Hungary poses a stern test for Europe

The European institutions have rarely faced a sterner test than in their dealings with Hungary. As defender of the European treaties the Commission must do all in its power to protect the fundamental principles that underpin liberal democracy in the EU, yet any decision to block an EU-IMF aid package until Hungary’s authoritarian measures have been scrapped risks further serious damage to an already fragile European banking sector.

A collapse of the Hungarian currency and subsequent default would hit Austrian banks particularly hard. They have €40 billion in liabilities in Hungary. Italian banks would also suffer with liabilities of €20 billion. The damage would not end there, as contagion spread. No doubt Prime Minister Viktor Orbán and his Fidesz party hope to rely on the threat of such collateral damage to secure “precautionary” support from the IMF without having to make too many other concessions.

Hungarian negotiators may say that everything is negotiable and that there are “no preconditions” in talks with the IMF taking place in Washington this week. There may even be a move to restore some independence to the Hungarian National Bank, but there are so many wider issues to be resolved in Hungary-EU relations such as press control, dismantling of the Constitutional Court, weakening of the judiciary, changes to the electoral system, grant of nationality and voting rights to Hungarian minorities in neighbouring countries, limited recognition for religious groups and the arrest of the Socialist party leader – to name but a few. Here is a recent analysis.

Hungary’s new constitution which came into effect on January 1 2012 seems indeed to have many of the trappings of an authoritarian state. The European Commission and the other EU institutions must do all they can to reverse this situation. In the background is always the threat of Hungary’s suspension or expulsion from the EU. A paradoxical outcome in pursuit of democratic principles!

It is a sad irony that the death of Vaclav Havel, standard bearer of freedom for all the countries of Central and Eastern Europe, should occur at a time when another country of Eastern Europe is donning the apparel of a one-party state. It’s a further irony that Hungary’s governing party, with a clear parliamentary majority, is apparently intent on entrenching a single party in government. It has some of the hallmarks of Putin’s Russia, including party control of administrative, judicial and constitutional appointments – in other words a “nomenclatura” without the checks and balances vital to a democratic society.