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Sanctions on Hungary: What For and Why Now?

Hungary was recently criticized for its high budget deficit and its fiscal policy. For the first time, the European Commission (EC) threatened a country with loss of funding and went ahead to suspend financial obligations to Budapest unless it does not accept EC financial conditions. Alex Herholz argues that sanctions should have been imposed earlier for reasons other than financial.

In 2011, the nationalist conservative government of Viktor Orban could not reduce the deficit below 3% of GDP. The EC found that, without special taxes and reclassifications in the retirement system, the real deficit for 2011 is 6%. It is for this reason that Brussels intends to withhold payments of over €495mn to Hungary, starting January 2013.

The EC does not want the announcement to be seen as a punishment.  It wants the announcement to act as a "strong incentive" for the government in Budapest to meet EU requirements. The Orbán government, on the other hand, called the decision "unfair and unfounded". The government spokesman declared it to be "legally questionable and contrary to the spirit of (European) contracts."

It is interesting that the EC is making a clear separation between the fiscal issue and the issue involving human rights in Hungary. The EC and Orbán’s government have been at loggerheads regarding Hungary's human rights situation, the dire state of which has alarmed the EC. Nevertheless, the EC is treating the fiscal issue in isolation and Commissioner Oli Rehn declared, "These are two things and we should treat them separately."

The right-wing government of Hungary has been criticized for months for curtailing democratic participation in the political system by bringing in repressive legislation and diluting constitutional safeguards. The media and judiciary have been the prime targets of legislative action. Almost one-third of the 3,400 employees in public media are being replaced by stooges of the government.  These include award-winning journalists with a reputation for integrity and quality.

Orbán has been shaking up the media landscape for nearly a year with a speed and ruthlessness that is alarming. Last fall, a powerful government agency was created to censor the media. It has broad powers to examine the work of public and private media, and impose sanctions. Journalists who do not toe the government line are finding themselves out of a job, especially if they had any association with the public media.  In December, the Hungarian Parliament passed a new media bill with new restrictions on journalists in both public and private media. A further law has since been drafted that makes it easier for the government to revoke the licenses of radio and television stations.

Hungary, under Orbán, is consistently moving away from EU values and standards. A new draft law gives the government the right to conscript the unemployed for public work. In case journeys to work are too long, the government can house conscripts in labor camps. A Budget Council has been created with a term of nine years. This means that Orbán can lose the election and yet hold a veto over the budget through his cronies in the Budget Council. The freedom of religion and the right to strike are also in danger.

With a two-thirds majority, the nationalist conservative party, Fidesz, and its satellite party, KDNP, have complete authority to do anything. Orbán, the Prime Minister has been using this parliamentary majority to maximize his power and Hungarian democracy is in a fragile state. The power of the Constitutional Court has been constrained. The Supreme Judge and the Prosecutor are now appointed for nine-year terms and can only be removed by a two-thirds majority. The former Communist Party and their successors are now defined as "criminal organizations", and can expect to be prosecuted. Since January 2012 Hungary is officially no longer a republic. Its new constitution begins with a paean to patriotism.

The EC has largely ignored these events and not taken any action whether in terms of legal proceedings or public criticism. What made the EC act was the danger to the Hungarian central bank and the risk of impending bankruptcy because of Hungary’s high public debt level.

Orbán’s government recently added one representative to the central bank. This threatened the independence of the central bank and contravened EU rules that do now allow any EU government to interfere in its central bank.

The question arises as to why the EC is acting when its economic standards are in danger. Before the planned reform of the Hungarian Central Bank, there were enough reasons to sanction Hungary. The EU is a grand project and yet the EC is a bureacratic institution that shies away from any major decisions. It aims to focus on narrow technocratic rules and sees them in isolation. This tendency is in no small part a reason for the European crisis as the EC is incapable of stepping up to lead. In the case of Hungary, the EC refused to act in spite of the mounting body of evidence about the threat to Hungarian democracy. By acting on the fiscal decision in isolation, it has given the impression that all it cares about is the bottomline. A Europe of balanced books is not an inspiring idea.  If the EC has to have legitimacy, it has to inspire and what can be more inspiring than fighting for democracy in a country that was denied it for much of its recent past.

The views expressed in this article are the author's own and do not necessarily reflect Fair Observer’s editorial policy.
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