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.
János Lázár, head of the Prime Minister’s Office, had three foreign trips in the previous term of the government which were remarkable for two reasons. The hotel bills were unusually high and what happened on the trips was covered with a lot of secrecy.
A public information lawsuit launched by a reporter of Direkt36 (with the legal assistance of Transparency International), however, produced some details.
What we know
Where did Mr. Lázár travel and when? England – November 27-29, 2012; Switzerland – March 22-23, 2013; Italy – July 26-27, 2013.
How much were the hotel bills? England: 920.019 HUF (EUR 3.000), Italy: 582.000 HUF (EUR 1.900), Switzerland: there is some confusion here because the Prime Minister’s Office originally said that he hotel bill was 469.878 HUF (EUR 1.535) but now, more than a year later, they claim that it was 189.478 HUF (EUR 619). We asked for clarification but they have not responded yet.
Why do these numbers appear high? The 2012-2013 travel figures of the Prime Minister’s Office show that hotel bills of officials in the same position as Lázár did not even come close to the hotel expenses of these three trips.
How many nights? János Lázár spent 2 nights in England and 1 night both in Switzerland and Italy. This means that altogether it took 4 nights to produce hotel bills worth nearly 2 million HUF or EUR 6.535 (based on the original figures of the Prime Minister’s Office).
How many people travelled? Initially, the Prime Minister’s Office tried to dismiss the questions by saying that the hotel bills covered a whole delegation’s expenses. Later they revealed, however, that the delegations had only two members on each trip: János Lázár and one of his aides. The hotel bills appear extraordinarily high compared to other officials’ trips even with counting two travellers.
Who was Lázár travelling with? Last September, Lázár told Index that he was accompanied on the trips by either Zsigmond Perényi or Balázs Sonkodi, both of whom are working for him at the Prime Minister’s Office. Lázár said that they were helping him as interpreters.
What happened on these trips? Of the visit to Switzerland, the Prime Minister’s Office said that Lázár had „a meeting with a German citizen over the German-Hungarian and the Hungarian-Russian relations”. Of the trip to Italy, the office said that Lázár had talks with a partner about „ the Hungarian assets that were moved to Switzerland illegally”. Of his visit to England, Lázár said in an interview that he went there to meet his „counterpart in intelligence”.
What we don’t know
Where did Lázár stay? Although a legally binding court decision forced the Prime Minister’s Office to disclose the names of the hotel, this has not happened yet. The office turned to Curia, the supreme court of Hungary, for a legal review. Lázár had suggested that he would do everyting he can to keep the hotel names secret. In his interview with Index last September, he said that that the hotel names „can not be revealed”.
Who did Lázár meet? The Prime Minister’s Office and János Lázár has declined to disclose this, arguing that revealing these details would hurt national security. During the lawsuit they acknowledged, however, that only the details of the England trip were recorded in a secret document but the Swiss and Italian visits do no have similar protection. According to a recent court decision, the Prime Minister’s Office has to disclose the details of the meetings (the names of the officials Lázár met and the subjects they discussed) on these two trips. The court ruling is not legally binding yet.
BUDAPEST (Reuters) – Its currency is wounded and its economy besieged by sanctions, yet Russia still has money to spare for potential allies overseas. Even as it scrabbles for foreign funds, Moscow is poised to make a 10 billion euro ($10.8 billion) loan to Hungary, one of the European Union members most sympathetic to it.
Budapest plans to draw on the first tranche of the loan this year, a Hungarian government commissioner told Reuters.
Officially the loan is to finance the expansion of the Paks nuclear power plant, Hungary’s only atomic power station, which supplies about 40 percent of the country’s electricity. But critics say there is another motive as well: Russia buying favor with a European Union (EU) government.
“This Paks deal is camouflage,” said Zoltan Illes, a former lawmaker in the ruling Fidesz party who was a state secretary for the environment until 2014. “This is a financial transaction, and for the Russians this is buying influence.”
