Thursday, February 23, 2012

Pressure and tact are the right response to Victor Orban

Viktor Orban's FIDESZ party won a constitutional majority in the Hungarian parliament two years ago on a promise of purging the country’s politics of the remnants of communism. The prime minister had a point: unlike neighbouring Central European states, Hungary had moved from communism through compromise, not revolution, so many of the old system’s worst traits including rampant tax evasion and addiction to debt have been preserved or worsened. When Orban promised to “complete regime change”, he had the backing of most Hungarians, even if many suspected the prime minister’s political instincts, and worried that he lacked a clear programme and a team with the expertise to reform the country.

Two years later, Orban is in open conflict with his country’s opposition and much of the West. Critics hold him responsible for a series of confusing, counterproductive and sometimes contradictory economic measures, such as the de facto nationalisation of the private pension system. They also suspect him of trying to build a one-party state. The EU, too, is alarmed, and the European Commission initiated court proceedings against Hungary, chiefly over measures that curb the powers of the country’s central bank. But the West should resist the urge to isolate Viktor Orban, as it does with Belarus’ Alexander Lukashenko. Orban has genuine support from the majority of Hungarians, who believe that the country is on the wrong track and needs deep reforms. While many of the prime minister’s steps have been undemocratic, Orban has proven to be a pragmatist, capable of adjusting course. The EU’s goal in Hungary should be to steer his government away from damaging undemocratic ideas towards needed reforms.

Orban inherited a country in terrible economic and political shape. The brief period of reforms of the 1990s improved living standards, brought in foreign investment and generated some growth, but not enough to repair the country’s finances. The Socialist government that immediately preceded Orban's increased debt from 53 per cent to 80 per cent of GDP during eight years in power – this was before the economic crisis, so the growth in debt cannot be attributed to Keynesian measures to stimulate the economy. Shortly after Orban had assumed power, the global economic crisis hit Hungary hard, eroding the value of the forint and plunging thousands of holders of foreign-denominated mortgages into insolvency.

Orban's response, similar to that of other governments west of Hungary, has been to protect the middle classes from the effects of the economic crisis, and to find a better economic model for Hungary. He sees that Europe is in a profound crisis, and is trying to make the economy more 'national', less dependent on outside investment (that is why the prime minister imposed one-off taxes on mostly foreign-owned big banks). In foreign policy terms, Orban sees Hungary as firmly within the EU and the West; he is no Vladimir Putin. The prime minister simply thinks that Hungary needs to be more self-reliant, as the West is facing tremendous challenges. Orban assumes that the EU’s influence – and possibly its borders too – will be shrinking for the foreseeable future, so he is trying to position Hungary for existence in a buffer zone, outside Europe’s core and close to its eastern fringe. He would like to have a stronger Central Europe, but the Poles reserve their time and attention for the Germans and the French and ignore Hungary. Orban, for his part, ignores Slovakia, another natural would-be partner, preferring to act as spokesman to the latter country’s large Hungarian minority rather than a partner to the Slovak government.

The trouble with Orban’s reforms is that, good intentions notwithstanding, many have been wrong-headed. Economic measures such as the de facto nationalisation of private pension funds or ‘windfall’ taxes on banks have scared foreign investors without renewing economic growth or reducing the country’s large debt. Given that the Hungarian economy greatly relies on exports to the rest of the EU, Orban is bound to fail to completely insulate it, and it is probably fruitless to try. Moreover, the prime minister is deliberately shirking from taking the necessary measures, which would be required to make Hungary truly self-reliant. He should be making serious budget cuts to reduce dependence on foreign lenders. But while Orban has made some savings by reducing the number of public servants and the defence budget, most of his energy is spent elsewhere, such as on forcing the banks to allow the middle classes to repay foreign currency-denominate mortgages at rates below market ones.

Besides a dubious list of priorities, Orban also has a profoundly undemocratic tendency to equate his own government and party with the state. FIDESZ thinks and acts like a clan; it is suspicious of other parties and opinions and seeks to minimise the opposition’s input into law-making, using expedited procedures to pass laws even though FIDESZ holds a comfortable two-third majority in parliament. The EU has rightly criticised him for curbing the freedom of media and packing government institutions with party cronies. Critics worry that in addition to finishing the ‘revolution’ by reforming the economy, Orban has also chosen to cement the power of his party, where his control is unquestioned, over democratic institutions.

But the EU and Orban’s domestic opponents need to tread delicately. FIDESZ’s policies are deeply rooted in the Hungarian society, and Orban remains one of the few Hungarian politicians with a vision of how to reform the state, even if it is in parts dangerous. Indeed, while voters have grown dissatisfied with Orban’s conduct, support for the opposition has barely increased. Hungarians are unhappy with the prime minister’s implementation of policies rather than his broad goals. They want Orban to do better, not necessarily to go.

