Hungarian corruption becomes one of the worst in EU

Hungarian corruption becomes one of the worst in EU
Viktor Orban greets his good friend Chief Prosecutor Peter Polt.
By Blanka Zoldi in Brussels January 26, 2017

Hungary dropped seven places on the Corruption Perceptions Index (CPI) released by Transparency International (TI) on January 26. The country finished in the 57th place out of the 176 countries examined, joining the ranks of the worst performers in the EU alongside Bulgaria, Greece, Italy and Romania.

Even though corruption and lack of transparency is increasingly becoming a drag on Hungary’s competitiveness compared to regional peers, critics points out that the country’s chief prosecutor remains reluctant to investigate alleged corruption cases that are potentially uncomfortable for the government.

Characteristic

In 2016, Hungary garnered 48 points on a scale of 0 (perceived as highly corrupt) to 100 (perceived as very clean), three points below its core in 2015. The latest figure is part of an ongoing decline that began before the governing Fidesz party came to power in 2010.

“We already pointed out in 2008, under the Socialist government, that corruption had institutionalised in Hungary,” TI Hungary says in its country report. “Back then, however, we considered this rather as the by-product of the democratic system. From 2010, this has changed: corruption has become the characteristic of the regime.”

Meanwhile, regional peers have all improved their scores by 4-6 points over the past five years, leaving Hungary behind. Poland ranked at the 29th place with 62 points, while the Czech Republic landed at the 47th place with 55 points and Slovakia at the 54th with 51 points. For the first time, Romania caught up with Hungary in 2016, leaving Italy, Greece and Bulgaria as the only EU countries that performed worse than Hungary, reaching 47, 44 and 41 points, respectively.

TI is not the only organization that warns of increasing corruption in Hungary. The European Commission picks corruption and the shadow economy as prevailing problems in only seven member states: Hungary is one of that group. Meanwhile, the latest World Economic Forum’s (WEF) competitiveness survey found that one of the biggest drags on Hungarian competitiveness is corruption and the lack of transparency.

While the government has repeatedly claimed that it is committed to fighting all types of fraudulent conduct, it has passed a series of legislations in recent years that clamp down on transparency. At the same time, a large number of alleged corruption cases involving Fidesz politicians and their allies have remained without consequences.

Opposition parties and several civil organizations argue that one of the most important pillars of Orban’s regime is Chief Prosecutor Peter Polt. Reportedly a close friend of Orban and often spotted in the company of the Hungarian PM at soccer matches, Polt was elected to lead the supposedly independent Chief Prosecutor’s Office already during the first Orban-government (1998-2002) for a six-year term commencing in 2000. When Fidesz returned to power in 2010, Polt was again tapped as chief prosecutor, this time for nine years due to legislative changes passed by the new government.

As chief prosecutor, Polt is responsible for prosecuting cases at a national level in Hungary, his mandate including alleged corruption cases. Since 2010, however, an increased proportion of complaints concerning bribery and corruption is dismissed by the Chief Prosecutor’s Office without launching an investigation. Looking at an annual average, Atlatszo calculates that the proportion was three times higher in 2010-2013 than in 2006-2010. Even if an investigation is launched, currently it is more often closed without any criminal charges being filed than before 2010.

Bias

Opposition parties have repeatedly called for the resignation of Polt, claiming that while proceedings are launched against the opponents of Fidesz, he ensures that procedures that are potentially uncomfortable for the government are either not launched or quickly closed.

Last year, for instance, the Chief Prosecutor’s Office launched investigations against banking oligarch Zoltan Speder, who clearly fell out of favour and found himself under a sudden and coordinated attack after years of working closely with the Fidesz government. While the investigations are still ongoing, the embattled banker already sold almost all of his stake in FHB Bank.

On the other hand, Polt did not launch an investigation when it was revealed that the six charitable foundations of the Magyar Nemzeti Bank (MNB) spent around HUF20bn without announcing public procurement, handing much of it to persons closely linked to the MNB’s management and to the PM. “In vain did TI Hungary report this as a crime to the chief public prosecutor, an investigation into a suspected case of damage to national assets was never initiated. As a result of the bias of the authorities, the foundations even got away with the unlawful circumvention of public procurement procedures,” Miklos Liget, legal director of TI Hungary, said as he presented the report.

Many suspect that Polt’s reluctance to launch an investigation into the scandal is connected to the fact that his wife is a high-level executive at MNB and sits on the board of two of the controversial foundations.  

In another case concerning the controversial public procurements won by the company of the PM’s son-in-law, the Chief Prosecutor’s Office did launch proceedings. However, following more than a year-long investigation, in 2016 it concluded that no crime had been committed.

While Fidesz repeatedly denied using the prosecutor’s office for its own political advantage, it has recently turned against civil organisations that voice criticism. Responding to TI’s latest CPI report, government spokesperson Zoltan Kovacs said he finds it “interesting” that TI had no major remarks before 2010 and ranked the country higher on the list at the time, despite the fact that “EU funds were embezzled in a free-for-all fashion” during the period of left-wing governance.

Earlier this year, a senior official of the ruling Fidesz party named Transparency International Hungary as one of the Hungarian NGOs funded by Hungarian-US financier George Soros that must be “cleared away” from the country.

News

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss