The world’s press has been keeping a watchful eye on Hungary’s governing Fidesz party – and especially its leader, Prime Minister Viktor Orbán – since they took power last May. Journalists are usually most interested in questions surrounding Fidesz’s economic policies. But certain reporters, notably from France and Germany, have also put a lot of energy into dissecting Fidesz’s ties to Hungary’s extreme right. Some even accuse Fidesz of being directly responsible for the rise of the ultranationalist Jobbik party, as a piece in Germany’s Spiegel Online suggested September 9.
Such ideas are way off the mark. The question of Fidesz’s relationship with the extreme right is highly complex. What follows is a summary of the events that lead to Jobbik’s breakthrough in Hungarian politics – and Fidesz’s efforts to turn it around.
When state socialism collapsed in 1990, Hungary’s radical left was a spent force in Hungary. No far left-wing movements managed to gain any ground in the early years of Hungary’s new democracy. People who opposed the market-based system therefore found their voice in the extreme right. Even so, it took a long time for the far right to make any political waves. The only exception was István Csurka’s Hungarian Justice and Life Party (MIÉP), which squeaked past the 5% threshold for parliamentary representation in the 1998 election, mostly thanks to low voter turnout. In the 2002 ballot, MIÉP failed to get enough votes to remain in Parliament, mostly thanks to Fidesz.
Once Fidesz became Hungary’s undisputed right-wing standard bearer in the mid-1990s, it began working to consolidate Hungary’s entire right under its own umbrella, from centrists to radicals. The presence of MIÉP made this strategy impossible to realize. Fidesz therefore began reaching out to extremist voters (similar to the way Nicolas Sarkozy’s Union for a Popular Movement has targeted supporters of France’s far right). Fidesz’s efforts halted the growth of the radical right and bounced MIÉP out of Parliament. The price was that Fidesz’s public statements frequently blurred the lines between moderate- and extreme-right points of view.
Fidesz leaders have openly talked about this strategy on several occasions. In January 2007, Orbán himself told ManagerMagazin, “There’s no need to criticize the fact that right- and left-wing parties are trying to integrate radical voters, even though these parties’ policies are otherwise centrist. From a societal point of view, I see this as a benefit. It prevents Hungary from looking like other countries where radical forces are cropping up on both the right and the left. God only knows how long these can be kept below the 20% level or how long they can exist within the framework of Europe’s democratic traditions.”
Fidesz’s politics thus cannot be characterized as extremist. Indeed, the party has always worked to prevent the far right from becoming institutionalized. And for 10 years, it worked.
September 17, 2006 marked a turning point. That was the day Hungarian media got hold of a recording on which former Socialist Prime Minister Ferenc Gyurcsány admitted that he had deliberately lied about the state of Hungary’s economy in order to win re-election the previous April (the infamous “Őszöd Speech”). Rioters poured into Budapest’s streets demanding Gyurcsány’s resignation, plunging the city into chaos for days. The turmoil in Hungary’s capital and the popular anger toward the Socialists gave the extreme right the opportunity it needed to regroup. Old ultra-right formations began to recover and new ones sprouted up.
It soon became clear that Jobbik, a youth movement that became a political party in 2003, was taking the leading role in building its movement. The party had run for Parliament in April 2006 in cooperation with MIÉP and failed to win a single seat. But in the October 2006 municipal elections, Jobbik successfully ran some joint candidates for mayor with Fidesz and other right-wing parties. At the end of 2006, Jobbik launched its campaign against “Gypsy crime,” tapping into popular prejudice against Hungary’s Roma minority.
The watershed moment came in 2007, when Jobbik spawned the Hungarian Guard (Magyar Gárda), a paramilitary organization whose uniforms evoked memories of Nazi-era Hungary. Hungarian courts banned the Guard in July 2009 – but by then, the group had already worked wonders for Jobbik. It was not only a magnet for media coverage, but also served a unifying force for right-wing radicals: Smaller extremist groups that had once competed with each other now lined up behind Jobbik.
Fidesz began to give up on radical-right voters once the Hungarian Guard was formed. At first, Fidesz tried to trivialize Jobbik; when this was no longer possible, the party launched a targeted campaign against right-wing extremists. But Fidesz was unable to derail the radical-right juggernaut: Jobbik won more than 450,000 votes in the June 2009 elections for European Parliament and took more than 850,000 votes in the 2010 parliamentary ballot.
