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mariacallous · 6 months ago

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A new generation of street protestors decry how Orban has failed to fully realise an opportunity rarely seen in Hungary’s 1,100-year history: a chance to become a successful European country.

Anniversaries come and go, but Viktor Orban's government has been busy ignoring them. Twenty-five years of NATO membership passed almost unnoticed in March, and the country's leaders are making no fuss about Hungary’s 20th birthday in the EU on May 1.

Perhaps with good reason: there is little to celebrate. From a socio-economic perspective, Hungary’s two decades in the EU have been one big missed opportunity. Politically, it's love turned into war.

“We had high hopes. We all expected that EU membership would pave the way for us to quickly catch up with the West,” Geza Jeszenszky, a former Hungarian foreign minister, who presented the country’s application for membership in Athens in April 1994, tells BIRN.

A historian and former diplomat who also served as ambassador in Washington and Oslo under two Orban governments (until 2014, when he very publicly resigned), Jeszenszky is deeply disappointed. “All the other countries in the region made better use of the generous EU funds and opportunities than we did,” he laments bitterly. “This is a historic sin by Orban – and I hope history will judge him for it.”

Story told in numbers

This disappointment is numericized by the statistics. Hungary, which used to be a forerunner in Central Europe up to 2000, has now fallen behind most of its peers by most measures.

While the Czech Republic has reached 90 per cent of the EU average in GDP per capita and Poland stands close to 80 per cent, Hungary is only at 76 per cent, neck and neck with Romania, according to Eurostat. The independent economic research institute Gazdasagkutato Intezet (GKI) offers an even bleaker picture: despite wages having increased 2.5-fold in the last two decades, they still only reach 67 per cent of the EU average in terms of purchasing power, and in absolute terms (in euros) they stand at just 41 per cent. Meanwhile, Pensions have slipped from 52 per cent of the EU average in 2004 to 45 per cent in 2021, and productivity growth of Hungarian companies is nowhere near that of its Central European peers.

In fact, in most of the data (except for employment), Hungary tends to be among the last five countries of the EU. Even so, Hungarian politicians (on both the left and right) still profess their hopes about catching up with Austria, when even keeping up with Czechia seems an insurmountable task.

But Hungary’s minister of regional development and a former European commissioner, Tibor Navracsics, sees the glass half full. “Wages in Hungary have risen sharply since accession, from under 7,000 euros in 2004 to more than 17,000 euros in 2022. There is and there could be room for improvement, but an Austrian financial forecast shows that this year Hungary could have the best wage growth in the European Union, with 9.8 per cent,” he tells BIRN.

Many others think the glass is rather half empty. “EU membership was a great opportunity that contributed to the country’s development. But it could have done much more if it had been used effectively,” says Andras Biro-Nagy, director of Policy Solutions, a Budapest-based independent think tank, and co-editor of the book “20 years in the EU – A Policy Balance of Hungary’s EU membership”, published in mid-April.

As an example, he cites the massive inflow of EU funds – totalling around 83 billion euros, or an average of 3.5 per cent of GDP per year – which has led to some development but failed to narrow Hungary’s regional disparities. Three out of seven Hungarian regions still rank among the EU’s poorest, with very slow convergence over the last 20 years.

“This is not a Hungarian, but a European problem,” argues Navracsics. “Convergence is, unfortunately, despite its long history not a success story.”

He argues that the countries which joined the EU in 2004 have developed from 59 per cent of the EU average to 77 per cent, but this growth was driven mostly by the metropolitan areas. Hungary has been no exception. “Budapest is at 156 per cent of the EU average, while the North Great Plain region, which is very close to Budapest, is only at 49 per cent.”

On a more positive note, the former European commissioner emphasises that Hungary has managed to overtake some old EU members such as Greece and is in strong competition with Portugal.

When asked about the success stories of membership, Navracsics is keen to point out that Hungary was an overachiever in accessing EU funds, having used almost every cent of the funds available. “52,000 projects were completed using EU funds in the 2014-2020 period, meaning that you can’t find a corner in Hungary where there was nothing built,” he says.

But what has been built speaks to another missed opportunity. Perhaps not coincidentally, a list that Hungary actually tops is unfortunately the number of investigations launched by the EU’s anti-fraud agency OLAF into the misuse of EU funds. The average Hungarian will tell you that much of the money was simply stolen or ended up being dished out within pro-government circles.

Unfortunately, research also shows that EU funds have not always helped boost productivity. “We found that companies that received EU money grew slower than those that did not. You can guess the reasons: they may have become too complacent, or they were simply not the companies that deserved to be funded,” Biro-Nagy says.