Illes, who opposes the use of nuclear energy, believes the deal is more about pumping money into the economy of Hungary, where Prime Minister Viktor Orban faces re-election in 2018, than providing electricity.
For years, Moscow has used commercial relationships – in particular gas sales – to exert influence across Europe. Now those methods are coming under closer scrutiny after the United States and EU imposed tough economic sanctions on Russia for annexing Crimea and supporting separatist fighters in the east of Ukraine.
In return, Russia is striving to retain ties, commercially and diplomatically, from the Baltic states to Europe’s southern rim. The loan to Hungary, agreed last year, is seen by some as part of that undeclared struggle for influence.
Government spokesman Zoltan Kovacs rejected such claims. “The rationale of the Paks investment is not about election campaigns and chances. It serves the country’s long-term energy security,” he said. He added that Russia was helping to build reactors in other countries and that Russia had less economic influence in Hungary than in other Western European states.
Officials in Moscow and Budapest say the nuclear deal was concluded purely on commercial and energy grounds and was good for both countries.
Hungarian Foreign Minister Peter Szijjarto told Reuters the deal was “the business (transaction) of the century.” Rosatom, the Russian state nuclear firm, and the Russian finance ministry responsible for the loan to Hungary did not respond to requests for comment.
Hungary had initially planned to put the contract to expand Paks out to tender, and some Western firms showed interest, along with Rosatom. But Reuters found that Hungary abruptly dropped the idea of a tender.
Specialists in the Development Ministry who had worked on plans to expand the Paks plant were sidelined, said two people familiar with Hungary’s energy sector. Instead, a small group close to Prime Minister Orban chose to award the contract to Rosatom. Russia offered a loan as part of the deal.
Kovacs, the government spokesman, said: “The whole project is being carried out with very serious professional preparations. Decisions of a political nature are naturally made by politicians.”
Since the agreement was struck, Orban has appeared much more friendly towards the Kremlin than his EU peers have done. He has said Europe was shooting itself in the foot by imposing sanctions on Russia, though he did not go so far as blocking sanctions. Orban is also leading a push for a new pipeline to take Russian gas to southeast Europe, bypassing Ukraine.
Last month, Orban hosted Putin in Budapest. He is the only EU leader to invite the Russian president on an official bilateral visit since Malaysian airliner MH17 was shot down over Ukraine in July 2014. Western officials say the plane was most likely brought down by a Russian missile; Russia denies any responsibility.
Standing alongside Putin in the Hungarian parliament, Orban adopted a conciliatory approach to Moscow. He said EU governments were “chasing ghosts” if they believed they could get by without cooperating with Russia.
Asked whether Hungary was being more friendly towards Russia because of the Paks loan, Kovacs said: “Russia is important from an energy aspect, what’s more, it is a strategic partner … But this is not a question of ‘friendship.'”
Orban regularly flouts EU rules with policies that critics label populist. Since he was elected with a two-thirds parliamentary majority in 2010, Orban has imposed windfall taxes on banks, telecoms companies and retail firms to keep the budget deficit in check.
He’s clashed with Brussels over curbs on the media. And he has consolidated his power with measures that critics say weakened democratic checks and balances – an allegation the government denies.
At the same time, he is not a natural Kremlin ally. As a young student in 1989, he burst onto the political scene with an impassioned speech demanding the withdrawal of Soviet forces from Hungary. He and Putin appear to have little personal affinity; at their Feb. 17 meeting in Budapest, their body language was stiff.
However, people who know Orban say he is a pragmatist. “I think power is incredibly important to him per se,” said John Alderdice, who was a leading member along with Orban of an organization called Liberal International, a global network promoting liberalism. “The issue (for him) is: ‘How can I get into power, and hold onto power.'”
In November 2010, soon after he was elected, Orban met Putin in Moscow for talks on economic issues, including further cooperation at the Paks plant. The plant is a huge concrete structure built in the 1970s by Soviet technicians on a floodplain next to the Danube River. Orban was looking to spur growth in Hungary’s economy, and Russia could help him achieve that.