It is clear that Jobbik was helped by public revulsion toward the constant mudslinging that Fidesz and its biggest rival, the Hungarian Socialist Party (MSZP) engaged in between 2002 and 2010. But the main factor behind Jobbik’s rise has been its ability to make political hay out of popular demand for extremist policies. The percentage of Hungarians who are predisposed to radical right-wing ideologies more than doubled between 2003 and 2009, according to Political Capital’s Demand for Right-Wing Extremism (DEREX) Index. The primary driver behind extremist sentiment is a decline in public morale: Many Hungarians feel they can no longer trust the political elite or their governing institutions. The other factor is a rise in prejudice, especially toward foreigners. In 2003, 37% of Hungarians expressed prejudicial sentiments; in 2009 the rate had jumped to 52%, according to DEREX data.
There is little doubt that the Gyurcsány administration bears a large degree of responsibility for the popularity of the extreme right. At the very least, the Socialists failed to counter Jobbik’s rise while in power, just as Fidesz did while in opposition. The main question is whether Fidesz will be able to weaken Jobbik as a governing party. The initial indicators are favorable: Since Fidesz took over last May, Jobbik has lost much of its power to affect public opinion. Whether Jobbik’s political support has declined is a question that will be answered when the votes are counted in the municipal elections October 3.
Prime Minister Viktor Orbán’s Fidesz party is trying to win the October 3 municipal elections using roughly the same tactic that brought it a 68% majority in Parliament last April: Make vague, crowd-pleaser promises without disclosing the dirty details of how they will be fulfilled – or more importantly, who is going to pay for them. There is certainly nothing unusual about politicians making unrealistic promises. But Fidesz has raised it to an art form: When pressed for more information, party leaders not only resort to tried-and-true political subterfuge, they behave as if they have no obligation to explain themselves.
Fidesz’s state secretary in charge of healthcare, Miklós Szócska, last week refused to elucidate his plans to overhaul the medical system, saying it would inappropriate during a political campaign, according to the Népszabadság newspaper.* This is an interesting take on democracy: A sitting government should clarify its budgetary priorities only when the voting is over. The press would have skewered Szócska in the United States, where he earned his master’s in public administration from Harvard University. But his words barely made a ripple on the Hungarian political radar screen.
Leading Fidesz candidates see no reason to defend their positions in public debates – a basic tenet of democracy in developed countries. István Tarlós, the runaway favorite to become Budapest mayor, refuses to go head-to-head with his rivals. His spokeswoman said Tarlós prefers to spend his time with the people of Budapest rather than other politicians. Ákos Kriza, Fidesz’s mayoral candidate in Hungary’s third-biggest city, Miskolc, did not show up for a September 15 debate with incumbent Socialist Mayor Sándor Káli and independent Ákos Hircsu. This means neither Tarlós’ nor Kriza’s ideas will be subject to the kind of scrutiny that only a debate can bring. Of course, both men have a strong precedent: Orbán refused to debate other parties’ nominees for prime minister ahead of the April 11 ballot.
Fidesz is also keeping its plans for the 2011 budget under wraps. On July 5, Fidesz restored an old law that extends the deadline for the government to present its draft budget until Oct. 31 in election years. Without this change, the Orbán administration would have had to send its 2011 spending plan to Parliament before the municipal vote. It is understandable that a brand-new government needs an extra month to get its spending priorities in order. However, Fidesz is facing an EU-imposed budget-deficit target of 2.8% of GDP for 2011, which would be a record-low shortfall since 1995. The budget is therefore bound to bring some negative news, whether it be delays in promised income-tax cuts, lower social spending or sector-specific corporate levies similar to the “bank tax.” Problem is, voters will not know the details until after the polls close.
Nonetheless, Fidesz is poised to sweep every county and nearly every major city on election day, if opinion polls are correct. Popular revulsion toward the main opposition party, the Socialists, is so strong that many Hungarians will stick by Fidesz no matter what they say. Perhaps it would be wise to recall the words of U.S. President Andrew Jackson: “Eternal vigilance by the people is the price of liberty.” In modern-day parlance: “Democracy: Use it or lose it.”
*Szócska’s office declined to confirm or deny whether the Népszabadság quote was accurate.
