intractable problems: what to do about Russia, the growing Islamist threat within and beyond its borders, and last but not least the populist backlash shaking the political landscape in a number of countries.

In this last respect, Hungary, and the rise in political extremism there, is a case in point.

Europe has a problem with Hungary, so much so that the European Commission President, Jean-Claude Juncker, was recently overheard calling Hungary’s leader a “dictator” upon his arrival at an EU summit.

The remark was hastily dismissed as a joke, even though it betrays wider European concerns about an apparent weakening of civil institutions and a backlash against civic groups in the country.

Hungary’s Prime Minister, Viktor Orban, is an interesting political case study.

He began as a darling of those on the side of political freedoms, with his strident anti-Communist background.

Yet that all seems a long time ago now.

He hasn’t been helped by Hungary’s economic problems.

The global economic crisis of 2008 hit Hungary hard, leading to an international bailout.

All this helped Mr Orban sweep to power in 2010.

He has presided over an impressive economic turnaround (of sorts), with measures including taxes on banks and other sectors such as energy.

The public debt is coming down slowly and the economy has returned to growth.

Prime Minister Viktor Orban
Viktor Orban delights in ruffling feathers

His supporters credit him with leading the country through the crisis.

But foreign investors fight shy of Mr Orban’s rhetoric and grandstanding, particularly his skirmishes with big business.

And the public have yet to feel much improvement in their purchasing power – as recent by-election defeats for Mr Orban’s Fidesz party show.

Unemployment of just over 7% has been exacerbated by a controversial government work scheme, which does little to retrain participants for the market place.

And Hungarians – the young in particular – in search of a better life are still leaving the country in significant numbers.

Since the local elections last October, Mr Orban has seen his popularity plunge and that of the radical nationalist party Jobbik soar.

His response so far has been a series of measures to win back the far-right vote.

Immigration rhetoric

Last month, his government launched an immigration questionnaire asking Hungarians whether they agreed that immigrants endangered their livelihoods and spread terrorism.

“As Brussels has failed to address immigration appropriately, Hungary must follow its own path,” Mr Orban insisted.

It is, according to critics, part of an increasingly anti-immigrant rhetoric from the Hungarian government.

Mr Orban has also spoken of the possibility of bringing back the death penalty.

There is no realistic likelihood of this, but Mr Orban glories in saying things guaranteed to irk his liberal critics.


Viktor Orban:

  • born 31 May 1963 in the small Hungarian village of Alcsutdoboz
  • trained as a lawyer before entering politics in mid-20s
  • twice prime minister: 1998-2002 and 2010-present
  • married with five children
  • football fan and player (FC Felcsut)

Profile: Viktor Orban


His ruling Fidesz party insists on a version of Hungarian history that stresses Hungary’s fate as a victim of World War Two – although government ministers have also acknowledged the country’s shared responsibility for the Holocaust.

All this helps garner support in Hungary itself, and not just from those who are attracted to the political extremes.

Many Hungarians approve of Mr Orban’s populist and Eurosceptic approach.

They believe Brussels has no real idea of the scale of the challenges facing the country and the institutional and social legacy left behind by decades of political and social neglect under Communist rule.

They argue that one-size-fits-all solutions and liberal orthodoxies are too simplistic and one-dimensional.

And yet, rather paradoxically, overall support for the EU remains strong among Hungarians.

That must be in part due to the financial realities.

Jean-Claude Juncker
Jean-Claude Juncker called Mr Orban a “dictator”

The EU gives more than €5bn (£3.7bn) in financial support to Budapest – some 6% of Hungarian GDP.

But the question for some is what does the EU get in return?

The Orban government, like those of Slovakia and the Czech Republic, is a sharp critic of EU sanctions against Russia over the conflict in Ukraine.

More recently, Hungary’s leader attacked fellow EU leaders for what he called their “absurd, bordering on insanity” proposals for migrant quotas.

To his European critics, Mr Orban is a serial offender when it comes to what they call European values, such as respect for human rights.

The row with Europe over the possible return of the death penalty in Hungary is just the latest example. It won’t be the last skirmish of its kind.