The two men talked for hours, including over lunch, said a source familiar with the discussions. But no decision was taken on the Paks project.
Instead, a team of energy specialists at the Development Ministry in Budapest prepared for an open tender for a contract to expand the plant, according to a former energy official.
In addition to Rosatom, French company Areva expressed interest in bidding, as did U.S. firm Westinghouse, according to three people with knowledge of the preparations.
In early 2013, the plans for a tender were still on track, according to comments by the chief executive of MVM, a Hungarian state-owned energy group, published in the journal of the Paks power station. Bidders were told then that a tender would go ahead, according to a diplomatic source in Hungary.
Late that year the international context changed. In November 2013, then Ukrainian President Viktor Yanukovich rejected an association agreement with the EU and instead signed an aid deal with Moscow.
Thousands of pro-Western protesters camped out in Kiev’s central square, determined to make Yanukovich stick with the EU agreement or give up power. The stage was set for the biggest standoff between Russia and the West since the Cold War.
In Budapest, too, there was a change of tack. On Dec. 17, the parliament’s economy committee was convened at one day’s notice. Antal Rogan, a lawmaker with the ruling Fidesz party and head of the committee, called the meeting.
Orban’s chief of staff, Janos Lazar, told the committee that the government was in advanced talks with Russia on extending the life of the Paks plant. “It was sudden,” said Bernadett Szel, an opposition lawmaker.
Pal Kovacs, who at the time was state secretary for energy and had a leading role in preparations for the Paks tender, had not been told the tender was being scrapped, according to a person with links to Hungary’s state energy sector. The source said the deal with Russia was concluded by members of the prime minister’s inner circle.
Government spokesman Zoltan Kovacs said parliament’s approval of the deal showed it had broad political support.
Asked about the decision to scrap the tender and award the contract to Rosatom, Westinghouse said the decision was “abrupt.” Areva declined to comment. Government spokesman Kovacs said: “Of course, the agreement on concrete conditions was made at a given point of time, but it would be a mistake to say it was ‘abrupt.'”
Attila Aszodi, the state commissioner in charge of the Paks expansion, said the Rosatom deal stood out because the Russians had offered long-term financing for the entire construction project, something he said the other prospective bidders would not provide. He told Reuters in a December interview that a tender is “a good tool; however, it is not the silver bullet.”
The Hungarian government has also pointed out that the existing reactors at Paks were built with Soviet nuclear expertise.
Critics say the deal’s terms are generous. Hungary will begin repayments on the loan only once the new reactors are up and running in 2026 and will repay the loan over 21 years. Until 2026 the interest rate will be just under 4 percent, rising to 4.5 percent afterwards and 4.8 to 4.95 percent in the final 14 years.
The terms compare well to market rates for financing, although conditions in every debt deal are different. The Russian loan finally agreed will cover 80 percent of the construction costs, and Hungary will put up the rest. Hungary plans to start drawing on the loan this year to finance planning work for the new reactors, Aszodi told Reuters.
Moscow has voiced its happiness with Hungary’s recent support for Russia. In November last year, Russian Foreign Minister Sergei Lavrov said that Hungary – unlike other ex-Communist states in the EU – conducts itself “responsibly” and does not succumb to “Russophobic approaches.” At a Kremlin ceremony, Putin called Hungary one of Russia’s most important partners.
Orban’s invitation last month added to the mutual appreciation. During the visit, Putin and Orban agreed that Russia would give Hungary several years’ grace to pay for gas that Budapest had committed to buy but never used.
For Orban, though, the cost of staying close to Russia has gone up as the Ukraine crisis has deepened. Some EU governments are uncomfortable with what they see as a drift by Hungary into the Kremlin’s orbit. The United States has also criticized some of Orban’s policies towards Russia, and one U.S. diplomat said there had been a lack of transparency in granting the Paks contract.
Illes, the former environment secretary, said the Paks deal was typical of Orban’s pragmatic style of governing. In the short term he reaped domestic political benefits against opponents, and in the medium term the project will generate jobs.
