Faced with a dire economic outlook, the Orbán government undermined those best positioned to help — municipal governments.
So far, Hungary emerged from the COVID-19 pandemic with relatively few casualties — to date, the country has had 4,077 confirmed cases, and 565 deaths. Back in early May, the government began to lift restrictions from public institutions and the hospitality industry, and in June, the country opened its borders and air travel. The phases of reopening reflected the government’s preferential treatment of voters outside Budapest: restrictions were first lifted outside the capital, and only weeks later in the city that elected an anti-government mayor last year.
The decision to stall reopening in Budapest is a small piece of a systematic campaign the Orbán government waged against anti-government municipalities in the pandemic. As we have previously noted, the municipal elections of October 2019 turned local governments into the Orbán government’s weak point. When the pandemic hit, the administration took a series of steps to centralize power and weaken municipal autonomy, and to put individual political opponents at a clear financial and political disadvantage. Here’s a summary of how Fidesz used the crisis to weaken its political opposition.
Against global trends, the Orbán government cut into local authority and funding.
At this point it is common knowledge that local governments are on the frontlines of the pandemic response: the COVID-19 virus seems to affect localities very unevenly, and local governments are better positioned to directly aid citizens. But as pressure is mounting on local services, infrastructure, and expenses, revenues from public transportation, housing, and commerce are slashed because of the economic slowdown. Many cities and states are facing budget shortfalls, or bankruptcy.
To help, some governments are boosting municipal and local budgets: Germany, for example, allocated EUR 10 billion to municipalities in order to cover housing costs. The United States is directly aiding local governments through the CARES act. (Even the famously frugal European Central Bank boosted member country budgets by buying government debt.)
Hungary did not follow suit. Instead, the administration took steps to weaken local government authority, and further centralize power in the country.
Step 1: Starve Local Governments on the Frontlines of the Crisis
Introducing: Proportional Burden Sharing
The virus may not have hit the country heavily, but according to a recent government data release, the pandemic caused a severe economic fallout: about 100,000 people are newly unemployed as of March and April 2020. And yet, the national government did not introduce emergency unemployment measures or housing support for those who lost their jobs.
Under these circumstances, local governments had to step up to provide emergency unemployment aid to their constituents. One Budapest mayor introduced universal basic income for the duration of the crisis. Another, lower income district established a HUF 1.8 billion (about USD 6 million) Solidarity Fund with the help of local real estate developer Péter Futó. The mayor and members of his coalition in the city assembly all contributed ten percent of their salary to the fund.
The government’s response: seize municipal resources to restrict local room for maneuver. On April 4, government chief of staff Gergely Gulyás announced a new crisis response fund with an estimated HUF 663 billion (a little over USD 2 billion). In the name of proportional burden sharing, municipal governments were to contribute their share of vehicle use taxes, a total of about HUF 34 billion, or about USD 111 million. (Until the COVID-19-crisis, municipal governments collected 40 percent of the revenue from the tax, passing 60 percent to the national budget.) The move dealt a significant blow to municipal budgets already strained in the pandemic response, but covered only 2 percent of the HUF 1345 billion response fund. Now 444.hu reports that the reallocation of the vehicle use tax is going to stretch into next year.
Less blatantly adversarial, but equally painful to local budgets: the national government instituted a moratorium on public parking fees and tourism taxes, which further cut into local revenues. Finally, the budget proposal for the 2021 budget year delivers a new blow: the government expects a fourfold increase in the commercial tax contributions of wealthier municipalities that benefit more from commercial activity compared to the rest of the country. Government communication smartly nicknamed the measure a “solidarity contribution”.
A few measures singled out individual political enemies: for example, the government seized HUF 1.1 billion (USD 330 million) from the aforementioned Budapest district that established a HUF 1.8 billion Solidarity Fund. Another HUF 400 million in state support (USD 1.3 million) was withdrawn from Budapest’s 9th district, another anti-government locality that provided emergency unemployment benefits to locals.
