Moment of Grace, or Coup de Grâce? A Realist View on Hungary

In his Transatlatlantic Take on 20 January Pavol Demeš argued that though Hungarian Prime Minister Viktor Orban should be aware that he cannot ‘continue bluffing the United States and the European Union forever,’ he is unlikely to ‘reset his policies any time soon.’ In fact he is doing just that, although not fully voluntarily. This does not mean the fundamental deconstruction of the whole system he and his party, Fidesz, have built in the last year and a half, but it is a considerable turn nonetheless. Taking a realist approach helps to understand the reasons.

Orban’s performance in the European Parliament on 18 January may have surprised many. Contrary to his generally uncompromising, sometimes headstrong image, he promised to enact practically all legislative changes that were requested by the European Union, including the independence of the judiciary system and the National Bank. He confirmed this during his 24 January meeting with President of the European Commission Jose Manuel Barroso and President of the European Council Herman van Rompuy. Several face-saving PR efforts were made in the pro-governmental parts of the Hungarian media, but these did not change the fact: in order to get an IMF loan, the Hungarian government and Viktor Orban basically gave in.

They did so because there was no other choice left, except a rapid default. The efforts in 2011 to finance the Hungarian budget deficit from the open market have not brought sustainable results. Despite numerous painful cuts in governmental spending, state debt has actually increased: most of the debt is denominated in Euro, while the national currency, the Forint has become extremely weak in 2011. Hence, Hungary desperately needs the security provided by an IMF loan in order to stabilize the national currency as well as the budget. Hungary also cannot risk any concrete EU sanctions being introduced, lest they lead to the suspension of its voting right, or deny access to the structural funds. All in all, the dependence is evident and lasting, taking into account the structural weaknesses of the Hungarian economy.

As Demeš pointed out, Orban skillfully capitalized on the ongoing economic and political crisis in the EU and the U.S. Now it is the other way around: the West, concerned about certain developments in Hungary, is going to capitalize on the economic weakness of Budapest. This is entirely logical from a realist perspective. The need for the loan has handed the U.S. and the EU extremely strong leverage over Hungary.

Therefore, one may well count on that the Hungarian government to fulfill the preconditions of the much-awaited IMF loan, including the ones set by the EU. Immediate reactions to Orban’s cooperative turn have been positive: the Forint became stronger, the credit default swap decreased and even a few almost-friendly articles appeared in the foreign media. Indeed a good start to turn back some worrisome processes.

One needs to realize though, that this moment of grace may quickly fade away. The Hungarian government cannot hope that promises alone will make Western political and media attention disappear, or that implementation of the promised legislative changes will not be monitored closely. Western embassies in Budapest, worried banks, nervous investors, civil society groups and the domestic opposition together comprise an immense monitoring potential. Orban’s turn needs to be lasting and credible. According to a WikiLeaks cable, Viktor Orban once told U.S. diplomats: “Don't look at what I am saying, look at my actions." This is exactly what is going to happen. Pacta sunt servanda; non-compliance is not an option any more.

The main problem in Hungary is with the domestic electorate. Just a few days after Orban’s cooperative performance in the European Parliament, a large pro-governmental demonstration was held in Budapest. Though in parliamentary democracies pro-governmental demonstrations are unusual, this is just a coleur locale. The core of the problem lies elsewhere. On Saturday 21 January over one hundred thousand demonstrators gathered together in order to ‘protect Hungary’s sovereignty’ and to defend the country against ‘attacks coming from abroad.’ For most of them, outside attacks meant in practice the European Union and the United States, which they believe violated Hungary’s sovereignty by requesting changes in domestic legislation. Besides, the constitutional two-thirds majority democratically won in 2010 gives Fidesz voters considerable confidence, particularly considering the weak and fragmented opposition. There were many signs waved on Saturday that read ‘We are the 2/3!’

Thus Prime Minister Viktor Orban needs to answer a difficult question, and needs to do it soon. On the one hand, there are the international commitments to be fulfilled, on which the vital IMF loan depends. On the other hand, a considerable part of his domestic electorate is firmly opposed to these commitments, a view in keeping with the earlier bellicose communications by Orban himself. Further complicating matters are Hungary’s highly EU-critical rightist radicals, who are now in the political opposition, but whose support is growing. This bloc could be strengthened were Orban to take a sudden pro-EU turn.

The good news is that realism helps. Domestic support matters in fact the most in times of elections, which in Hungary are due only in two and a half years, in 2014. The Hungarian government’s short and medium-term interests clearly point towards fulfilling the international obligations. Not doing so would result extreme economic hardships.

Decision-makers in Budapest seem to be well aware of this, indicated also by the refusal of Orban to speak at the pro-governmental demonstration. Wasting the moment of grace granted by this cooperative turn may result in the loss of the security guaranteed by the IMF loan, which would be in fact a financial coup the grâce. A lethal blow delivered to Hungary paradoxically enough by its own government. Though one may indeed find historical precedents for such actions in Hungarian history, this is no reason to repeat them.