Hungary risks isolation as Orban miscalculates

By bne IntelliNews October 29, 2014

Kester Eddy in Budapest -


Hungary's bungled handling of the US visa ban on what Washington calls corrupt government officials has focused international attention on institutionalised corruption in the country, leaving it isolated and Viktor Orban, the fiery prime minister, in a trap of his own making, say critics.

Meanwhile, the equally bungled attempt – believed by many to be Orban's personal idea  to introduce the world's first internet tax has galvinised the previously torpid Magyar public and precipitated public protests across the country at levels unprecedented since Orban swept to power in 2010.

While his government, elected with 45% of the vote last April, is still firmly in control, the upsurge in criticism and discontent has rattled both Orban and his Fidesz party, while giving hope to opponents that the religious-like zeal of his core supporters may finally be weakening. “Never, in the last 35 years, including the last 10 years of the [communist] Kadar era, has Hungary been so internationally isolated as now,” thundered Ferenc Gyurcsany, president of the pro-Europe Democratic Coalition (DK), at a meeting with international press on October 28.

In the eyes of the former Socialist – and to many on the right, disgraced - prime minister, the reasons comprise Orban's “historically dramatic shift” in politics, “turning the car of Hungary from the west to the east,” and the accompanying growth in institutionalised cronyism and graft. “I'm not just talking about general corruption [typical of the region]. It's not just the domestic rivals of this government, but the main international players, like the US, saying that the whole government is infiltrated by corruption issues,” Gyurcsany proclaimed.

Indeed, in less strident tones  interlaced with profuse diplomatic praise and warm overtures to cooperate – Andre Goodfriend, the US charge d'affaires in Budapest, verbally lashed the Orban government on October 24.

Asked what he meant in a statement suggesting a possible breakdown in cooperation with Hungary as an ally, he replied: “Hungary was a country ahead of the others [in throwing off communism]… From that high point of hope and expectation to rapidly being one where [we see] the weakening of the rule of law, the attacks on civil society, the lack of transparency and how rapidly those trends are taking hold, my statement last week was more of a concern for a valued ally.”

Goodfriend pointed to Hungary's sudden decision last January to expand the Paks nuclear facility using Russian technology and €10bn in credit as an example. “How was the decision made? Was it an open tender? Was there transparency in the decision? And that gets back to the discussion of… an overall environment in which corruption can flourish,” he said.

He also scolded Hungary for its statements on crisis-hit Ukraine. “At this time of Russian aggression in Ukraine… this is a time to stand firm with the EU, and understand the sensitivities on the ethnic nationalism question, particularly with calls for autonomy among Hungarian ethnic nationals in Ukraine. This is not the time to have that discussion… [nor] to break with EU partners and to publicly criticise the approach which the partners have taken,” he said.

Fidesz fightback

Hungary steadfastly argues that it is intent on fighting corruption, with Mihaly Varga, the economy minister, telling parliament on October 27 that the tax authorities are investigating suspected large-scale VAT fraud. Except, critics point out, that these investigations are at subsidiaries of Glencore, Cargill and Bunge  three US-based food companies.

Budapest also continues to insist that Washington reveal the names and evidence behind the ban on six of its citizens entering the US. Orban, speaking to reporters in Brussels on the day of Goodfriend's multiple broadsides, stressed that Hungary could not begin an investigation without evidence being handed over, saying “many of us do not understand why this is not happening.”

But critics point out that the US made clear when first informing Budapest of the ban that it would reveal neither the names nor the evidence against the individuals, as visa issues are a confidential matter under US law. “It's a good game, blaming somebody else, knowing that [the US] cannot give this information," Agnes Vadai, MP and DK vice-president, tells bne.

Goodfriend confirmed that he told the Hungarian foreign ministry on October 6 that there would be no names or evidence released, and insisted that evidence was already available to the Hungarian government if it wished to investigate. “[We have] nothing from any source that is not available to others from an investigation. People come to us and say 'this happened to me'… We received nothing through any type of covert means,” he said.

Quite how long the impasse can continue is a moot point. “Since the US ban [was revealed], PM Orban has been politically trapped. As, supposedly, his close allies are involved in these alleged corruption cases, it would be a political suicide for him to reveal names, or launch real investigations into these issues,” Tamas Boros, director of Policy Solutions, a Budapest-based political think tank, tells bne.

Boros also notes out that prominent Fidesz politicians and pro-government media have begun accusing the US of seeking to depose Orban with false allegations of corruption. “At a time of crisis, the government typically seeks counterattack as a communication strategy,” he says.

But in a country where more than 65% of the population supports European integration and Atlanticism, such a policy is fraught with risk. “I'd say this would be an extremely dangerous path for the Orban to take,” Boros warns.


Hungary risks isolation as Orban miscalculates

Related Articles

UK demands for EU reform provoke fury in Visegrad

bne IntelliNews - The Visegrad states raised a chorus of objection on November 10 as the UK prime minister demanded his country's welfare system be allowed to discriminate between EU citizens. The ... more

Erste claims Hungary is breaking peace deal with banks

bne IntelliNews - Hungary will breach its February agreement with Erste Group if it makes the planned reduction in the bank tax conditional on increased lending, the Austrian lender's CEO ... more

Austria's Erste rides CEE recovery to swing to profit in Jan-Sep

bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

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

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have 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.

If you have any questions please contact us at

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

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

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

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The 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.