But for Orban, he said, “long-term considerations, they don’t exist.”
(Additional reporting by Christian Lowe in Warsaw, Karolin Schaps and Nina Chestney in London, Barbara Lewis in Brussels, Geert de Clercq in Paris, and Vladimir Soldatkin and Maria Tsvetkova in Moscow. Editing by Richard Woods and Philippa Fletcher)
Hungary has agreed to EU demands that it diversify its nuclear fuel supply away from Russia, removing one of the main obstacles to the Kremlin-backed expansion of a landmark atomic power plant.
Hungary’s €12.5bn project to build two reactors in the town of Paks, largely financed by Moscow, has become a test case for Brussels as it seeks to break the EU’s dependence on Russian energy sources.
This month, the European Commission threw its weight behind a decision by Euratom, the EU’s atomic fuel watchdog, to reject the original terms of the supply contract between Budapest and Moscow, complaining of the exclusive supply rights given to Russia.
But Viktor Orban, Hungary’s prime minister, on Friday signalled the government could make adjustments to meet EU objections by modelling the deal on terms for a Finnish nuclear energy project involving Rosatom subsidiary TVER, which is due to begin operation in 2024.
“We thought that our contract is acceptable as is, but we left ourselves some room for manoeuvre, so what is good for Finland will be also good for us,” Mr Orban told reporters following last week’s EU leaders summit in Brussels.
János Lázár, a senior Hungarian minister, travelled to Brussels to meet Miguel Arias Canete, energy commissioner, on Tuesday night.
According to officials close to the talks, Hungary agreed to make important concessions to revive the Paks contract. Russia will now supply fuel to Paks for 10 years before the supply contracts are opened up to international competition, allowing companies such as the Japanese-US group Westinghouse to bid in the future.
Under the terms of the first rejected deal, Hungary had granted Russia exclusive rights for 20 years, EU officials said.
EU officials also said that they had insisted that alternative fuel suppliers should be able to test the suitability of their fuel for Paks, from the outset of the project.
“Hungary has accepted the comments of the European Commission . . . we have succeeded in finding a solution,” Mr Lázár told MTI, the Hungarian state news agency on Tuesday evening, adding that the changes were acceptable to Rosatom.
A government press release on Wednesday added: “All obstacles have been removed from the way of solving the issue of the fuel supply contract.”
The so-called Paks II project has drawn criticism from opponents who claim it deepens Hungary’s energy reliance on Russia at a time when European countries are seeking to wean themselves off dependence on Russian oil and gas.
Despite reaching a deal on fuel supply, Hungary still needs to overcome concerns among EU officials about the way in which contracts for the project were awarded to Rosatom subsidiaries in 2014 without a public tender.
The European Commission is also investigating whether the Paks deal violates EU rules on state aid.
The Budapest Court of Appeal upheld the ruling that forces the Prime Minister’s Office to publish details of two trips of János Lázár, the government official leading the office. The office has to disclose the names of the hotels where Mr. Lázár stayed at during his visits to Switzerland and Italy in 2013, according to the decision announced on Thursday. The office also has to reveal how much was paid at each hotel.
The Prime Minister’s Office will have 15 days following the delivery of the written ruling to release the information which may shed light on why the hotel bills on these two trips were much higher than bills on other high-level government officials’ trips.
Mr. Lázár said that he would turn the to the Curia (the highest judicial authority in Hungary) for a review of the sentence. This, however, should not affect the execution of the decision of the Court of Appeal.
The public information lawsuit was launched by András Pethő, a co-founder of Direkt36, last year when he was still working for newsportal Origo. Transparency International (TI) provided legal assistance for Pethő, who was represented in the Budapest Court of Appeal by Daniel Karsai, an attorney co-operating with TI.