The European Union’s best response to Orban’s excesses is to ‘play the ball, not the man’: to make a principled argument against those policies that deserve criticism, not to attack the prime minister personally. Orban is fundamentally a pragmatist. Behind the bluster hides a man capable of adjusting course, even if he never states so openly. Upon heavy European criticism, Hungary’s constitutional court annulled some provisions of the media and criminal procedure laws, because “certain passages in the laws contravened the constitution and international agreements”. The government also withdrew its controversial law on religion before the Constitutional Court could decide on its legality. The constitution will almost certainly be amended again to avoid a showdown with the European Commission over independence of the Hungarian central bank. Although the FIDESZ public relations machine hailed these changes as great victories, they were above all retreats. And they suggest that Orban will respond to pressure, as long as he is given the possibility and time to ‘save face’. The reverse is also true: the more the EU attacks Orban personally, the more each policy change looks to the Hungarians as a defeat for the prime minister, and the less incentive Orban has to compromise.

EU countries must also take care not to overstate their case lest they fuel nationalism and euro-scepticism in Hungary. The policy of giving passports to Hungarians living outside the country is a good example: some EU countries such as Slovakia (though not the EU institutions) criticised it. They should reconsider. The policy is not necessarily against European law; Romania practices it and Poland has introduced the Polish card for its minority. Until 2005, Slovakia too gave passports to people even if they did not reside in the country.

The EU governments and institutions are right to devote so much time and energy to Hungary: of all EU countries, Hungarian democracy seems most imperilled. The EU’s best way to check Victor Orban’s undemocratic tendencies is through principled and well informed pressure. But it needs to handle Hungary with care: if it attacks Orban personally, the EU risks losing influence over the prime minister, with Hungary sliding into certain isolation and possible poverty. That would be a terrible outcome for the country, its neighbours and the European Union as such.

Balázs Jarábik is associate fellow at FRIDE; he also heads the Kiev office of Pact, Inc., an NGO supporting civil society and media projects in Eastern Europe.


Liz said...

I disagree. Orban is doing not backing down. He is making the smallest changes to a series of outrageously anti-democratic laws, doing the bare minimum to make the EU think that he is playing ball.

The list of moves to reverse the democratisation of the past twenty years is long. These have been catalogued in the blogs of Kim Lane Scheppele hosted by Krugman. I won't repeat the content of those here. But she does nothing more than state the facts. And the facts are outrageous. Orban has ridden completely roughshod over the rather sound Hungarian constitution and democratic order that was put in place at the beginning of transition. The opposition has been completely excluded from the parliamentary process. The most obvious evidence of this was the late December change to parliamentary procedure so that it is no longer necessary to debate new laws. Orban can wake up in the morning with a new wacky idea and it is passed by the evening.

It is not clear to me that he has the support of the majority of Hungarians. People have reactivated their communist-era instincts and are afraid to talk politics at work. So many people have been purged from their jobs that there is a real fear that to do anything other than toe the line in public will have immediate consequences.

I agree that the opposition is weak and lacks credibility. But it is becoming impossible for a new opposition to emerge because FIdesz controls everything that might be a check on its power. Fundamentally, it is now extremely difficult to throw Orban out. That is in my view a complete perversion of democracy. And allowing him to save face over minor retreats simply legitimises his mission.

Elle Dale said...

Mr Jarábik’s remarks are certainly more balanced than the media-hoopla flood of Hungarian Government-hating articles has been. But then, this writer preserves the mainstays of that hoopla:

1. economic management: ‘Economic measures such as the de facto nationalisation of private pension funds or windfall taxes on banks have scared foreign investors without renewing economic growth or reducing the country's large debt.’

- In fact, these measures did reduce the country’s large debt significantly. Then, there was a massive, unexplainable attack on Hungary’s currency, which wiped out that reduction. Since that attack stopped, the debt-reduction is again showing. But, as we all know, the currency attack will come again, with the naked purpose of showing that debt must be increased, not reduced, on the IMF credo. Unfortunately, the Orbán Government cannot control that.

- ‘the defacto nationalisation of private pension funds’: Are you sure, Mr Jarábik, that this move did not forestall the disappearance into black holes of private pension funds? (That is not an uncommon event in Western economies, is it?)

- ‘windfall taxes on banks’: Is that really bad? Can banks not be taxed? Why?