In the wings lurks the increasingly popular nationalist party, Jobbik, which has openly anti-Semitic supporters.

A Jobbik MP came to wider public attention a little while back for openly spitting on a Budapest Holocaust memorial.

A few years ago, another leading Jobbik figure claimed, during a debate on the Middle East, that people in authority of Jewish ancestry “pose a national security risk”.

Government rattled

The party has contributed to a worsening of relations with the Roma, Hungary’s biggest ethnic minority community.

The Roma population, which lives on the fringes of Hungarian society, has faced persecution and discrimination for centuries.

Jobbik’s success continues to rattle the government of Hungary.

As recently as April, Jobbik won a parliamentary seat previously held by the ruling Fidesz party.

Gabor Vona
Gabor Vona is trying to rid Jobbik of its extremist reputation

All in all, the political momentum appears to be with Jobbik. And as the party gets stronger and nearer to its ultimate goal of supreme power, it appears to be cleaning up its act.

The party’s leader, Gabor Vona, insists he is determined to rid the party of its unsavoury elements and reposition it as a people’s party like the German CDU or CSU, in a bid to win outright power in the next general elections, due in 2018.

He has been turning down the volume when it comes to the party rhetoric.

“Whoever has a romantic Nazi yearning… has no place in this party,” he declared at a recent political gathering.

Ronald Lauder
Ronald Lauder has warned of reputational damage

Mr Vona appears to want to shed the party’s extremist origins, stay in the EU and work with foreign businesses.

Critics say this is a sham, a cynical ploy to win votes.

In a recent speech in Budapest, the World Jewish Congress leader, Ronald Lauder, said Jobbik’s rise was hurting Hungary’s image abroad.

His voice matters: Hungary is home to one of Europe’s largest Jewish communities, but one recent poll suggested a third of Hungarians expressed anti-Semitic views.

None of this is necessarily helping Hungary’s position in the group of EU nations.

Austrian lesson

It is worth remembering what happened when a far-right party entered into a governing coalition in Austria, back in 2000.

The Freedom Party’s success led the rest of Europe to give Vienna the cold shoulder.

That political reality is probably one of the strongest cards left in the hands of the Hungarian leader.

His combination of nationalist populism and state control of key areas of the economy still rules the roost, for now at least.

The Hungarian Putin — Is Viktor Orban Following the Kremlin’s Playbook?

People take part in a protest against the Orban government in central Budapest, February 1, 2015.
People take part in a protest against the Orban government in central Budapest, February 1, 2015. (Laszlo Balogh / Courtesy Reuters) 

When, in 2010 and 2012, Hungary passed laws entitling Hungarians living abroad to Hungarian passports and then the right to vote in Hungarian elections, it seemed to fan dangerous nationalistic flames and fueled fears of secessionist movements in Hungarian communities beyond the country’s border. Indeed,

Hungary’s illiberal Prime Minister Viktor Orban has frequently stated that the Hungarian nation does not end at the borders of the state; rather, it ends with those Hungarians who were stranded in Romania, Slovakia, Serbia, and Ukraine when the Treaty of Versailles lopped off two-thirds of the Hungarian territory.

Given the parallels to Russia, where granting Russian citizenship to Ukrainians and Abkhazians has been a precursor to invasion, observers can be forgiven for feeling chilled.

Although Orban is certainly tapping into nationalist nostalgia when he talks about Hungarians abroad, his purposes are not the same as those of Russian President Vladimir Putin. More than irredentism, Orban is thinking about votes. In fact, since he returned to power in 2010, he has done everything possible to avoid ever losing another election.

He has proven to be a world-class virtuoso of gerrymandering; after he pulled in a supermajority of votes in 2010, he was able to contort Hungary’s electoral system so much that in 2014, Fidesz, his party, was able to win two-thirds of all seats in the parliament with only 45 percent of the vote. And even if Fidesz does lose an election,

Orban has manipulated the system so that Fidesz appointees in the media office, the prosecutor’s office, the state audit office, the central bank, and the presidency would continue to wield substantial power.

