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Authoritarian right: Hungary

Fidesz gives us great insight of what happens when an authoritarian party is elected and kept in power for a decade. The party has been a staple of Hungarian politics since the late 80s when it started as an anti-communist party with liberal values. After losing elections in the early 2000s, Fidesz became considerably more conservative and with less respect for freedom of the press. In 2010 Fidesz was elected to govern Hungary, a position they hold to this day.

Click here to read the full report, or check out our methodology and data set

Since taking power, the party has steadily attacked the democratic structures of the country, starting with limiting the freedom of the press and the constitutional court. Notoriously, in the past few years Prime Minister Orbán has stepped up his rhetoric (and actions) against migrants and refugees and tried to limit the freedoms of civil society, seeking to de-fund NGOs, criminalising those that help refugees, demonising Hungarian-born, Jewish billionaire George Soros SidenoteCorporate Europe Observatory is funded by the Open Society Foundation, alongside many other foundations. We have not discussed or prepared this research with Open Society. You can read more about our own funding and how we keep our independence here: https://corporateeurope.org/en/who-we-are and forcing the closure of the Central Eastern University which he funds, and limiting gender studies courses in the country. There is no question that the Fidesz Government is authoritarian.

The way Fidesz MEPs vote in the European Parliament, however, has been less scrutinised. Out of the 14 votes analysed (see results here), Fidesz voted against or abstained in 12. Fidesz MEPs did not vote for paternity leave, improvements to work-life balance, transparency of gender pay gaps, and a directive to promote ‘decent work’ for all. Fidesz votes on issues dealing with paternity leave and work life balance – both measures meant to allow parents to be better able to combine employment with parenting – are particularly hypocritical as the party, and Orbán himself, have "criticised Brussels for not focusing enough on family policy", according to Hungary Today.

Fidesz MEPs also voted against all proposals to tackle tax avoidance we looked at and to increase corporate tax to 25 per cent and create a special digital services tax at three per cent. This is in stark contrast to the rhetoric in a blog penned in 2016 and still on the cover page of Fidesz MEPs’ website, where former MEP Ildikó Gáll-Pelcz rallied against big tech companies like Apple receiving tax privileges in Ireland and, above all, not paying their fair dues in Hungary and other member states.

Fidesz MEPs votes in the European Parliament seem to be aligned with its government's approach to foreign investment: a mix of unbelievably low corporate taxes with incredibly low wages and close cooperation with industry.

While beyond our own research scope, Fidesz’ MEPs voting records on climate change policy were analysed by Adelphi which found it to be more moderate than other authoritarian right-wing parties on climate change (although the bar is incredibly low considering many of the comparing parties don’t even believe in man-made climate change). Yet that has not been reflected in the party's domestic policies where it is still supporting fossil fuels and not investing in renewables. Climate Action Network’s voting analysis classed Fidesz (and the rest of the EPP group) as a 'dinosaur' when it came to climate action.

The way Fidesz MEPs vote in the European Parliament seems to be aligned with its government's own approach to foreign investment: support for a mix of unbelievably low corporate taxes with incredibly low wages and close cooperation with industry.

Hungary is currently the European country with the lowest corporate tax rate, an unbelievably low 9 per cent (according to the OECD the European average is closer to 20 per cent). Even then it is often lowered for the 30 largest multinationals by various allowances going as low as an effective rate of 3.6 per cent. MEPs have recently agreed that Hungary acts as a tax haven. At the same time, the minimum wage stands at €464.20 SidenoteMonthly minimum wages, bi-annual data from Eurostat accurate for 2019: https://ec.europa.eu/eurostat/web/products-datasets/-/earn_mw_cur a month for non-skilled workers. Eurostat data shows that in the European Union only Romania, Latvia and Bulgaria have lower minimum wages.

This mixture of very low taxes and corporate-friendly policies has attracted major foreign investment. As a result, Hungary’s economy has become heavily dependent on an industrial sector mostly dominated by foreign companies, accounting for almost two-thirds of production according to Bavaria Worldwide. Most significant among these foreign investors is Germany, Hungary’s biggest trading partner. Car-makers Daimler (producer of Mercedes-Benz), Audi, and the Japanese Suzuki have built car factories in Hungary the past decade. Just last year BMW announced it was building a car plant, while Opel produces car parts there. According to Automative News, “Carmakers’ output reached… about 21 percent of economic product” in Hungary. German investment however is the not limited to auto industry: Bosch, for instance, is the largest industrial employer in the country.

In the European Parliament, Fidesz rejected the proposal to lower car emissions in 2018 which followed the immensely controversial Dieselgate cheating scandal. This had been heavily lobbied by the car industry (particularly from Germany) and its representatives (see Box 2).

