The Descent of Hungary

The goulash democracy

By RAYMOND ZHONG

How much can the European Union, by law a club of democracies, actually do to stop a freely elected government within its borders from turning its democracy into an autocracy?

This week the Venice Commission, the European Council's advisory body on constitutional matters, issued a stinging report on recent judiciary reforms passed by Hungary's ruling Fidesz party, which the group says are antidemocratic and jeopardize the right to fair trial. The European Commission is in talks with Budapest for this and other potential violations of EU law. Last month the European Parliament broached procedures that could effectively kick Hungary out of the EU.

All signs indicate that compromises will eventually be reached. This is not a fight that either side wants to see end messily. Yet European institutions can only do so much to reverse the ugly turn that public life has taken here on Budapest's splendid stone boulevards, and in its houses of power.

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The scale and speed of what has happened in Hungary since 2010 took even old Budapest hands by surprise. In April of that year, Fidesz and its coalition partner won a two-thirds majority in Parliament following eight years of incompetent, scandal-plagued rule by the Socialist Party. Fidesz chief Viktor Orban took office as prime minister with, he declared, a broad mandate for change.

In its first 20 months in office, Mr. Orban's government restructured public administration in almost every aspect of Hungarian life. Among the 363 new laws Fidesz passed between May 2010 and December 2011—about one new law for every two working days—were reforms of the courts, the central bank and media regulation. There was a new constitution. There was a new electoral map that favored Fidesz candidates, and a reduction in the number of MPs. There were new laws governing taxation, health care, churches, universities, even the tobacco trade and the State Opera—all with the effect of bringing power closer to the center and placing Fidesz appointees in key posts.

During the Cold War, Hungary was said to be governed by "goulash communism" due to Janos Kadar's experiments in free-market economics and gradual loosening of his totalitarian rule. Today we are witnessing the birth of goulash democracy: parliamentary government spiced with strong centralized control and elements of single-party rule.

None of this might have mattered so much to crisis-addled Europe, however, but for the failure of Mr. Orban's economic program. Imposing Europe's highest tax on banks and windfall levies on sectors dominated by multinational firms has done no miracles for foreign investment and growth, or for confidence in Budapest's solvency.

That's why the real pressure on Fidesz to reconsider its legislative hyperactivity is financial. Last week European finance ministers voted to suspend €495 million in aid to Hungary because its measures for deficit reduction are not sufficiently "permanent." Negotiations for a new loan arrangement with the International Monetary Fund (where the big money is) are also on hold until the European Commission settles its infringement proceedings against three of Fidesz's new laws.

The markets seem to expect that an IMF deal will eventually get done, and they're probably right. Fidesz knows that it needs IMF money more than it needs its new laws. And it's not in the EU's interest to send another country into economic free-fall. As a result, the forint has strengthened since January, and bond yields have cooled.

At the same time, it seems likely that Mr. Orban will get to keep most of his "reforms" intact. Jousting with European institutions may even have served him well politically. On March 15, Hungary celebrated its national day, which commemorates the day in 1848 when demonstrations in the then-separated cities of Buda and Pest led to a failed war of independence against the Habsburgs. Addressing 100,000 flag-waving supporters gathered in front of Parliament, Mr. Orban did rhetorical battle with old foes: the EU and the IMF, market speculators, the international press.

"We will not be a colony," he bellowed. The crowd cheered.

This is the real tragedy of Hungary—that economic peril has caused the country's politics to curdle into chauvinism and score-settling. Fidesz supporters describe Mr. Orban's legislative program as a belated rebalancing after communism. The Socialists, privileged with business and institutional connections inherited from the Kadar era, made government corrupt and ineffective. Only a wholesale tightening could restore efficacy.

But Fidesz's ties to its own cast of oligarchs raise more than a few red flags. And some of Fidesz's recent incursions into Hungarian political life seem impelled not by reorganization, but by retribution.

One law passed in December formally identifies the Hungarian Socialist Party as the successors to Kadar's Socialist Workers' Party. The law also suspends statutes of limitations on communist-era killings. No criminal charges have yet been filed using the new decree, though Socialist Party chairman Attila Mesterhazy considers it merely symbolic: an attempt to stigmatize, not to persecute. May Mr. Orban never be tempted.

Still, a sense of calm resilience pervades even Fidesz's most prominent critics. Few are willing to use the D word that others have invoked to describe Mr. Orban's government: diktatura, in Hungarian. Hungarians' confidence in their democracy is a rebuke, in a way, to Fidesz's claim that government was broken before 2010 and needed the party's top-down remaking.

Last Friday, I visited Frigyes Solymosi, a renowned chemist who became a Fidesz adviser when the party was in parliamentary opposition in the 1990s. Lately the 80-year-old Mr. Solymosi, who lives in the southern city of Szeged, feels betrayed by his old party and its leadership. Of his "great friend Viktor," he says that the prime minister's principal weaknesses are his dislike for critics and a cognate taste for picking fights.

But he also says that Mr. Orban, despite his hot head, is savvy enough to know that he cannot be too untethered from his electorate. He notes that the prime minister has already shifted his party's ideology once, from leftish to its current incarnation, in a calculation that was key to Fidesz's 1998 parliamentary victory.

Mr. Orban is a Machiavellian, in other words, but one with no greater designs on Hungary than to remain the person who steers it. Like his mongrel economic policy, Mr. Orban's Janus-faced attitude toward Europe—smiles in Brussels, gnashing teeth at home—suggests a political pragmatist, not an ideologue.

And that, Mr. Solymosi says, should make him malleable to what Hungary's voters want and will vote for. Today it is economic populism and fury at European institutions. But in two years?

"He's a very flexible politician," Mr. Solymosi tells me over coffee in his office, which looks out onto a stunning twin-spired cathedral in the center of Szeged. "Orban is able to change very quickly if he needs to change."