Orban’s dealings with Hungarians abroad should likewise be seen as an electoral strategy. Since Fidesz passed the 2010 law, 675,000 and counting ethnic Hungarians have taken advantage of the opportunity. Fewer than 130,000 of these new dual citizens voted in 2014, but 95 percent of those who did vote picked Fidesz.

Although 130,000 may not seem a lot in a country of eight million eligible voters, the votes did give Fidesz an extra seat in the parliament to hold on to its narrow two-thirds majority—a small advantage, but one that meant a lot.

And looking toward the next election in 2018, Fidesz could get even more out of this group by motivating more ethnic Hungarians to apply for passports and to vote, especially in pro-Fidesz areas. Orban’s government can also set up more ballots and polling stations, for example, in surrounding countries where voters tend to support his party—as opposed to London and elsewhere, where Fidesz did not rush to make it easier for Hungarians to vote.

Beyond votes, Orban also sees Hungarians abroad as a way to solve his country’s demographic problems. A nation of 10.6 million in 1988, Hungary has lost 700,000 people over the 27 years since, mostly from out-migration and lower birth rates. It is true that Orban, like many other right-wing politicians in Europe (but in a more radical tone), generally opposes immigration, especially of people from different cultural backgrounds.

For instance, he spoke out sharply after the Charlie Hebdoattack in Paris, stating, “We do not want to see a significant minority among ourselves that has different cultural characteristics and background. We would like to keep Hungary as Hungary.

” But the Hungarian diaspora can help Orban square the circle. Here, his strategy is similar to that of Russia, which has also encouraged Russians abroad to come home from other republics of the former Soviet Union.

Orban also sees Hungarians abroad as a way to solve his country’s demographic problems.

Although Orban does not intend to stir up real trouble, he frequently uses strongly nationalist messages in his speeches. For example, he encourages “autonomy” and talks about a nation that goes beyond current borders.

One possible explanation for the mismatch is that he is preparing for a Russian-dominated Europe, in which Hungary might gain back (at least symbolically) some of its former territories. Orban might have some hopes that Putin will do what Adolf Hitler did in 1938: give Hungary back the territories that were lost at Trianon. That is unrealistic; borders in Europe do seem to be more flexible than before after Crimea.

But most ethnic Hungarians abroad are not supportive of aggressive autonomy movements, as they understand that they would be the first victims of irredentism. They tend to support political forces that are working toward peaceful cooperation among Hungarian, Romanian, Serbian, and Slovakian political forces.

Polls by Political Capital, a Budapest think tank, have shown that enthusiastic Fidesz supporters compose only one-fourth of the Hungarians in Transylvania, the part of Romania where many Hungarians are concentrated.

This silent majority has neither applied for dual citizenship nor voted in Hungarian elections. Meanwhile, Hungary’s radical, right-wing, fascist, and irredentist party, Jobbik, has virtually no support among Hungarians abroad, despite its attempts to build up networks in the Hungarian communities and fuel secessionist movements.

This does not mean, however, that aggressive separatist political movements, especially those with external political support, could not act as though they have a majority behind them, as in eastern Ukraine.

That hasn’t happened so far, but any nationalist political use of Hungarians abroad in Hungary could set the stage for such extremism and instability in neighboring countries.

Nowhere are these dangers more evident than in Ukraine, where Orban has taken advantage of political chaos to press Hungarian minority issues (about 200,000 Hungarians live in Ukraine) in the sub-Carpathian region of western Ukraine, adjacent to Hungary.

Here, Orban has echoed Russian nationalists, calling for increased autonomy for national minorities in Ukraine. In his inauguration speech on May 10, 2014, Orban stated that “the Hungarians in the Carpathian basin deserve dual citizenship, rights, and even autonomy. . . .

This is our clear expectation toward the newly forming Ukraine.” This speech, not surprisingly, resulted in some diplomatic turbulence.

Similar calls had landed Hungary in trouble before: in a 1996 treaty, it was forced to cease and desist making calls for autonomy for Hungarians living in Romania as a condition of membership in the European Union. The European Union may keep the peace among its member states, but Ukraine lies outside the EU.

