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Key Economic Data 
  2003 2002 2001 Ranking(2003)
Millions of US $ 82,805 65,843 51,900 41
GNI per capita
 US $ 6,330 5,280 4,830 67
Ranking is given out of 208 nations - (data from the World Bank)

Books on Hungary

Update No: 127 - (26/02/12)

Hungary's Prime Minister Viktor Orban, the leader of the right wing Fidesz party, has been in power for two controversial years. During this period, he has been accused of rolling back democratic advances in the Eastern European country particularly via changes to the constitutions inaugurated on January 1, which some have called tantamount to a 'constitutional coup'. Numerous international bodies, from the US state department, to the OSCE, to Brussels itself have lambasted changes which they consider an affront to the values of democracy enshrined by the EU, of which Hungary is an increasingly reluctant member. Orban's recent political escapades have earned him an unenviable soubriquet -the 'Vikttator.' In addition to these controversial constitutional and legal changes, Hungary is facing another major crisis: financial freefall.

To start with the last point, Budapest has, for more than a year, been attempting to stave off the effect of a long-term budget shortfall that has drawn the country to the point of bankruptcy at several points. Hungary's financial problems, very much like those of Greece, have deep roots stemming back to their accession to the EU. Hungary, unlike Greece however, has kept its currency, the forint. This has not prevented it from falling victim to the woes that hit the eurozone as a whole. The export-driven economy was severely affected by the downturn in its biggest trading partner Germany. Low domestic consumption and consistent unemployment rates have both been obstacles to growth. In 2011, Hungary’s banking industry was unprofitable for the first time in 13 years due to losses from foreign-currency mortgage repayments, rising bad loan provisions and a special industry tax. After 66 years in service, national airline Malev went bankrupt at the beginning of February after failing to find a solution to "unsustainable" liabilities estimated at €550 million. As a result, the European Commission has downgraded its economic outlook for Hungary to a 0.1% contraction this year versus growth of 0.5% previously, in forecasts made earlier this week. The EU has taken punitive measures against Budapest, such as suspending almost 500 million euros in EU funds for Hungary next year, which would amount to 29% of Hungary’s allocations for 2013, until it can prove that it can cut its budget deficit to less than 3%. The government has described the decision as "unfounded and unfair.”

Hungary's financial problems however are also the result of a set of new laws, enshrined on January 1st, which would, the EU believes, compromise the independence of the central bank and make it subject to political control. The new law would allow the government to appoint a deputy governor, jeopardizing the system of checks and balances. This is forbidden by EU treaties. Another matter the EU has taken issue with is a new set of fiscal laws which establish a flat personal income-tax rate and cap public debt, thus diminishing the ability of future governments to generate revenue. This comes at a time when Hungary is looking for its second bailout from the IMF in four years, which some say could be the only way of saving the state from insolvency. The IMF is however reluctant to offer funds, while the central bank's independence is threatened. The fund’s head, Christine Lagarde, has stated quite clearly "we are not compliant" in dealing with the nation and that unless changes are instituted, a bailout fund is off the cards. In mid-January the European Commission gave Hungary one month to respond to its concerns over the central bank legislation. That deadline is approaching. Orban and his maverick Finance Minister, György Matolcsy, who unhelpfully described Hungary last year as 'at war' with the IMF, and has regularly baited the institution, have wavered somewhat in attitude. In mid-January, in the eye of the storm, when the forint slid to record lows, it was announced that they were willing to negotiate on ‘everything’. Question marks remained, however, as to whether this would go as far as an outright reversal of the law. At the moment it seems that that government has reached an agreement with the IMF in the process of negotiation. What results this brings should be seen in the coming months.

Hungary's tensions with the EU are not limited to its parlous financial situation. A bone of contention on the agenda for some months now is the general tightening of state apparatus under this regime, which some critics believe to be a reflection of a new authoritarianism. The first aspect is that of media freedom, which observers say has suffered greatly under Orban. Problems began with the Mass Media Act and Press Freedom Act, which came into effect on July 1, 2011. This created the Media Council, a new regulatory body under the National Media Authority, which people say is an organ of government policy. One of the first acts of the Media Council was to strip a leading independent national news radio station, Klub Radio, of its license. Human Rights Watch has issued an 11-page memo describing a lack of independence by the Media Council and a litany of complaints relating to the freedom of the press. The NGO recommended that the EU investigate Hungary's breach of the media, under Article 7 of the EU Treaty, which states clearly that deteriorating media liberty would be a breach of common EU values. Were this to take place, Hungary could risk losing its member state voting rights in the council. The EU has agreed to monitor the situation and should Hungary fail to observe the council's recommendations, Article 7 action may be considered. Another worrying development has been observed in Budapest's theatre scene, where the mayor sacked the director of Új Színház (the New Theatre), and appointed actor György Dörner in his place. The latter is a supporter of extreme right wing party Jobbik (which has incidentally gained momentum in recent months) and plans to reverse what he describes as a "degenerate, sick, liberal hegemony" in Hungary by stopping the production of "foreign garbage" and concentrating on Hungarian plays.

The new raft of legislation does not just put the media on mute, but has also given political weight to other highly conservative positions. Abortion and same-sex marriages are now outlawed, and discrimination against women and sexual minors are inscribed at a legislative level. All but 14 religious denominations have been denied official recognition; those losing tax-exempt status and state school payments include the Episcopal and Methodist churches, several Jewish congregations, and all Muslim sects. A slew of minorities, whose rights the EU tries to protect, suffer under Orban's regime, from a circumvention of their political freedom to a reduction of their economic rights. In an EU Civil Liberties Committee debate at the start of the year MEPS accused of Hungary overseeing a "mutation of democracy." The independence of the judiciary has also been compromised, says the EU. The attack on civil liberties has not only caused consternation within the EU, but also attracted the censure of US Secretary of State Hillary Clinton, who penned a letter expressing her concern and a "particular call for a real commitment to the independence of the judiciary, a free press and governmental transparency" last year. The EU has now followed its rhetorical criticism with concrete action. This week the European commission launched three suits against Hungary, arguing that Orban's actions and policies were in breach of European law. The European commission noted specific concerns about constraints on the central bank's independence, excessive influence on the country's judiciary (evinced by forcing judges who were in office before Orban came to power to retire early) and data protection laws which the government's critics claim infringe privacy laws. Whether Hungary is willing to implement a complete volte-face, remains to be seen.

The day after the new constitution was ushered in, on January 2, tens of thousands of protestors took to the streets in Budapest to protest against what they saw as the undermining of democracy. There are some however for whom Orban's defiance against the EU strikes a chord - many believe that accession to the Union has not benefited the country as a whole. Hungary's dependence on foreign funds means that Budapest has no choice at the moment but to negotiate with its more democratic neighbors. Orban’s vision for a more autocratic Hungary may therefore have to be revised. We can but hope this is the case.  

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