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Will Hungary's Orban weather the storms of 2023?

Keno Verseck
January 7, 2023

Prime Minister Viktor Orban is facing his most severe challenges yet: a serious economic crisis and Hungry's increasing isolation from the European Union, which threatens to freeze its payments to Budapest.

Hungary's Prime Minister Viktor Orban at an EU summit in Brussels on December 15, 2022, looking wary
Hungary's Prime Minister Viktor Orban is facing the toughest challenges of his 13-year premiershipImage: Olivier Matthys/AP/dpa/picture alliance

Hungarian Prime Minister Viktor Orban has already survived several domestic, international, economic and social crises that have threatened to loosen his grip on power. But now he faces the greatest challenge of his 13-year rule. This is why 2023 could become a decisive — perhaps even fateful — year for the politician, whose name is inextricably linked to the rise of illiberalism in Europe.

Hungary is currently in the midst of its most serious economic crisis since the country almost went bankrupt during the international financial meltdown of 2008-09. Its currency, the forint, has plummeted in value in recent months, and inflation now exceeds 20%, plunging a rising number of people into hardship. Price caps for food and petrol have not been much help so far and have resulted in shortages for the first time since the collapse of socialism in Eastern Europe in 1989.

In the middle of this difficult socioeconomic situation, the European Union decided in December to withhold billions of euros in funds because of concerns about corruption and the rule of law in Hungary. Brussels is now threatening to make even more cuts, or to completely halt all EU payments to Budapest.

Cars wait in line at a gas station in Hungary
A price cap on gas led to shortages and long lines outside gas stations in DecemberImage: Robert Jaeger/APA/picture alliance

In addition, the pro-Russian stance of Orban's government has made Hungary more isolated than ever within the European Union. It's the only country in the EU to reject sanctions against Russia, it has refused to allow the transit of weapons shipments to Ukraine through its territory and was reluctant to agree to billions of euros in aid for Kyiv.

'Orban and his government are still very good at shifting the blame'

"The fact is that the Orban government has never been in as difficult a situation as it is now," said political scientist Peter Kreko, of Political Capital, a left-wing liberal policy research and consulting institute in Budapest. "You can see it in the opinion polls, which tell us that a growing number of people are dissatisfied, and in the teachers' protests, which have been going on for months now."

But, said Kreko, Orban and his government may prove to be resilient.

"Orban and his government are still very good at shifting the blame for all crises onto other players, such as the EU or the stock exchange billionaire George Soros," Kreko told DW. "Orban and his party, Fidesz, still have a very stable electoral base. They have also set up the most centralized political system in the EU. All of this means that it is likely the Hungarian government will weather the storm of this crisis, too."

Budapest facing a recession

Laszlo Csaba, a conservative economist who was once part of an informal group of Orban's advisers and lectures at the Central European University, told DW that Hungary's current crisis is primarily a "crisis of the Orban model."

Students and teachers demonstrating for higher wages and better working conditions on Liberty Bridge, Budapest, Hungary, October 23, 2022
Hungarian teachers have demonstrated for better working conditions for several monthsImage: Anna Szilagyi/AP Photo/picture alliance

"This model is built on a policy of cheap money, loose monetary policy and high spending. This is now no longer sustainable," said Csaba. "Overall, the government's situation is difficult, but not catastrophic. Hungary is facing recession, but it is not teetering on the brink as it was 15 years ago, during the financial crisis."

Much in the coming months will depend on whether the European Union pays out funds to Hungary, the second-largest net recipient of EU funds after Poland. In recent years, these funds have accounted for an average 3–4% of the country's gross national product, roughly corresponding to its annual economic growth.

Haggling with Brussels

After months of negotiations, the European Commission decided last last year to withhold the payment of €6.3 billion ($6.6 billion) to Hungary because of concerns about corruption and the rule of law in the country.

Hungaryian PM Minister Viktor Orban (second from left) speaks with Italian PM Mario Draghi (left), French President Emmanuel Macron (center), Greek PM Kyriakos Mitsotakis (second from right) and President of the European Commission Ursula von der Leyen (right), Brussels, October 21, 2022
The European Union could freeze funds earmarked for Hungary — or just pay them in partImage: JOHN THYS/AFP/Getty Images

Later that month, Brussels even threatened to freeze the total sum of money earmarked for Hungary in the EU budget to 2027 — a total of €22 billion. If it does, the EU could push Hungary into a deep economic crisis.

Hardly anyone in Hungary believes it will come to that. "The EU has in the past always used strong words when speaking to Hungary, but it has never actually acted on them," said Csaba.

"That's why I think that some of the EU funds will be paid out. If nothing were paid out, the EU would lose its influence over Hungary, and that's not in Brussels' interest. So, I expect the negotiation process will become a bit like a Balkan bazaar: Ultimately, there will be a compromise," he added.

Orban not expected to make compromises

Political scientist Kreko cautions against any illusions about Orban's willingness to make any kind of compromises when it comes to the rule of law.

"We cannot expect a lion to become a vegetarian from one moment to the next," he said. "It's not in Orban's interest to simply abolish the nepotism and corruption that are characteristic of his government. That would mean that staff working closely with him or family members could even end up in prison. It's also not typical of illiberal systems to open up — especially in economically challenging times. They actually tend to close themselves off even more."

Hungary's PM Orban personally accused of corruption: DW's Terri Schultz

Both experts assume Orban will try to maneuver his way through the crisis — both politically and economically. Csaba cites the so-called "Matolcsy affair" as an example.

Gyorgy Matolcsy, governor of the Hungarian National Bank and longtime Orban ally, was uncharacteristically open in his criticism of the national economic policy in early December and indirectly called for austerity measures. In Hungary, Matolcsy's criticism triggered a debate about how firm Orban's grip on power really is.

Orban's strategy 'too little, too late'

Csaba believes the prime minister remains in control. "Orban has two people for every task," he said. "One group is the realists, like Matolcsy, the other the optimists. Once he has run out of options, he will resort to radical, realistic measures, while at the same time continuing to talk big."

Hungarian President Katalin Novak, left, delivers her speech during her official inauguration ceremony, Budapest, Hungary, May 14, 2022
Hungarian President Katalin Novak visited Kyiv at the end of NovemberImage: Szilard Koszticsak/AP Photo/picture alliance

Kreko sees a similar two-pronged strategy in Hungary's current foreign policy. Because of Orban's stance on Russia's war against Ukraine, Hungary has publicly fallen out with Poland, its closest ally. In December, Orban even went as far as to blame the United States for the war.

At the same time, he dispatched President Katalin Novak to visit Kyiv. What's more, pro-government media — which up until now have been spouting the very worst pro-Russian propaganda — are now talking more frequently about "Russia's aggression."

Nevertheless, Kreko doubts this kind of strategy will get Orban through the crisis, end his isolation on the international stage and resolve the conflict with the European Union. "What Orban is doing at the moment can easily be summed up as follows," Kreko said. "It's too little, too late."

This article was originally published in German.