In his approach to politics, Orban may stretch the limits of democratic respectability, but so far, he has not fully let go of European norms. His approach to Hungarians abroad fits this pattern.

He toys with soft revisionist policies (they are not unique: dual citizenship with voting rights is a practice in Croatia and Romania as well). But he does so mainly to win votes at home, not to foment serious ethnic conflict. So far, his strategy has worked. But the delicate balance could easily topple.

Hungary Offers Olive Branch to U.S.

NATO Ally Shows Willingness to Mend Bridges as Hostilities Continue Between Ukraine and Russia

Hungary’s foreign minister has extended an olive branch to the U.S., saying his country is ready to start mending bridges weakened recently by Washington’s corruption allegations, which Budapest firmly rejects.

The country hopes to overcome its differences with the U.S., a North Atlantic Treaty Organization ally, amid deepening hostility between neighboring Ukraine and Russia, Peter Szijjarto said in an interview.

“In the current situation, when there is a military conflict under way in a neighboring country, cooperation with our ally gains ever greater significance,” he said. “We are hoping that our friend, the U.S., will present signs that this situation could come to a close.”

Washington last year put several Hungarian government officials on its visa-ban list because of alleged involvement in corruption. There have been regular protests against the populist Fidesz government since October.

Mr. Szijjarto dismissed such allegations and said the U.S. needs to present evidence of wrongdoing by Hungarian officials. The U.S. has said it may not name those on its visa-ban list, but has presented some documents to the Hungarian government, which were dismissed by it as irrelevant.

“If we were speaking about corruption in earnest, the Hungarian government’s initiatives and measures do deserve acknowledgment,” Mr. Szijjarto said.

The foreign minister also said he was troubled by remarks made by Sarah Sewall, Under Secretary of State, who said in December that U.S. “embassies in two dozen countries in Central and Eastern Europe are currently drafting action plans for supporting and cooperating on anticorruption reform in their host country.”

Mr. Szijjarto said the comment came close to meddling in Hungary’s internal affairs.

“If someone has a self-declared action plan about another country, it is only acceptable if it is coordinated and carried out with our involvement,” he said.

“I do acknowledge the U.S.’s commitment to democratic values and spreading its values, but one of the most important democratic value is sovereignty. The Hungarian people made an unequivocal decision in 2010 and 2014 as well, which is only proper to respect,” Mr. Szijjarto added.

The Fidesz party won parliamentary elections convincingly in 2010 and was re-elected in 2014, giving the government of Viktor Orban a two-third majority each time.

The combative premier has introduced controversial measures, including a new constitution, prompting Sen. John McCain to recently brand him “a neofascist dictator,” a charge Hungary angrily rebuffed.

Public support for Fidesz has fallen sharply since the most recent vote in April last year, but the party continues to lead in the polls, despite the protests.

Mr. Szijjarto said Hungary was sharply criticized during his visit to Washington last year “over every single measure” in its current legal framework, which he rejected, saying the country’s laws comply with those of the 28-nation European Union, which it joined in 2004.

While walking tightrope between the EU and Russia, Hungary has stood out in Central Europe during the crisis in Ukraine by pursuing closer business ties with the Kremlin.

Last year, it agreed to expand its nuclear plant in partnership with Russia’s state-owned Rosatom. It has been far less critical of Moscow and its actions in Ukraine than some of its regional peers.

Still, Mr. Szijjarto said attempts to reduce the EU’s dependence on Russian energy resources should continue.

Hungary is highly dependent on Russian natural gas, with more than 80% of its imports coming through a pipeline from Russia via Ukraine. The country would favor the diversification of its sources for gas, or at least the routes for access.

Since Russia scrapped the plan for the South Stream gas pipeline through the Black Sea, a link that would have crossed Hungary, it has to seek other opportunities and Mr. Szijjarto said the European Commission in Brussels, the bloc’s executive arm, should help in that process.

One such opportunity could be a gas pipeline from Azerbaijan, another a connection to the planned Russian gas hub in Turkey, or a line allowing it to receive liquefied natural gas from Qatar or the U.S., the minister said.

