Hungarian metamorphosis: from returning to Europe to occupying Brussels

Hungary’s prime minister, Viktor Orban, reacts at his arrival at the working meeting of the leaders from the European Council in Bucharest last April. Hungary will be taking up the presidency of the EU Council starting in July Photo: LCV / Shutterstock

In 1994, the national conservative Hungarian Democratic Forum-led government under József Antall submitted Hungary’s membership application to the EU. From 1998 onwards, accession negotiations were conducted by the initially liberal but by this time increasingly right-wing Fidesz under the first Orbán-government. Finally, Hungary joined the European Union under the left-liberal governing coalition of the Hungarian Socialist Party and the Alliance of Free Democrats led by Péter Medgyessy.

For its part, the EU supported Hungary’s quest both politically and financially and then welcomed the country as one of the frontrunners of the democratic and economic transformation process that unfolded in Central Europe following the collapse of the Soviet Union. Hungary, just like its Visegrad partners – Czechia, Poland and Slovakia – was considered as one of the most prominent success stories of Europeanization. This accomplishment even inspired these new member states to commit to sharing their newly acquired transition experience with those in the Western Balkans and the EU’s eastern neighbourhood, who aspired to similar goals.

Beyond the political class, joining the EU also enjoyed wide support within Hungarian society. Although only 45.62 per cent of eligible voters participated in the referendum about the country’s EU accession in April 2003, an overwhelming majority, 83.76 per cent, voted in favour of membership. Thus, when on May 1st 2004, Hungary became a member of the European Union, it seemed it did so to the satisfaction of the vast majority involved on all sides.

High hopes

Joining the EU was also seen as a confirmation of belonging: the Central European countries’ sovereign choice to “return to Europe” after decades of subjugation as the Soviet Union’s satellites reinforced both their freedom to choose their geopolitical orientation and their European self-identification. At the same time, EU accession also promised tangible economic benefits for the new member states. Hungary, like other newcomers, hoped to catch up with Western Europe as it expected economic and social prosperity, modernization and higher living standards following membership. Nevertheless, fears that Hungarian businesses will face more difficulties upon entering the single market were initially also prevalent in  society. This was clear in the first Eurobarometer survey conducted after accession in the autumn of 2004.

Through its agricultural and cohesion policies, the EU indeed provided significant financial resources for Hungary to support the country’s agricultural sector; regional and rural development; the creation of new jobs; as well as territorial and social cohesion. According to the European Commission, Hungary has received over 83 billion euros since 2004, which on average means over four billion euros annually. Over the same period, it paid around 20.5 billion euros into the EU’s budget, which is somewhat over one billion a year on average. The difference of over three billion annually has made Hungary one of the biggest net beneficiaries of the EU.

 The EU was strongly associated among Hungarians not only with prosperity but with the ability to travel, work and study freely anywhere in the European Union. Accession to the Schengen Zone opened the borders for Hungarians in 2007 to travel, while the Erasmus programme has provided the opportunity for tens of thousands of students over the past two decades to study abroad. What later became the most important destination countries – apart from the United Kingdom – for work migration for Hungarians, Austria and Germany, opened their labour markets fully in 2011, thus removing all limitations ahead of the free flow of the Hungarian workforce. Together with EU funds, freedom of movement continues to be the most highly regarded benefit of Hungary’s EU membership to date. This shows that on the societal level, economic benefits hold greater value when it comes to support for the EU than shared values or the idea of a common European identity.

Falling short

The support provided by the EU offered Hungary an unprecedented opportunity to invest in its own development and competitiveness, and at first glance the country has indeed experienced significant growth over the past 20 years. But a closer look – and some regional comparisons – reveals a more nuanced and sobering picture. According to the World Bank, Hungary’s GDP per capita grew from 10,301 US dollars in 2004 – one of the highest among the new member states – to 18,390 in 2022. That is, according to Eurostat, 61 and 76 per cent of the EU average respectively. Thus, while Hungary did not catch up with the West, it did make some progress toward it. At the same time, despite ranking lower in their development initially, most new member states managed to exceed Hungary’s growth and are closer to the EU average today. Changes in individual purchasing power show a similar picture: from 63 per cent of the EU average in 2005, Hungary jumped to 71 per cent in 2022, which is still one of the smallest increases in the region. Except for Bulgaria, all countries that joined the EU during the “Big Bang” enlargement overtook Hungary, rendering it one of the countries with the lowest living standards in the EU today.

Regional development also fell short of initial expectations: except for Budapest, the GDP per capita in all regions of Hungary continues to be under 75 per cent of the EU average. In fact, it was only in 2022 that all regions of the country reached the 50 per cent mark, and three – out of the eight altogether – continue to be among the 20 poorest areas in the EU. While all regions progressed over the past 20 years, differences, especially when comparing eastern and western regions, have not disappeared. Budapest’s GDP per capita is 158 per cent of the EU’s, followed by 70 per cent in Central Transdanubia. Northern Hungary and the Northern Great Plain close the list with 50 per cent.

