Can anyone do anything about Viktor Orban?
HOW DO YOU solve a problem like Viktor Orban? Hungary’s prime minister has been a thorn in the side of his country’s notional allies ever since his Fidesz party returned to power in 2010 and set about dismantling, undermining or sidelining the country’s institutions—trampling EU rules in the process, according to critics. Mr Orban, the EU’s longest-serving head of government currently in office, is a canny operator: he and his lawyers tend to remain one step ahead of attempts by Hungary’s adversaries to bring his government to heel.
More recently Hungary’s foreign policy has become a particular irritant. Mr Orban has exploited unanimity requirements in the EU to block a four-year €50bn ($54bn) aid package for Ukraine, and in NATO to hold up Swedish accession to the alliance. The first of these issues will be debated at a special EU summit starting on February 1st. Undermining democracy and the rule of law at home is one thing; disrupting the West’s foreign and security policy another. What can other governments do about it?
The EU has often struggled to tackle miscreants within its ranks. In theory Article 7 of the Lisbon treaty, the closest thing the EU has to a constitution, is available to tackle rule-of-law abuses. But this has proved a limp instrument: the article’s “nuclear option”—suspending a member state’s voting rights—requires unanimity, and some governments are leery about pressing the button. Other political efforts have foundered, too. Critics used to rage that Fidesz was a member in good standing of the European People’s Party, a mainstream centre-right grouping. But it was forced out in 2021, and Mr Orban has been no more obliging since.
More recently the EU has found the stomach to use its considerable financial leverage. Hungary receives EU transfers that in good years can exceed 4% of GDP. A mechanism inserted into the club’s budget in 2020 allows it to impose financial sanctions on governments that violate EU rule-of-law provisions. These have helped extract concessions from Mr Orban’s government, for example on establishing anti-corruption safeguards. The EU continues to withhold funds worth €21bn. But such measures are not designed to bring about changes in foreign policy, and Mr Orban, who enjoys warm relations with Vladimir Putin, Russia’s president, has dug in his heels over Ukraine.
European governments appear close to their wits’ end. This week the Financial Times obtained an unofficial EU document that outlined plans to attack Hungary’s currency, the forint, and undermine investor confidence in its debt, should Hungary refuse to back the Ukraine funding package. Mr Orban denounced it as “blackmail”.
Whether the document was intended as anything more than a warning is unclear. But the Hungarian economy has vulnerabilities. Inflation peaked at around 25% in early 2023. And because fully one-quarter of Hungary’s public debt is denominated in foreign currencies, the national central bank (Hungary is not in the euro zone) has been obliged to take drastic action to prop up the forint: interest rates now stand at 10% (compared with the European Central Bank’s deposit rate of 4%). Hungary’s debt-service bill is now the highest in Europe, at 4.3% of GDP. The budget deficit in 2023 was probably around 6% of GDP. Without EU funds, narrowing that will prove painful.
Still, a crisis hardly seems imminent. Hungarian banks are well capitalised, and loan defaults and other such issues affect only 2.7% of banks’ books. The central bank will continue to bolster the currency. “Hungarian financial fundamentals are not great, but not terrible either,” says a long-time observer of the country. The EU can hurt Hungary, but it is unlikely that it could engineer an economic crisis.
What about NATO? Here Mr Orban’s motives seem hard to grasp. Having promised that Hungary would not be the last holdout against Sweden’s membership, Mr Orban finds himself in exactly that position after Turkey consented, in exchange for an agreement by America to sell it up to 40 F-16 fighter jets. Perhaps Mr Orban hopes to extract a high price from the EU at this week’s summit by linking the two issues (most EU countries also belong to NATO). America, the heftiest NATO member, has indicated a willingness to turn the screws on Hungary. In early January it scrapped a bilateral tax treaty between the countries.
All this means the stakes in Brussels this week will be especially high. The EU is determined to sign off on the €50bn for Ukraine, and has been negotiating with Hungarian officials furiously in the run-up. Should unanimity prove impossible, as a last resort the 26 other EU leaders may be prepared to go behind Hungary’s back and agree to the funding outside formal EU structures. That would leave Mr Orban completely isolated. But it is not obvious that he will mind. ■