He urged the construction of an LNG terminal in Croatia, which would allow gas supplies to be delivered by ships in the Mediterranean Sea.

Hungary Seeks to Avoid International Isolation in 2015


Next year will bring a number of complications for the Hungarian government, both at home and abroad. For the first time since taking power in 2010, Hungarian Prime Minister Viktor Orban is dealing with persistent opposition from social groups and trade unions. Budapest is trying to reduce its fiscal deficit and, in pursuit of this goal, will continue to apply special taxes to some sectors of the economy, including supermarkets and tobacco companies, while making spending cuts. These changes will lead to further protests, though they will not threaten the Orban government’s hold on power.

Abroad, Hungary’s relations with the United States will continue to cool off because of accusations of internal corruption and Hungary’s political and economic ties with Russia. Budapest must also deal with its increasingly distant relationship with the European Union, which comes at a time of growing uncertainty over Russia’s future moves. Hungary cannot afford to completely sever ties with its Western partners, and its main challenge for 2015 will be to maintain its current domestic and foreign policy trajectories without completely alienating these allies.


The final two months of 2014 have proven particularly difficult for the Hungarian government. Several groups, from civic organizations to trade unions, have taken to the streets to protest a series of government decisions. In late October, a demonstration of around 100,000 people forced Budapest to cancel plans to introduce a tax on Internet use. The cancellation, however, did not appease the groups and protesters broadened the scope of their criticisms to include allegations of corruption and opposition to reforms in education, health care and other areas.

Over time the protests began to shrink, bringing out between 2,000 and 10,000 people depending on the issue, but they did not stop. Separate demonstrations mobilized teachers who rejected education reforms and opponents of Budapest’s plan to nationalize the remaining funds available in the private pension system.

Trade unions, too, have been active in recent weeks, protesting government plans to phase out an early retirement scheme and to raise taxes on food vouchers for workers. They have also demanded an amendment to the strike law to include constitutional safeguards for protesters. On Dec. 15, workers blocked highways in different Hungarian cities and slowed down traffic.

Typically, unions in Hungary are not particularly combative and tend to negotiate with the government. Now, however, many resent the fact that Budapest did not consult its union partners about recent economic measures.

In spite of this opposition, the Hungarian Parliament approved most of the controversial measures Dec. 15. The reason was simple: Budapest needs to increase its available funds to keep the deficit under control.

While the nation’s budget deficit is still below the ceiling of 3 percent of GDP requested by the European Union, it has risen from 2.4 percent in 2013 to an estimated 2.9 percent in 2014. Next year, Budapest will try to reduce its deficit, and the budget is based on a 2 percent increase in state revenue and only a 0.03 percent increase in state expenditures.

In addition, the Hungarian government predicts that economic growth will slow down in 2015. Budapest expects Hungary’s GDP to grow by 2.5 percent next year, down from 3.3 percent in 2014. Several independent think thanks and research groups believe that the country’s economic performance will be lower.

The measures planned for 2015 will hurt some more than others. The Hungarian Parliament has introduced higher taxes on media and energy-trading companies as well as investment funds. Foreign-owned retail chains, however, will be among those harmed the most. Most of Hungary’s largest retail chains are British, German or French.

The budget includes both a hike in fees for food retailers and a shift from a flat tax rate to a progressive tax rate. In addition, Budapest plans to introduce a law requiring that, starting in 2018, retail chains with high annual turnover must close if they do not turn a profit for two years.

The government contends that many foreign-owned retailers accept losses to weaken their Hungarian competitors. Representatives from the sector said that, taken together, these policies would first push the retailers into a loss and then penalize them for that loss.

Tobacco manufacturers and traders will also see negative effects as a result of the new laws. They will be required to pay a one-off health care contribution fee, which will be calculated as a percentage of their revenue.

Hungary’s parliament has also created a state tobacco wholesaler that will act as an intermediary between producers and retailers. Tobacco producers, mainly U.S. and British firms, have said the new rules will lead to job cuts.

At the same time, Hungary’s municipalities are still dealing with more than $4 billion in debt in spite of a relief program recently approved by Budapest. As a result, the national government will push local governments to introduce their own taxes in 2015.