BOX 2: A “truly good” cooperation: German carmakers and the Hungarian Government

The cosy relationship between German carmakers and the Hungarian Government is hinted at in a state pamphlet designed to attract foreign investors: “You can count on the government’s commitment to further improve the business climate”. It goes on to highlight that the Fidesz administration has created “competitive” corporate tax; “further improved the practice-based dual education system built on industry needs”, and crucially “offers companies a strategic partnership, and provides them with fast access to the Government”.

Access to the government for German investors does seem to be easy. The German-Hungarian Chamber of Commerce and Industry (DUIHK) often hosts events and cocktails with at least one government speaker in attendance. From business lunches with the Finance Minister, to private lectures by the Secretary of State for Tax Affairs, to garden parties sponsored by the German car industry attended by a host of governmental officials, a quick scroll through the pictures of their past events shows how common these events are.

In an interview the Director of Communication for the Chamber explained they had a “joint committee with the (former) Ministry of National Economy” and that their “experience is that many authorities really try to address the specific problems of the corporate sector, starting from permits to subsidies to education and labour market matters”. In the same magazine, the Chief Financial Officer of Daimler Hungary bragged about having a “truly good" cooperation with the Hungarian Government which gives them long term predictability”.

Sadly there is no lobby transparency in Hungary making it harder to fully scrutinise the relationships between the government and vested interests.

The cosy relationship between industrial multinationals and the Hungarian Government came to the forefront of the public discussion just before Christmas in 2018. The Fidesz regime attempted to approve a highly controversial reform of labour law, which became known by an angry public as the ‘slave labour law’. The Government wanted to raise the maximum number of hours an employee could work overtime per year without being paid from 250 to 400 hours and – incredibly – allow employers to wait up to three years to pay back overtime. This rule would end up adding one full extra day to the work week. Following protests, the government made the changes voluntary but they still allowed companies to negotiate directly with individual workers and ignore collective negotiations and trade unions.

BusinessInsider reported that the Hungarian Government had justified the measure with the need for more “labour flexibility” to “satisfy investors’ needs”. Meanwhile the German-Hungarian Chamber of Commerce and Industry denied that any German firms have sought the modifications. Yet they have been pressing the Government hard on the labour issue. For instance, Bloomberg quotes a report from the Chamber from October 2018 complaining that, “The lack of qualified labour is the single biggest risk for investors, followed by the cost of hiring.”

Researchers Gagyu and Gerocs argue in Europe Solidaire that “industrial lobby groups, supported by the Hungarian Chamber of Industry and Commerce, have been directly involved in policy-making, and helped write many of the legislative drafts that meant to reform key policy terrains such as education, taxation and labour”.

2018’s slave labour law was also not the first attempt at de-regulating the labour market by this administration. Already there have been changes that had made trade unions weaker and in 2012 companies were allowed to “force overtime work when demand is high, but put workers into un- or underpaid idle when demand is low”. The power of these companies has also been felt in the reform of the educational system, which the Hungarian Chamber of Industry and Commerce had identified as a priority.

For the researchers, the conclusion is that the Fidesz Government “has explicitly and outspokenly given up on the representation of workers’ interests in industrial relations, and instead solely represents the interest of industry, including their most influential segment, the German multinationals.”

Fidesz and Mr Russia

German manufacturers are not the only lobbying interest with the ear of the party.

In 2016 a scandal in Brussels exposed how the Hungarian Government is apparently directly employing Klaus Mangold, a German lobbyist and former board member of Daimler. Mangold seems to have become a power-broker in Hungary, linking the Fidesz Government with German industry (for example speaking at the ‘Central and Eastern Europe: a strong partner of Germany’ conference organised by the German-Hungarian Chamber of Commerce and Industry), as well as Russian interests.

Mangold’s client list is not clear. Hungarian investigative journalists at Diretk36 found he lobbies on behalf of Shell, Vodafone, Bosch and E&Y, among others. And the German press has named him Mr Russia, given that Mangold has direct links with the Russian Government and is known to lobby European governments against Russia sanctions and on Gazprom.

Mangold became the target of public scrutiny when investigative journalists exposed the lobbyist had given a lift via a private plane to current German Commissioner, Gunther Oettinger, from Brussels to Hungary. The two Germans supposedly then had dinner with Prime Minister Orbán. Mangold is an unregistered lobbyist in the EU transparency register and Oettinger has never listed this meeting as a lobby meeting. This led to a mini-scandal aptly called #Oettingair.

Following this revelation, the Hungarian Government revealed that it had hired Mangold as a consultant. However, his contracts are classified and were not even shared with the members of the Hungarian Parliament's National Security Committee. According to an anonymous source reported in the EUObserver newspaper, “Mangold’s knowledge is used when various Russian-Hungarian meetings are prepared”, and that he has been involved in the PAKS II project in which Russian firm Rosatom was contracted by the Hungarian Government to extend an old nuclear plant without public tender, which led to an EU investigation. The meeting between Mangold and Oettinger, old friends, took place just before Hungarian Minister flew to Brussels to answer to this investigation, which would later be closed and PAKS II cleared by the EU with a few conditions.

