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Hungary in 2023: Orban Faces Perfect Storm

Viktor Orban’s 13th year in power will put the prime minister’s political skills to the test, as a perfect storm looms.

The energy crisis, the ongoing quarrel with the EU and consequent freezing of funds, and the war in Ukraine and its fallout have seriously altered the political, economic and diplomatic realities for the Hungarian government. The foundations of its economic strategy, like relying on cheap energy, cheap labour and state intervention, are crumbling. Billions in EU money is on hold. And political allies in Europe have distanced themselves from Orban over his pro-Russian stance.

These mounting economic difficulties are expected to undermine the conviction of many voters of the ruling Fidesz party that the country is going in the right direction with Orban at the wheel. A large part of the population will see their savings eaten up by the skyrocketing inflation, which is expected to peak in 2023 at 17 per cent.

Dual-track approach

2023 will show whether the prime minister is capable of leading Hungary out of a crisis much of its own making, and back into the arms of its EU allies. Or whether the country will spiral out further towards the periphery of the EU.

Experts say the government’s strategy is likely to be twofold: it will try to tackle some of the root causes of the problems and rectify the financial imbalances, but at the same time pump up the volume of its domestic propaganda to place the blame on foreign actors for the economic difficulties that are mostly homegrown.

The first half of the year will be spent in “survival mode”: high energy prices, rising inflation, low foreign reserves, constant downward pressure on the currency and a nightmarish situation of stagflation will leave little room of manoeuvre for Orban. State investments are on hold, unemployment currently at a relatively low 4 per cent is expected to start rising, while poverty, inequality and deprivation will almost certainly worsen in 2023.

The optimistic view is that disputes with the EU will be toned down – at least temporarily. The government will try to convince its fellow EU member states that it is fulfilling the 27 “super-milestones” set out by the European Commission to properly address the corruption of EU funds. In this case, money from the EU’s pandemic recovery fund and the EU budget structural funds – up to 12 billion euros – will be gradually disbursed, providing a vital bloodline for the budget.

A key question for 2023 will be whether the EU Commission has either the will or the way to keep Hungary on a short leash, or the government will, yet again, find ways to pull the wool over its eyes. Most probably, the EU Commission’s increased attention will reduce what has been at times the blatant theft of EU money, but is unlikely to address the root causes of the corruption, which is the system of patronage and favouritism created by Fidesz during its more than a decade in power. Essentially, the EU Commission’s efforts will make it just that little bit more complicated for government allies to game the system.

Energy issues will be central: after a decade of neglect, energy efficiency and diversification will have to find their way onto the government’s agenda.

Like the rest of Europe, Hungary will need to address its reliance on cheap Russian energy. It has become clear even for this most pro-Russian government that a quick normalisation of political and economic relations with Moscow is unlikely even should the war end anytime soon.

Luckily for Orban, there is still another authoritarian regime he can turn to. China’s economic leverage in Hungary will grow with the historic 7.3-billion-euro investment from Contemporary Amperex Technology Co. Ltd (CATL), the Chinese global market leader in lithium-ion battery manufacturing, which has begun building Europe’s second largest battery factory in the eastern Hungarian city of Debrecen.

China could also use Hungary’s financial vulnerability to its advantage. If EU money continues to be frozen, Hungary would need to look elsewhere, probably to China, which would no doubt put a high price tag on any help.

Visegrad vicissitudes

In foreign policy, Orban will try to undo some of the damage to its battered relations with its Visegrad neighbours, especially rebuilding ties with Poland. This won’t be easy amid a Polish electoral campaign where Orban will be portrayed by both the ruling Law and Justice party and the opposition as Putin’s man in Europe.

Ties might be strengthened with Austria, Italy and Israel, and perhaps even Slovakia depending on political developments there. And some face-saving efforts at normalising relations with Ukraine could be on the cards.

Cordial ties with chief ally Serbian President Aleksandar Vucic and Bosnian Serb leader Milorad Dodik will remain important, but money spent on oiling Hungarian businesses beyond its borders in places like Bosnia will dry up in 2023.

Further afield, Orban will continue courting US Republicans and bolstering his reputation as a “Christian, conservative, pro-family and anti-migration” politician battling progressive, woke ideologies, in the hope that radical Republicanism will make a comeback in Washington. In this sense, 2023 will be a year to survive in the hope of a political renaissance of conservative – rather far-right and populist forces – in 2024.

In domestic politics, despite the serious economic problems, Orban is not expected to be seriously threatened by an opposition that still lies in ruins after the wipeout in the April 2022 election.

The main opposition party, the leftist-liberal Democratic Coalition led by former prime minister Ferenc Gyurcsany, was first to split from the opposition alliance that failed to make a dent in Fidesz’s power in the 2022 election. It will try to confront Orban on his own, but its popularity remains well below 20 per cent.

To his right, Orban will have to keep an eye on the emerging far-right party Mi hazánk (Our Homeland), which could capitalise on the growing popular discontent, especially in rural areas. But it, too, is currently polling in the doldrums, below 10 per cent.

Fortunately for the government, autumn’s large street protests organized by students to demand higher pay for their teachers and a better education system seem to be dying out because of the colder weather and the government’s sly strategy of offering a minimal pay rise for teachers from January. Yet the deep problems in the country’s education sector remain unaddressed.

Source: Reporting Democracy



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