Nor has Viktor Orban’s decade-long battle with European institutions helped the country make the most of its EU membership. While it is fair to say that Hungary’s economic problems predate the prime minister’s landslide victory in the 2010 parliamentary election – just four years after joining, Hungary was hit hard by the global financial crisis and had to turn to the International Monetary Fund for help – Orban’s prescription has been found wanting.

“When Orban took office in 2010, he had to find answers to some of the inherent problems of the Hungarian economy, such as a huge and expensive state, a dual economic structure of highly productive multinationals and low-performing small and medium-sized domestic companies, and a high exposure to external economic shocks,” points out Akos Peter Bod, a former governor of the Hungarian central bank and now professor at Budapest’s Corvinus University.

Orban opted for further centralisation, strong state intervention and a policy of reindustrialisation. “Some of these measures were logical but risky – especially in the long term,” claims Bod.

The reindustrialisation strategy entailed a steady devaluation of the national currency, which led to weak real income growth and ultimately to record inflation in 2022. “While the Baltic states chose more globalisation as a solution after the financial crisis, Orban opted for more sovereignty,” he says.

The government has constantly communicated that Hungary is a strong and fast-developing country, but the fact is that average growth over the past decade has been only 2.1 per cent, which would be fine for a developed country but not enough for an emerging economy to make the necessary leap.

Bod is also critical of the use of EU funds. “The government has followed a classic rent-seeking strategy. Give us all the money and don’t worry about implementation, they said. Investment in human capital, education and health was not a priority” – proof, he says, that the Orban government has clearly misinterpreted what re-industrialisation means in the 21st century.

Still in love after all these years

Despite a general sense of disenchantment and Orban’s strong anti-Brussels propaganda, Hungarians remain, by and large, strong believers in the EU. The latest Eurobarometer found that 77 per cent of citizens think they have benefitted from EU membership.

“People still associate the EU with money and development, but also with the four freedoms and a sense of belonging to a Western community,” says Biro-Nagy.

However, he warns that political polarisation has spilled over into EU-related issues, driving a wedge further into society. Around half of Hungarians favour closer integration, while 35 per cent share Orban’s sovereigntist narrative that the EU should “give us the money and leave us alone”. Within this group, 15 per cent would openly support a ‘Huxit’ (leaving the EU), though they remain a small minority even in the Fidesz voting camp.

Most experts agree that the Eurosceptic path the prime minister is following was not preordained.

In his early thirties, Orban chaired the parliamentary committee on EU integration, and it was his first government (1998-2002) that conducted the accession negotiations, though, much to his dismay, it was his successor, a social-liberal government, that signed the accession treaty in 2004. Yet even in opposition, between 2002 and 2010, few would have questioned either Orban’s pro-European commitment or his ability to negotiate effectively once re-elected.

However, within a year of his return to power in 2010, significant cracks began appearing in Hungary’s relationship with the EU.

Insiders usually refer to an ill-fated meeting with then-German chancellor Angela Merkel, who refused to give Orban any leeway with the national budget – which was running at a 6 per cent deficit, largely inherited from the previous government – as the “original sin”. Then there were the EU’s unexpectedly harsh reactions to a Hungarian media law and the new constitution – both of which were seen as ridiculous and a breach of national sovereignty by the government.

Relations with Brussels deteriorated rapidly, with Orban comparing the EU to the Kremlin (and the Soviet Union) as early as 2012, and entering a freefall with the migration crisis in 2015.

This downward spiral continued in 2021, when Orban’s Fidesz party was forced out of the European Parliament grouping of centre-right parties, the European People’s Party, and in 2022 reached freezing point with the launch of the rule-of-law conditionality mechanism by the European Commission and the subsequent blocking of 30 billion euros in EU funds.

“Orban found it excessively difficult to defend his interests at the negotiating table in Brussels. So, he looked for alternatives, but these alternatives, be it Russia or China, are only interested in having a foot in the EU,” sums up the former central bank governor, Akos Peter Bod.

Jeszenszky, as a former foreign minister, takes an even harsher line. “Orban’s policies are incompatible with European democratic values, and he knows it. He is only interested in money and power – and it is a big mistake to believe that he is doing anything for the good of the country,” he argues.

The price, as always, is paid by the citizenry. Hungarians, who had liked to flatter themselves in the belief that Hungary was richer, smarter and more developed than most of the rest of Central and Eastern Europe, now clearly see the country is falling behind both politically and economically.

No wonder, then, that a new generation of protestors, who have been pouring onto the streets since the emergence of Peter Magyar, a former Fidesz insider-turned-critic, are haunted by the feeling that their future was stolen from them by the current government; that Orban was unable to fully realise an opportunity Hungary had rarely seen in its 1,100-year history: a chance to become a successful European country.

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