Happy New Year! These are roller-coaster times for the land of Houdini and Liszt. On January 11, the European Commission issued a blunt warning to Hungary, in which the EU pledged to take legal (yes – legal!) action against Hungary for failing to comply with the basic membership conditions in the European Union. Issues such as central bank independence, the judiciary, and personal data protection were among those particularly emphasized. The US has remained on course with the mainstream Anglo-Saxon policy, by sticking to the rhetoric of standard anti-Orbánism. It’s noted that the US ambassador to Hungary intentionally missed the celebration of the new constitution, which took place at the Opera House, so that to demonstrate her disappointment. Much to Orbán’s apparent imprudence.
On the financial front, the political pressure on Hungary has led to the worsening of the country’s borrowing capacity, which is evidenced by the extraordinarily high 10-year bond yields at the most recent auction. Hungary will be forced to pay 10% on those long-term bills, which is unsustainable enough in itself. Imagine now that the short-term debt obligations are priced at those same 10%. What is ironic is the sad fact that a 10% pricing is still better than the situation of several months ago when the country was struggling to find any short-term funding at all.
In addition to that, severing the relationship with the West could be catastrophic for the small Central-European economy that Hungary is, which receives around 2% of its total GDP in “cohesion” funds from the EU. Add to that the prospects of being secluded from the foreign financial markets from which Hungary must continue to borrow heavily in the next years to remain solvent. Finally, the International Monetary Fund, on which the country depends (heavily) to avoid bankruptcy, can simply reject to provide any more support should Hungary object to comply with the US-EU demands. Again, same old Anglo-Saxon rhetoric.
On one hand it’s sad to observe that the West is so fast with intervening into domestic affairs of a country to fix its “anti-democratic tendencies” after leaving the Hungarian people with billions in household debt following the boom and bust of those Western financial “too-big-to-fail” giants. The fault for causing the crisis which lead to this whole Fidesz situation is, of course, not the fault of the western states. But when it comes to interventions based on democratic principles, as if they really care for the average Hungarian, then the West is quicker and fairer than ever.
However, the political reality is what it is, and Orbán should have predicted this response when he came to power and when he pledged to “remain in control for 25 years”. Yes, Orban has apparently promised to beat the historical record of the inter-war ruler Miklós Horthy, who managed to stay in command for some ridiculous 24 years.
Personally, I wonder what fun can it be to govern a country completely isolated from the rest of the world, cut off from the foreign debt markets, unable to sustain its public finances via the institutional funds of the World Bank of the IMF, and with poverty looming over the whole population. For reference, Google search “Iran”.
Orbán is practically killing his country. I believe, or at least I want to believe, that he still is a patriot and wishes his citizens well. Despite his apparent unprecedented lust for power, evidenced by his frenzied strive to gain full control over the past 20 years, he is still Hungarian in his blood. What he needs to realize is that political stability (if you can call a semi-autocratic regime this way) will do very little good for a small country dependent on the foreign markets, especially in the paradigm of the post-crisis stagnation.
The problem is that Hungary does not have a normal political spectrum. The only party which has seen at least a mild increase in popularity is the far-right Jobbik (God forbid). Fidesz has only been able to win majority in the past election because of the lack of any serious opposition. Any potential coalition will be thrashed by the state-controlled media, which will discredit the gathering, in addition to the state-controlled judiciary system, and the state-controlled police. So, betting on the continued disorganization of opposition forces, Orbán will most surely go on developing his power structure, even if he accepts some minor adjustments in order to appease the worried, but ultimately powerless, West.
The heat escalates, and there is indeed very little we can do to save Hungary from autocracy.
* Rustam Jamilov, Azerbaijan,
Junior Economist at the Central Bank of the Republic of Azerbaijan
Lecturer at Azerbaijan State Economic University
Alumnus of CEU Business School, Bocconi University, Dartmouth College
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