– Alex Kuli
Few institutions generate stronger hatred among emerging-market investors these days than Romania’s Constitutional Court. By striking down the Romanian government’s pension cuts June 25, the court sparked financial panic that led to a general loss of investor confidence in the entire Central and Eastern European region. As a result of the court’s ruling, the IMF decided to postpone its June 28 review of its €20 billion standby loan; fund managers are currently discussing the fate of the loan’s next €900 million tranche – money that the country desperately needs.
The ruling sent credit-default swap prices skywards while currencies across the region tumbled. The Romanian lei hit a record low of 4.37 to the euro on June 28. Not only investors who took the hit: Households and companies that have foreign currency-denominated loans are now at a higher risk of default than ever before, especially in Hungary, where more than 600,000 households have foreign-currency credits. Weaker currencies and higher debt-service expenses can hamper economic recovery; moreover, a rise in non-performing loans may destabilize the banking sector. It would be unjust to blame Romania’s Constitutional Court for all Central Europe’s economic hardships ¬ but its ruling is helping to destabilize the region’s still-unstable economies.
After the court handed down its decision, Romania’s government decided its only recourse was to raise the value-added tax to 24% from 19% as of July 1, or lose its IMF lifeline. Romania now has the second-highest VAT in the European Union behind Hungary, Sweden and Denmark at 25%. This kind of austerity measure will affect all Romanians, and not just pensioners. Is there anyone in Europe who is satisfied with the court’s action (besides maybe a few hundred thousand Romanian retirees)? The fact that the Constitutional Court is one of the most important democratic counterweights to the government is poor comfort to the millions who must bear the brunt of the ruling.
Across the border in Hungary, the problem is just the opposite. There, the governing Fidesz party is systematically eliminating institutional checks on its power, emboldened by a two-thirds parliamentary majority that allows the party to amend the Constitution singlehandedly. Last month, Fidesz MPs watered down the Constitutional Court’s independence by changing the rules for nominating the judges. Under the old system, each parliamentary caucus had the right to delegate one member to a committee that would nominate a judge by consensus. The full Parliament would then vote on the nominee, with a two-thirds majority required for confirmation to the court. Under Fidesz’s new rules, the governing majority will nominate Constitutional Court judges. Parliament still needs to confirm each candidate with a two-thirds majority, but Fidesz controls 68% of the seats. Fidesz can thus appoint and elect Constitutional Court judges on its own.
Fidesz’s efforts have met with harsh criticism at home and abroad. Outgoing President László Sólyom expressed his displeasure by vetoing the law on Constitutional Court nominations. However, Hungarian law makes it easy for MPs to override presidential vetoes, so Sólyom’s gesture was largely symbolic.
Romania and Hungary are grappling with problems that are mirror images of each other: In Hungary, Fidesz is meddling with nomination processes to switch off institutional controls on its powe; the Constitutional Court is just the tip of the iceberg. In Romania, an overly independent Constitutional Court is wreaking havoc across the region. The underlying tension is nothing new: Economic and governmental efficiency and the high principles of democracy are more often enemies than friends.
On the other hand, Fidesz doesn’t necessarily need the Constitutional Court to drive Hungary’s economy to near-bankruptcy; as the events of June 2010 proved, Hungary’s government is perfectly capable of doing that on its own.
Alex has just arrived back from Brussels, where he had the honour of posing a question to Gert-Jan Koopman, economic affairs adviser to European Commission President José Manuel Barrosso:
Alex: In Hungary, the people who are almost sure to win next April’s elections are talking about letting the budget deficit slide to 7.5% instead of the 3.9% agreed with the IMF. Since the country is small and is not a member of the Eurozone, would this pose a problem for the European Commission?
Koopman: “That would obviously be a problem… Hungary has a convergence plan and we would hope that Hungary sticks to it as much as possible.”
“It’s true that Hungary is a small country that doesn’t use the euro. But if every member starts relaxing its budget discipline… then we wouldn’t have much discipline anymore.”
This response strengthens our opinion that Fidesz, which is all but certain to win Hungary’s April elections with an unassailable majority, will face huge difficulties if they ignore the 2010 budget-deficit target of 3.9% of GDP and try to implement fiscal stimulus policies. The main barrier is not IMF, as several analysts have suggested, but rather the European Union as it trembles in the shadow of the financial markets.