The reasons behind the slower than expected development are manifold. Some are external, like the impact of the financial or the eurozone crisis. These however do not explain why other countries of the region managed to even overtake Hungary. Internal reasons play a more significant role. These on the one hand include the non-strategic and inefficient use of funds, e.g. insufficient investment into human capital, or the financing of projects that ultimately have no multiplier effect. On the other hand, corruption surrounding the use of EU funds also plays a role. The country has some of the highest rates of corruption in the European Union according to the annual reports of the European Anti-Fraud Office. Over the past decade and a half, EU funds have been used to position and re-enforce a tight-knit business circle close to the governing Fidesz party, not only by favouring certain well-connected bidders but also by supporting overpriced projects while covering up blatant financial mismanagement.

By 2022, the European Commission considered the corruption risk so high and the existing mechanisms to sanction it so inefficient that it concluded that the Union’s financial interests are endangered in Hungary. As a consequence, it froze a significant share of the cohesion funds allocated for the country with the help of the newly introduced conditionality procedure. The suspension of these payments is to remain in force as long as the Hungarian government does not implement a series of anti-corruption measures to improve safeguards. The Viktor Orbán-led Fidesz government, however, shows limited inclination to substantially remedy the situation as corruption is essential for it to uphold the system it gradually built following the 2010 parliamentary elections.

Not a one-way street

The conditionality procedure, which was introduced alongside the 2021-27 multi-annual financial framework, marks the EU’s belated response to the abuse of the Union’s budgetary resources. The fact that no such procedures were in place before testifies to the previously held assumption that once a country enters the European Union, it is willing and able to adhere to its rules and principles. The example of Hungary under Viktor Orbán, however, showed that bad faith actors may come into power even in countries that were regarded as consolidated democracies.

In fact, it is not only the EU’s financial resources but also its values and principles that came under threat in Hungary, proving that democratization and Europeanization are not one-way streets. Long before the suspension of EU funds, conflicts between the Fidesz government and the EU institutions became the order of the day and have intensified as time passed. Worries about the Orbán government’s democratic commitments arose already in 2010 as the leading party curbed the rights of the constitutional court. This was followed by the unilateral adoption of a new constitution; the forced retirement of judges; the adoption of a new restrictive media law and the subsequent subjugation of state media to party preferences; the complete reform of the electoral system that disproportionately favours the largest party; and more. The European Commission tried to address many of these challenges with the tools it had, which were either insufficient or ineffective to deal with the systemic challenge democracy faced in Hungary.

Already in 2010 Orbán was critical of the West and considered it to be in decline, which is why Budapest announced the “Eastern Opening” policy that served to strengthen ties with emerging economies. It took until 2014-15 for the government to start pursuing explicitly Eurosceptic rhetoric and embraced topics like migration or gender, with which it decided to challenge the EU institutions. The “anti-Brussels” rhetoric continued throughout the 2010s and was ramped up as Fidesz’s relations started to deteriorate with its political allies in the European People’s Party.

The Orbán government went so far as to organize so-called national consultations spreading falsehoods about the EU and its institutions, as well as billboard campaigns that  directly attacked the European Commission’s president with whom Fidesz used to share the same wider political party. The government’s confrontational style led to Fidesz’s departure from the European People’s Party in 2021 and a search for a new political home among the parties of the Eurosceptic radical right.

Twenty years later, the party that once negotiated the country’s accession to the EU is at fundamental odds with integration, and is highly critical of the political directions the group set out to take in keeping with the idea of an ever-closer union. Orbán considers the EU dysfunctional and is cultivating increasingly close ties with authoritarian powers like Russia or China. Budapest also blocks joint EU action that would seek to address the challenges they pose to Europe’s security and prosperity. As such, Hungary, which was once a democratic frontrunner, is now regarded in the EU as a Trojan horse for autocrats.

Occupying Brussels

Hungary joined the European Union 20 years ago and became a member of NATO 25 years ago. Yet, neither occasion has been officially commemorated by the Hungarian government. As Viktor Orbán geared up for this year’s European parliamentary election and the Hungarian EU Council presidency is due to take place from July, he announced that he wants to “occupy Brussels”.

Like most radical right politicians after Brexit, he does not want his country to leave the EU anymore – with over 70 per cent of Hungarians supporting the country’s EU membership, even Fidesz voters would resist a “Huxit”. Instead of leaving the EU, Orbán wants to reform it from within and calls for turning integration into a union of strong, sovereign nation-states that would be little more than an economic union without any of the elements that seek to keep governments democratically accountable. As illiberal and Eurosceptic forces are gaining ground in the EU, his call does not fall on deaf ears.

Zsuzsanna Végh is a programme officer at the German Marshall Fund of the United States. The views expressed here are those of the author.

EU integration, EU membership, Hungary