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Why the EU Is Getting Tough on Hungary’s Orban

Shortly after Hungarian Prime Minister Viktor Orban notched up a fourth landslide election win in April, the European Union triggered a probe that may ultimately deprive his government of billions of euros in funding. Long concerned about what it calls the erosion of the rule of law under Orban, the EU sees getting him to change course as vital to bolster democracy and EU unity. Failure may dilute the EU, strengthen polarization or even rekindle talk of Hungary’s potential exit from the bloc.

1. What’s the backdrop?

Since 2010, Orban has made it harder for outsiders to hold the government to account. He’s appointed loyalists to the courts, the chief prosecutor’s office and the media authority. A big parliamentary majority allowed him to write a new constitution that opposition critics condemned as an attack on democracy and human rights. And he’s targeted minorities, including the Roma and LGBTQ communities, seeking to limit their rights. In 2019, Hungary became the first EU country to lose its rating as a full-fledged democracy at Freedom House, a Washington-based advocacy group that assesses political systems. Meantime, Transparency International, a not-for-profit graft watchdog, rates Hungary as among the most-corrupt countries in the 27-nation bloc.

2. How did this happen?

While governments must adopt stringent democratic criteria to join the world’s largest trading bloc, there have been few tools available to deal with wayward members once they’ve joined. The EU did try legal action, but Orban always found a way out -- dragging his feet on demands for change, cutting deals that stopped short of meaningfully rolling back his power and exploiting shortcomings in the bloc’s own legal charters. In addition, former German Chancellor Angela Merkel shielded Orban, arguing that pressing him too hard may prompt Hungary to follow the UK in its decision to leave the EU. He also found allies in Poland, where the nationalist Law & Justice party took power in 2015 and proceeded to emulate Orban’s policies. Orban has also forged ties with populist politicians elsewhere such as Marine Le Pen in France and Giorgia Meloni in Italy.

3. What changed?

The European Parliament voted in 2018 to trigger a rule-of-law probe against Hungary into what it called “a clear risk of a serious breach” of the EU’s democratic principles. A new legal process adopted in 2020 allows the EU to potentially cut off funding when its financial interests may be undermined. The European Commission, the EU’s executive, triggered that so-called conditionality mechanism in late April. It has until late September to make its recommendation to the European Council, where leaders of EU member states make the most important decisions.

4. Is the investigation related to democracy or corruption?

The two are intertwined but the commission must limit its probe to areas that could affect the EU budget and undermine the financial interests of the bloc. So while Orban’s comments on racial purity, his clampdown on independent media or his restrictions on LGBTQ rights have triggered condemnation from others within the EU, they aren’t the focus of the investigation. The independence of the judiciary, however, is in the spotlight as it’s seen as central to a country’s ability to tackle graft and issue unbiased judgments. 

5. How much money is at stake?

The European Commission hasn’t stated how much is at risk. The country’s share of the 2021-2027 EU budget is about 36 billion euros ($36.5 billion). There’s also Hungary’s 5.8 billion euro share of pandemic recovery funds. The EU has delayed releasing that, citing corruption concerns. The forint has been one of the world’s worst-performing currencies this year, with investors citing uncertain outlook for EU funds as contributing to the selloff.

6. How has Hungary’s government reacted?

At first, Orban’s ministers attacked the EU decision to start the investigation, calling it a political move to help the just-defeated opposition. But conscious of the need to unlock EU funds, the government has offered what it’s calling a “comprehensive” package of steps to address corruption concerns, including the setting up of a new anti-corruption agency.

7. Is that enough?

That’s unclear. Orban has been adroit at outmaneuvering EU institutions over the past decade and critics see his promises of reform ringing hollow. For example, he’s pledged to make the anti-corruption agency “independent.” But other nominally autonomous institutions in Hungary are nonetheless heavily influenced by Orban and his ruling party, including the courts. This time, the EU could make the disbursement of money conditional on the actual implementation of any pledges. The commission also could recommend funding be cut or that the probe against Hungary be closed. The final decision by the leaders would come one to three months later.

8. Could Hungary one day leave the EU?

Orban has said he intends to keep Hungary in the EU. Its export-oriented economy relies heavily on the free movement of goods and services. The UK’s tortuous exit from the EU also showed how difficult the process of leaving can be for both sides. In addition, the conflict raging in neighboring Ukraine has given Hungarians a sense of the security provided inside the EU (as well as the NATO military alliance). But it’s hard to see Orban willingly unwinding the legal changes of the past decade and launching a spirited campaign against corruption. The ruling elite and its business allies have benefited greatly during his tenure. Hungary’s Finance Minister Mihaly Varga said last year that, if the EU keeps up its criticism, Hungary may re-evaluate its membership at the end of this decade, when it’s expected to become a net contributor to the bloc’s budget.

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