 

A circle of cronies

The list of vested interests that benefit from the Orbán-Fidesz administration does not end here.This government has been accused of running a system of crony capitalism whereby those close to the Prime Minister are rewarded financially with public procurement contracts, some accumulating so much wealth and resources they can only be described as oligarchs.

This government has been accused of running a system of crony capitalism whereby those close to the Prime Minister are rewarded financially with public procurement contracts, some accumulating so much wealth and resources they can only be described as oligarchs.

For instance Lőrinc Mészáros, a personal friend of Orbán in just three years became the fifth richest man in Hungary, mostly due to a wide number of public contracts awarded to him and his family.

The EU’s anti-fraud office OLAF has found several instances of fraud involving EU funding, at times involving mis-spending but also severe conflicts of interest. The latter includes one case which implicated Orbán’s own son-in-law. In 2018 the Hungarian prosecution office launched a full investigation into these cases but then rapidly and summarily closed them leading MEPs to question the independence of the Hungarian judiciary.

Fidesz’ main narrative is that it represents an alternative to the political forces of the EU. However, once we actually dig into the voting records of its MEPs we see that it opposes regulations that protect citizens in day-to-day life and hold multinationals to account. At home, big multinationals have had direct access to the government, with their wishes taken on board, regardless of what that means for Hungarian workers. This, the network of lobbyists surrounding them, and a seeming network of friendly oligarchs, shows that the Hungarian Government does not work towards the interests of Hungarian citizens.

 

Jobbik

We cannot talk about Fidesz without also looking at the Hungarian opposition party Jobbik, which was set up in Hungary as an extreme-right party advocating hatred against the Roma community, migrants, and promoting anti-semitism. The party used to organise a paramilitary body that would patrol Roma neighbourhoods.

In the past few years, Jobbik has tried to re-brand itself to attempt to drop the most extreme far-right factions. However according to the Counter Extremism Project while some of the most radical members have left since this rebrand, many extreme figures remain in the party.

A key part of Jobbik’s new strategy has been to focus on standing up for working class people. Their message for this year’s European Parliament elections is to stop Fidesz from building “a dictatorship based on wage slavery”. In 2017, Jobbik got together with Central European parties and some trade unions to launch the unsuccessful citizens’ initiative “Wage Union”. Its mandate for the 2019 European elections focuses on migration as a threat, plus stopping the exodus of Hungarian workers which they hope to achieve by increasing cohesion in Europe and fighting corruption at home. Nationally it seems they are still stoking up hatred towards the Roma community. Its only remaining MEP is Zoltán Balczó who seemingly remains convinced of the party’s former politics of “national radicalism”.

Jobbik MEPs have a mixed voting record, rejecting 7 out of the 14 votes in our analysis (see results here).

Their poor performance on labour rights stands out, as they rejected measures to improve work-life balance, decent working conditions for all workers, mechanisms to detect gender pay gaps, and taxing robots to fund retraining unemployed workers.

They do similarly poorly when it comes to fighting tax justice, rejecting a minimum corporate tax rate of 25 per cent, and even the three per cent digital services tax. CAN EU named it a ‘dinosaur party’ as when it came to action on climate change its MEP scoring an impressive zero per cent in climate votes.

In Hungary Jobbik has been hit with two significant fines for unidentified and illegal campaign funds in 2017 when it allegedly paid less than market price for political billboards owned by Lajos Simicska, a Hungarian oligarch whose fortune was built thanks to his previous close relationship with Prime Minister Orbán. Simicska recently fell out with Orbán, at which point he started supporting Jobbik. Politico Europe reports that since then, Simicska’s “media outlets have been hammering at the Government. His billboard company has plastered the country’s highways and boulevards with slogans like “You work. They steal” and “They are the fear. We are the hope”. Just this month, Jobbik was hit with a second fine, this time for apparently having incorrectly declared debts as assets.

Jobbik has countered these claims and is currently in court against them. The party accuses Fidesz of using the fines to crush opposition, and it is true that the accusations were brought forth by the State Auditor office, led by a former Fidesz member. It seems that the office has found problems with the other campaigns as well but as far as we could see, no follow up happened when it came to Fidesz. Unfortunately, the State Auditor’s full reports are not public (although Jobbik has published its own) and this practice has been criticised for not being rigorous enough.

Jobbik’s re-branding is ongoing but so far it has not been reflected in their voting choices in the European Parliament. Nationally, they have not shied away from support from Simicska, an oligarch propped up by Prime Minister Orbán.

Click here to read the full report, or check out our methodology and data set