Step 2: Seize Power from Local Governments with a Decree
Introducing: Special Economic Zones
Early in the pandemic, Deputy Prime Minister Semjén proposed a bill to suspend the autonomy of municipalities as a whole and submit them to centrally controlled provisional task forces. In the end, Fidesz withdrew the proposal because the policy would have stalled decision making in the pandemic to such an extent that it would have sabotaged the pandemic response as a whole.
Instead, the government found subtler ways to eat at municipal powers once enabled to rule by decree in the pandemic. Dressed as an emergency pandemic measure, the government passed a degree to introduce Special Economic Zones, seizing power from a small town with an anti-government mayor and an increasingly contentious situation around the environmental impact of a Samsung factory expansion. There is also a bill in front of parliament that is modeled on the decree, but significantly extends its scope, drastically lowering the bar for future intervention. If passed, it would open up the opportunity for the government to step in practically anywhere where they are faced with opposition.
As we covered in detail in a post last week, the administration exploited a specific feature of the electoral system in this case. Because localities over 10,000 inhabitants do not vote in county elections, every single county in Hungary is pro-government. The pandemic allowed the government to shift resources from anti-government municipalities over to their allies at the county level.
Step 3: Frame Anti-Government Mayors as Incompetent
Introducing: Incompetence as a Threat
With expenses piling up, and a passive and at times hostile national government, local governments were struggling to stay afloat in the crisis. 444.hu reports that in the wake of the pandemic, over 200 municipalities are facing bankruptcy. Big cities were most affected: they were disproportionately hit by the economic slowdown, as well as the pandemic. In the meantime, the government starved them from resources and information to respond to the crisis — only to frame them as incompetent later.
As restrictions began to ease, the Orbán government began to blame opposition-led municipalities for an inadequate crisis response. In a radio interview, Orbán suggested that opposition mayors were preoccupied with infighting and criticizing the government, too distracted to respond to the pandemic in a competent manner. A Fidesz MP argued that the crisis showcased the difference between a competent group of statesmen in charge and a petty opposition.
The government worked to centralize power, but bypassed economic measures to help workers survive the recession.
After a long silence, the administration finally released unemployment statistics in late May. The data is pretty clear that job losses hit Hungary significantly harder than the pandemic. Government unemployment data indicates that the country saw about two hundred times more people lose their jobs in the first few months of the COVID-19 crisis than die of the virus. In a population of about 10 million, there were over 100,000 new job seekers in March and April of 2020 — compared to a little over 500 dead. Unofficial estimates suggest that the economic fallout may be much harsher. Unlike most countries in the world, Hungary did not introduce provisional aid or unemployment benefits to help its citizens make up for lost income. Instead, the government trimmed the resources and authority of those who were prepared to do so.
Meanwhile, there are obvious signs that the national crisis response fund is mismanaged: for example, HUF 82 billion (about USD 270 million) of it was already reallocated to the most expensive infrastructure project in the history of the country, the renovation of the Budapest-Belgrade railway route under the umbrella of China’s One Belt, One Road Initiative. The opportunity to renovate the Hungarian stretch went to Lőrinc Mészáros, a close friend of the Prime Minister and Hungary’s most influential oligarch. The details of the project were recently classified for the next ten years. But whatever the details, it is hard to imagine that they are relevant to the COVID-19 crisis and its economic aftermath.
Contributed by Lili Török.
Illustration by István Gábor Takács.
This article relies on the great work of Hungarian journalists at 444.hu. If you speak Hungarian, please check out this video by Sándor Czinkóczi and Bence Kiss, and support their work.
Lili Török | @LiliTorok
Editor, Rights Reporter Blog
Lili Török is a freelance writer and economist who focuses on emerging market economies. She has an MPA in Advanced Policy and Economic Analysis from Columbia University and an MA in Political Economy from Central European University. She is the author of a thesis on the perceptions of the 1989 Transition among young people in Hungary. Born and raised in Budapest and Moscow, she lives in New York City.