In our previous analysis we described the situation following the Greek crisis as possibly advantageous for Hungary:
Predictably, the Greek crisis caused a domino effect in emerging markets as investors became skittish. The prestige of the euro has also been seriously damaged. Even so, Hungary should be grateful to Greece. After 2006, Hungary gained a reputation as the “liar of Europe” – not just because of former Prime Minister Ferenc Gyurcsány’s infamous “Oszöd speech,” but because of Hungary’s much higher-than-expected budget deficit in 2006. Hungary can now pass on this title to Greece… By tightening their belts and pursuing strict fiscal policy during the recession, Hungarians have become models of prudence, to such an extent that Greek Prime Minister Geórgios Papandréou attempted to calm the markets by saying he would follow the Hungarian path.
At the same time, we added:
The bad news is that Fidesz, the party that is all but sure to win this April’s election, cannot let the deficit climb back upwards.
Fidesz’s chances of renegotiating Hungary’s $15.7 billion (€11.5 billion) loan from the IMF may be better. We should recall the rumours that the IMF had agreed to allow Fidesz to run a deficit of 5.5% of GDP for 2010. While this hearsay has proven false (Fidesz, still an opposition party, is not a typical negotiation partner for IMF), it is based on the fact that the IMF has been open to modifying the terms of its loans in the past.
Fidesz will have a much tougher time convincing the EU that it needs to loosen its deficit target. Koopman’s comment reflects fears of a domino effect – if Hungary wants to loosen the conditions, everyone else will, too. Given the shock over the Greek crisis, the Hungarian economy’s less-than-stellar reputation, and past experience, fears of Hungary falling back into a state of “fiscal alcoholism” would be justified.
Fidesz seems to be getting the message: The party’s policy wonks are talking less and less about fiscal stimulus and Fidesz’s election manifesto is cautious on this question. On the other hand, Fidesz still hopes it will have some room for bargaining – and they probably do. Former National Bank of Hungary Governor Zsigmond Járai, an economist close to Fidesz, recently declared that a 5% GDP deficit would be acceptable for both the IMF and the EU. Given that Fidesz’s “offer” was 7-8% several months ago, we can see a clear tendency toward improvement. And, since serious doubts have arisen about Hungary’s ability to fulfil its 2010 deficit target, 5% may prove quite realistic.
Even if the IMF and the EU are willing to let Hungary’s deficit rise slightly (8% of GDP is out of the question), the price of their indulgence may be deep and extensive economic reforms – an extremely unappetizing prospect for the next government.
Peter Kreko-Alex Kuli
Over the past few weeks I have been meeting with leading analysts from banks, funds and other financial institutions from all over the world. Everybody is interested in what’s going to happen to Hungary after the elections and what risks the future may hold. I have come to realize that there are two common misunderstandings about Hungary.
The first is about the euro. Accession to the euro zone is not the focus of the election campaign at all. Except for the far-right Jobbik party, all mainstream political parties agree that Hungary needs to adopt the euro as soon as possible. This is actually the only political issue that enjoys widespread political consensus. Parties don’t campaign for or against the euro and don’t expect any political benefits from doing so. Financial analysts tend to see the euro as essential for political success, but that’s not the case. The issue is simply not on the table. Of course, should Jobbik perform surprisingly well in the elections (which is exactly what I anticipate), the euro may get into the spotlight. This scenario is unlikely, since Jobbik will not have any real power unless it becomes Fidesz’s coalition partner or wins the elections. Neither scenario can be excluded, but at this stage neither has much chance.
Certainly Fidesz has not helped foreign analysts better understand its stance on euro. Fidesz’s economic- and fiscal-policy talking heads have declared several times that boosting the economy (even at the price of boosting the deficit) is a priority, while introduction of the euro is not. There is a persistent conflict within Fidesz between the desire for short-term economic growth and quick Eurozone accession.
The second misunderstanding stems from Western political experience. In old democracies, voters usually reward or punish the incumbent government based on the country’s economic situation. If the economy is doing fine, voters tend to support the incumbent party; if not, they vote for the opposition. This is not valid for Hungary. The country’s economic performance has never had any effect on the outcome of the elections. There is no correlation between support for the government and GDP growth.
At the same time, Political Capital’s research has found a strong correlation between support for governing parties and the perceived state of the economy and the perceived outlook for living standards. Hungarian voters are strongly influenced by perception — and there is frequently a disconnect between the popular perception of economic growth and reality. This is why many of the analysts I met were surprised that Hungarians don’t appreciate the caretaker government’s performance.