- ‘forcing the banks to allow the middle classes to repay foreign currency-denominate mortgages at rates below market ones’: What would the alternative have been: allowing foreclosures by banks in which they repossess people’s homes? As it is, banks are being required to take their share of responsibility for the foreign-currency mortgage packages they peddled to the public. And a new legislation that will prevent the evictions of below-middle-class income people who cannot meet their mortgage payments is in the offing. In other words, banks in Hungary will not benefit from the sub-prime mortgages trick, nor will people suffer for it. Is that bad?

2. The ‘undemocratic’ hoopla: ‘FIDESZ … is suspicious of other parties and opinions and seeks to minimise the opposition's input into law-making …’. You surely know, Mr Jarábik, that all parliamentary opposition parties other than Jobbik refused to participate in the committee discussions that preceded the acceptance by parliament of the Constitution? So how is it that Fidesz is seeking ‘to minimise the opposition's input’?

- ‘using expedited procedures to pass laws’: I have not seen any procedures other than the regular parliamentary ones. Have you?

3. The Media Law curbs media freedom: ‘The EU has rightly criticised him for curbing the freedom of media …’. Neither the EU, nor you, Mr Jarábik, has ever given a single instance of what freedoms are supposedly curbed. You a certainly aware that the government was free, under the old media law, to shut down any arm of the media it chose, without explanation. Now, that did work robustly as a kerb on the freedom of the media. The new Media Law is administered by the Media Authority, an independent statutory body of which the members are appointed by parliament, not by the government. The Media Authority cannot, by law, take it upon itself to censure an arm of the media. Its power is restricted to investigating complaints from the public about a media outlet’s breach of the Media Law. Should it find a breach, it can refer the matter to a court of law. There is not a whiff of media freedom curbed by this arrangement of the law. The very opposite is true.

4. ‘…and packing government institutions with party cronies’: Now, this is a scurrilous accusation that you back as ‘rightly criticised’ by the EU. Both you and the EU should point to at least a few government institutions where a ‘crony’, and not a competent person, is in charge. Your accusations hold bile, not water, otherwise.

But you are right that the EU will have to tread more delicately, for the sake of its own survival. The buffoonery that has been in evidence there lately sounds very much like its own death rattle.

Anonymous said...

When Fidesz won the elections in 2010 I reluctantly supported Viktor Orban's bid for power as he seemed the only credible alternative. Moreover his eight years spent in opposition and as vice-chairman of the EPP heightened my hopes that he understands how the EU (and the world) as well as capitalism works.
I was telling my more doubtful friends that all Orban needs to do is "not to f...k up his economic policies".
Well, he did exactly this.

1) State debt could have been reduced through a balanced budget and lower CDS won by a more credible/trusted government. There was no need to reach for pension savings for this.

2) I would have nevertheless supported nationalisation of private pension savings if the proceeds would have gone to finance the one-off costs of much needed (and well thought-through) structural reforms.

3) Banks can and should be taxed. But this should not cut excessively into returns on invested capital (less capital owners will shut the tap).

4) Fidesz and Viktor Orban had a huge momentum in 2010 to build bridges within the Hungarian society as they not only won the elections but also managed to destroy every other political force. The vacuum could have indeed been wisely filled by the constructive extension of a friendly hand. Instead he went into a authoritarian attack against perceived enemies, which raised an anarchist opposition from all sides of society 8effectively loosing the once-in-a-lifetime opportunity to unite).

5) Rejecting constructive critics (even from the right), such as Gyorgy Kopits, Tamas Mellar, Attila Chikan, Akos Peter Bod, Peter Heim, Laszlo Csaba and many more, not to mention those well meaning and experienced, yet admittedly not rightist people like Laszlo Bekesi, Andras Vertes, Peter Rona. Locking out criticism means also that the frequency of the only (talk)radio station providing space to voices criticising the government, Klubradio, was re-advertised as a music-radio.

6) Removed thousands of civil servants from their jobs to be replaced by people, who have never proven themselves; samples w/o a desire to be exhaustive: Pal Volner, Laszlone Nemeth, Gyorgy Matolcsy, Laszlo Csefalvay, the four appointed to the Monetary Council...
I refrain from naming those individuals, who work in lesser positions and are not considered public figures, but believe me I could name quite a few.
These personnel choices are even more difficult to understand as the intellectual elite of Hungary stood behind Fidesz to the greatest proportions, hence Viktor Orban had a unique chance to really choose the best of the best for every position.

I just hope that the article is right and Viktor Orban will (i) prove to be as flexible as suggested, while (ii) continuing to command a majority support among the electorate to implement what he must.
I am very afraid that the inadequate qualities of his team and the lack of feed-back (constructive criticism) will cause his demise and the rise of Jobbik, much like that of Ferenc Szalasi in 1944.