The lawsuit started after the Prime Minister’s Office had refused to answer questions about some of Mr. Lázár’s trips that resulted in unusually high hotel bills. On a 2012 November three-day trip to England the hotel stay cost more than 3000 euros, on a 2013 March two-day trip to Switzerland it was nearly 1547 euros, and on another two-day trip to Italy in July 2013 it was more than 1920 euros. No other trips of other officials of the Prime Minister’s Office carried hotel bills that were nearly as high as these in 2012 and 2013, a period examined by Pethő.
The Prime Minister’s Office argued that the trips’ details can not be released for national security reasons. They said that the trips were related to Mr. Lázár’s duties as the supervisor of the Information Agency, the government’s intelligence office.
The latest ruling does not cover Mr. Lázár’s visit to England. The Prime Minister’s Office disclosed during the initial trial in the lower court that there was a confidential document pertaining to that trip. The court requested the document but the government has failed to provide it yet, delaying the decision. The trial over the England trip is still continuing at the lower court, with the next hearing scheduled for April.
Mr. Lázár issued a statement after the lower court’s decision on the Swiss and Italian trips last May. He announced that he would pay back the hotel expenses to the state budget. He also said that he would be ready to provide the court with details about his “travel habits”. Later, however, his office appealed the decision.
Hungary’s most important goal in foreign policy next year is to strengthen its alliance with Germany, a minister told the weekly Figyelo on Thursday ahead of an expected visit by Chancellor Angela Merkel.
Janos Lazar, the minister in charge of Prime Minister Viktor Orban’s office, said the conflict between Ukraine and Russia could easily escalate further into a war which could pose a threat to ethnic Hungarians living in Ukraine.
“For the Hungarian government the most important is to guarantee their security and future,” Lazar was quoted as telling the newspaper.
He said Hungary’s stance was that peace talks, not only economic sanctions, were needed to defuse the conflict, and it was Germany that could resolve the situation.
“From the aspect of Hungary, the most important world leader today is Angela Merkel,” Lazar said. “For 2015, our most important foreign policy goal is to strengthen our alliance with Germany.”
His comments could reflect an attempt to court its main ally within Europe after a period of seeming to move closer to Russia, now facing its own economic turmoil, to secure trade and investment.
Earlier this year, Orban called for ethnic Hungarians in neighbouring Ukraine to be granted autonomy. His comments prompted Kiev to summon the Hungarian ambassador for an explanation and drew criticism from regional heavyweight Poland.
German media has reported Merkel is due in Budapest in February, but Lazar did not give a date.
In the five years since he was elected prime minister, Orban has courted controversy with Brussels and Washington and has irked some German interests by imposing big taxes on telecoms firms, including Magyar Telekom, and broadcaster RTL, which belongs to the Bertelsmann group.
Striking a conciliatory tone, Lazar said the disputes with these companies should be settled via negotiations.
Lazar also said Hungary would issue an international tender soon to hire foreign managers to work in the management of its existing Paks nuclear plant, to work out an operation model that could be competitive for the long term.
He said this would be useful for the planned expansion of the nuclear plant, which Russia’s state atomic energy corporation Rosatom will build.
Orban has been criticised for a lack of transparency in granting the deal to Russia without a tender, a move which has been seen as part of his drift into the Kremlin’s orbit.
“The implementation of the Paks 2 project will be probably carried out as part of an international consortium in the end. I hope the Russians will grant deals to Western European suppliers as well …” He did not name any potential suppliers.
Hungarians are commemorating the anniversary of their 1956 revolution against Soviet rule but many senior figures in the ruling Fidesz party believe Prime Minister Viktor Orban is steering the country back to its authoritarian past.
There are growing divisions in the right-wing party over Mr Orban’s steps to turn Hungary into an “illiberal democracy”, despite a third election victory this year:
In local elections on 12 October they won 19 of Hungary’s 21 larger towns and cities, including the capital, Budapest
In the European elections in June they won 12 of Hungary’s 21 seats
In parliamentary elections in April they won a second two-thirds majority in a row
Even though a majority of Hungarians oppose their policies – 2.8 million against to 2.3 million in favour in April – opposition parties are weak and divided, with the exception of the radical nationalist Jobbik movement, which has emerged as the main rival to Fidesz.
