Why Brexit is terrible news for Hungary’s Viktor Orbán

Writing in Saturday’s printed edition of the Népszava daily, journalist and author Paul Lendvai suggested that Brexit “strengthened Viktor Orbán’s position, almost as much as the recent soccer victories” during the UEFA European Championship. While Mr. Orbán may benefit on the surface, and in the very short-term, I would argue that Brexit will pose a very serious challenge to his regime.

The populist Orbán regime is not based on any coherent ideology. It cannot be described as conservative, nor is it based on free market principles. It is “Christian Democrat” only in name and, of course, it is not social democratic in any way. Mr. Orbán’s regime is based purely on its ability to satisfy the worldly needs of a very large nomenklatura that has been built around it. Its survival is based on instilling loyalty through fear–threats of loss of employment, making life difficult for politically wayward businesses through punitive action or character assassination–and once loyalty is achieved, it is rewarded by gifts and a stable existence.

The regime’s ability to continue to buy the loyalty of its collaborators hinges almost entirely on massive EU transfers to Hungary. With Britain’s impending departure from the European Union, these transfers will almost certainly decrease.

Péter Szijjártó, Hungary’s Minister of Foreign Affairs and International Trade, was quite candid in admitting that Hungary’s already anaemic growth (0.8%), may now only reach 0.3% or 0.4%, as a direct result of Brexit. But Mr. Szijjártó may be overly optimistic, as Morgan Stanley has suggested that Hungary may actually fall into recession next year, following the vote, as the EU’s GDP as a whole, decreases by 0.7%.

Mr. Szijjártó, speaking with Népszava’s journalists, also conceded that Great Britain’s departure will also have a very negative impact on the EU budget, considering that the country covers 8% of the total expenses. Hungary receives some 25 billion euros in support from the EU, which Erste Bank estimates comprises 5.6% of Hungary’s GDP. In fact, Hungary is more dependent on EU transfers than any other country in East/Central Europe, including relatively underdeveloped states, like Bulgaria.

The Hungarian forint was impacted by the crisis right away, although it regained some of its losses by the end of the day on Friday, closing at 316 forints against the euro.

Beyond the looming economic impact on Hungary, Mr. Orbán has reason to be concerned that by losing an important eurosceptic ally, which also opposed ideas of EU federalism, Germany’s already impressive influence in the EU will increase even further. As our readers will know, Mr. Orbán has had a very prickly relationship with Chancellor Angela Merkel.

Outgoing Prime Minister David Cameron with Viktor Orbán earlier this year.

Outgoing Prime Minister David Cameron with Viktor Orbán earlier this year.

It is not surprising that Mr. Orbán ran English-language ads in Britain’s major daily newspapers, calling upon Britons to vote to remain in the EU. As the crude saying goes: money talks, and Hungary–so vulnerable to any potential drop in EU funding–will be getting less of it. And since much of these funds end up being used in tenders that are granted to companies and people closely intertwined with the ruling Fidesz party, the nomenklatura may become restless.

Meanwhile, several opposition parties in Hungary called on the prime minister to suspend his anti-EU and anti-migrant referendum, scheduled for October, in light of the crisis caused by Brexit. Gábor Fodor’s Hungarian Liberal Party called for Mr. Orbán to cancel his referendum, as did Ferenc Gyurcsány’s Democratic Coalition. The referendum, which has no legally binding power at all, is widely seen as little more than a populist, anti-immigration and anti-EU PR stunt, to focus attention on anything, but corruption, and crumbling health care and public education back home.

The Hungarian Socialist Party remarked that the Hungarian referendum was “the first station in Hungary’s departure from the EU.” Both the Politics Can Be Different green party (LMP) and Dialogue for Hungary (PM) called on Mr. Orbán to put the focus on the fate of an estimated 350,000 Hungarians living and working in Britain, and to begin negotiations with the British government, on their status and protection in the UK.

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