The Foreign Front

The past two months have been complicated on the foreign front for Hungary as well. In October, the U.S. government introduced a visa ban on six unnamed Hungarian officials, most of who are believed to work for the National Tax and Customs Administration. The institution’s president, Ildiko Vida, is the only official who has admitted to having been included on the list.

But Budapest’s public position on the issue is that the United States has not provided enough evidence to back the allegations of corruption used to justify the ban. On Dec. 15, the Hungarian government announced that the U.S. charge d’affaires in Budapest is facing an investigation by Hungary’s Central Investigation Bureau based on libel charges brought against them by Vida.

The U.S. push against Hungary over alleged corruption at the National Tax and Customs Administration comes as the result of two factors. First, two U.S. agribusinesses reported that they were losing money because of value-added tax fraud. Between late 2012 and mid-2014, the U.S. Embassy in Budapest formally discussed the issue of valued-added tax fraud with the Hungarian government on several occasions.

At the same time, the U.S. government is using these cases of alleged corruption as a way to pressure Hungary into continuing to follow the common European policy of sanctions against Russia. So far, Budapest has reluctantly supported the successive rounds of sanctions, but the United States is concerned about Hungary’s recent rapprochement with Russia and joint plans to expand Hungary’s nuclear plant in Pecs.

The United States is also troubled by Hungary’s temporary suspension of natural gas flows to Ukraine and, until it was canceled, the construction of the South Stream natural gas pipeline.

Hungary’s relationship with the European Union is equally complicated. For some time, Budapest has leveled criticism against the European Union and has demanded that powers be given back to national governments. Hungary’s policies under Orban have hurt European companies, targeting Austrian banks, German media companies and others.

These policies have left Orban relatively isolated from Western European governments. Orban will have the opportunity to improve ties with Germany in February 2015, when German Chancellor Angela Merkel will visit Budapest. The meeting likely will focus on Hungary’s treatment of German companies and its ties to Russia.

Hungary in 2015

Next year will be the most complicated year that Orban has faced since he became prime minister in 2011. Opinion polls show that the popularity of his ruling Fidesz party has dropped and different groups have openly expressed their opposition to the government. Orban’s government, however, is not at risk of collapse.

Despite falling approval ratings, Fidesz is still the most popular party in the country by a large margin, and Orban’s alliance retains comfortable control of the Parliament.

Protest groups will continue to be active in 2015 but have yet to evolve into a coherent opposition. Their differing agendas will make it difficult for a single, large group to form and capitalize on social discontent. More important, no significant elections are scheduled for 2015 in Hungary. However, popular discontent with the government will continue to create fertile ground for the emergence of protest groups.

At the international level, Budapest will struggle to maintain its current policies without completely alienating its partners. Hungary can afford to keep itself at a relative distance from the European Union.

It cannot afford, however, to completely sever ties with Brussels — Hungary still needs investment and funding from the European Union and its core member states. More important, the suspension of South Stream will push Hungary to seek cooperation with other regional players to diversify its energy supply, although most projects are still in their early stages.

Budapest is not interested in a permanent conflict with the United States either. While Hungary’s domestic policies will continue to irritate the United States and Europe, Orban’s administration will be careful not to completely alienate Washington.

The Hungarian government will continue using anti-American rhetoric because it plays well to a domestic audience, but it will not lead to concrete action. As the United States desires, Budapest will continue to support the sanctions regime against Russia, wagering that the European Union will ease its stance toward Moscow by mid-2015, when sanctions start to expire and will require unanimity for renewal.

In the wake of the crisis in Ukraine, Hungary sought to balance between an apparently re-emerging Russia and a weakening NATO. This position was part of a broader strategy of balancing between a fragmenting European Union to the west and a more assertive Russia to the east while increasing national control of the Hungarian economy.

But U.S. pressure on Hungary, Germany’s decision to back sanctions against Russia and Moscow’s recent cancellation of the South Stream project have begun to show the limits of Budapest’s strategy. In 2015, the Hungarian government’s main challenge will be to assuage domestic dissent and prevent its own international isolation.

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