Hungary faces EU judgement day that could hammer its economy

Leonardo Rasaki

Hungary is facing a reckoning with Brussels over corruption concerns that could cost Budapest billions. 

The EU appears to be about to impose financial penalties on the government of Viktor Orban, amid alleged fraudulent behaviour and rule of law violations. 

Though not set in stone, the move could cost Hungary billions of euros in EU funding, crippling its already faltering economy. 

A decision is expected on Sunday during a “college readout” by the European Commission, the EU’s executive arm. 

In a bid to allay Brussels’ fears, Budapest announced today that it was about to vote on laws aimed at curbing corruption.  

The conflict between Hungary, one of the bloc’s largest net beneficiaries, and the EU has steadily grown since Orban’s ruling Fidesz party came to power in 2010. 

The right-wing, nationalist political party is accused of degrading the country’s democratic institutions, curbing media freedoms and infringing minority rights — something the Hungarian President denies. 

On Friday, the European Parliament published a report calling Hungary an “electoral autocracy”, which Orban blasted as a “joke”. 

“I find it funny,” Orbán said during a visit to Belgrade, Serbia’s capital. “It’s the third or fourth time they’ve passed a resolution condemning Hungary in the European Parliament. At first, we thought it was significant. But now we see it as a joke.”

However, the mood in Budapest was more consolatory on Saturday. 

Gergely Gulyas, Orban’s chief of staff, told reporters that MPs would vote within days on measures intended to end the standoff, including an independent anti-corruption authority and greater monitoring of how EU funds are spent. 

Tensions between Budapest and Brussels — aggravated by Orban’s criticism of EU policy towards the Ukraine war — are coming to a head, partly because of allegations that funding from the bloc is being misused by the government. 

Hungary’s economy is currently experiencing its highest inflation in nearly 25 years, while its currency recently reached record lows against the euro and dollar. 

“When Fidesz came to power, I saw more and more that a very serious organisation was beginning to develop throughout the country, whose main task was to steal as much of the European Union’s money as possible,” said Akos Hadhazy, a former member of Fidesz. 

Hadhazy left the party in 2013 after becoming aware of what he described as unchecked corruption and bribery in the halls of power. 

Orban in the past has stonewalled allegations of corruption, dismissing a US report on the subject as a “flimsy piece of paper” in 2014. 

The EU was appearing to be hardening its stance towards Orban, following the failure of previous disciplinary measures to bring Hungary in line with the bloc’s values, according to Peter Kreko, director of the Budapest-based think tank Political Capital. 

“EU institutions learn slowly, but they learn,” he said. “More and more people in the Commission and in the European Union know about the negotiation deception tactics of Hungary, as well as about the nature of the Hungarian political regime.” 

It is unclear how much money Hungary could lose if the funding is cut. 

In the EU’s 2021 – 27 budget, it receives 22 billion euros from the bloc, which accounts for around 70% of the funding for some programmes, as stated in an internal July document by Budget Commissioner Johannes Hahn.

Kreko, however, was doubtful Orban’s government would change its ways. 

“I would say that the engine of the Orban regime is nepotistic corruption,” he said. “So I think we can be rather skeptical about that how much the government really wants to step up against corruption, which is part of the nature of the regime.”

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