Viktor Orban has consistently spoken out against EU sanctions against Russia
But the mood in the corridors of power is wretched. In a country where backbench rebellions are almost unknown, politicians contend themselves with hints of dissent in anti-government media, and more open attacks on Viktor Orban’s policies in pro-government media.
A new, pro-Russian foreign policy sits particularly awkwardly in a party which rose to fame in 1989 as the first to demand publicly that Soviet troops leave Hungary.
It began with a photograph of Viktor Orban shaking hands with Russian President Vladimir Putin in January, after signing a highly controversial nuclear expansion deal.
When the Russians annexed Crimea in March, the Budapest government criticised the beleaguered Ukrainian government in Kiev, and stated publicly that all it cared about was the Hungarian minority in western Ukraine.
In July, Hungary’s embassy in Estonia was closed down at a moment when the Baltic states – Hungary’s Nato allies – felt under most pressure from Moscow.
Mr Orban has consistently opposed EU and US sanctions against Russia, on the grounds that “we should be doves in economic policy, and hawks in defence”.
Hungarians have been commemorating the 1956 uprising against the Soviets when 2,000 civilians died
In an August speech to Hungary’s ambassadors, he called openly for an unprincipled foreign policy, placing foreign investment in Hungary above any moral considerations such as a trade partner’s human rights record.
And in September, within an hour of Mr Orban meeting with the chief of Russia’s state-owned gas giant, Gazprom, the reverse flow of gas to Ukraine in Hungary’s pipelines, which had been annoying Russia, was stopped.
Dismay is growing within Fidesz at his domestic policy too: at government corruption, the playboy lifestyle of numerous party officials, and an economic policy which consistently suppresses the value of the Hungarian currency, the forint.
There is also increasing rivalry between the oligarchs: the rich men who fund the party from behind the scenes, on a model learnt from the former communists.
“Unprincipled decisions cause harm, even if that is not visible in the short term,” parliament speaker Laszlo Kover, a founding member of Fidesz and close friend of Mr Orban said in August in the main pro-government weekly newspaper.
This was in reply to a question on the rise of communist-era secret service loyalists and businessmen with offshore accounts in government ranks.
The editor of the same weekly, Gabor Borokai, himself a former Fidesz government spokesman, lambasted what he called a “self-assured and arrogant social group” of young Fidesz leaders who believed they were beyond the law. This was apparently a reference to 36-year-old Foreign Minister Peter Szijjarto and his friends.
The government has sparked protest by investigating non-governmental organisations
Another intra-Fidesz dispute has broken out over the extensive power of Janos Lazar, 39, the minister in charge of Mr Orban’s office, who is responsible for the daily running of the government.
Other Fidesz officials, led by the head of the parliamentary group, increasingly regard Mr Lazar as a reckless and dangerous figure.
“From Hungary to Egypt, endless regulations and overt intimidation increasingly target civil society,” US President Barack Obama said in September. This followed a government investigation into non-governmental organisations partially-funded by Norway, over alleged financial mismanagement.
The latest insult to split Fidesz came last week when the US government banned six unnamed Hungarian public officials from visiting the United States.
While the most hysterical pro-government commentators called for revenge, investigative reporters suggested that the head of the Hungarian tax authority was on the list for trying to bribe US businessmen.
That was followed this week by anger at a new government plan to tax internet use.
“Orban’s illiberal democracy is the expression of a power structure where all power… resides at the centre,” says Peter Rona, an Oxford-based economist and former member of the supervisory board of the Hungarian National Bank.
Unlike almost all other commentators, however, he can see an end to Fidesz’s rule.
Hungarian governments are traditionally brought down by the misguided policies of their central bankers.
And Mr Rona thinks Fidesz could fall too because the determination of national bank head Gyorgy Matolcsy, a former Orban minister, to keep the forint weak at all costs.