Hungary is often portrayed as a problem case for European integration due to frequent clashes between Viktor Orbán’s government and the EU’s institutions. Yet as András Bíró-Nagy and Gergő Medve-Bálint explain, the country’s 20 years in the EU have also seen a relatively high level of compliance with EU policies and strong support for membership among the public.
Hungary’s twenty years in the European Union can be divided into two distinct periods. The first six to seven years, the learning phase of membership, were characterised by compliance with EU requirements, the alignment of Hungarian public policy institutions with the EU and continuous integration into European markets.
During this period, the socialist-liberal government adopted a pro-European stance and did not question the EU’s competence in public policy. The global financial crisis of 2008 hit Hungary particularly hard, with a soaring public deficit and a drying up of foreign credit. Without EU membership and the stand-by agreement negotiated with the EU and the IMF, the crisis would have been deeper and the economic recovery would have taken longer.
Although the EU acted as a safety belt for Hungary during the global financial crisis, this marked a turning point in Hungary’s relations with the EU. In 2010, Viktor Orbán and his right-wing Fidesz party won a landslide victory in national elections. The Orbán government developed Eurosceptic rhetoric, questioned the EU’s mandate in several policy areas and began to openly criticise the European Union.
This increasingly hostile political rhetoric masks a surprising continuity in public policy. Data on infringement procedures show that Hungary generally fulfils its membership obligations and is not out of line with other member states in this respect.
However, infringement cases ruled by the Court of Justice of the European Union reveal there are areas where Hungarian legislation is not in line with EU obligations. These include the implementation of EU asylum policy and Hungarian tax and environmental legislation. Thus, a dichotomy between increasingly Eurosceptic political rhetoric and general compliance with European law has characterised Hungary’s EU membership over the past decade.
Mixed economic results
Economically, Hungary is deeply integrated into European markets. Almost 80 per cent of the country’s total exports are with the European Union, while the EU accounts for almost 70 per cent of total domestic imports.
EU membership has strengthened Hungary’s dependent market economy model, which now rests on three pillars of external financing. In the early period, foreign capital was the dominant source, followed by EU funds, and since the 2010s, remittances from Hungarians working in western Europe have also become an important source. Together, these three sources of external financing average 10 per cent of GDP per year.
Taking advantage of EU state aid rules, the Orbán government has increased state aid to foreign companies in the manufacturing sector, reinforcing Hungary’s functional specialisation in low value-added, complex manufacturing. However, the country has gradually lost its competitive advantage based on cheap, skilled labour, pointing to the limits of dependent development, the risk of a middle-income trap and a significant slowdown in the process of catching up economically.
Overall, successive Hungarian governments have failed to modernise the economy over the past twenty years and there has been no significant shift towards higher value-added activities. Rather than moving towards the centre, the Hungarian economy has remained in the European semi-periphery.
EU funds and migration
Since 2004, the EU has provided Hungary with around 56 billion euros through EU cohesion policy, an average of 3.5 per cent of the country’s GDP per year. Most of these funds have benefited state-owned enterprises, which have mainly invested in infrastructure. While EU funds have contributed significantly to the modernisation and expansion of the country’s physical infrastructure, private sector beneficiaries of EU funds have not been able to upgrade their production profile.
Similarly, the level of internal territorial disparities is broadly in line with that of two decades ago. Given the substantial amount of EU cohesion policy resources devoted to reducing development disparities, this result cannot be considered an outstanding achievement. Overall, the effectiveness of EU financial support has remained rather low, as the funds have not achieved their stated objectives.
The 2010s also saw a turnaround in the migration pattern of the Hungarian labour force. While in the first years after accession, Hungarians were not particularly mobile relative to the other eastern member states, from 2011 there has been a significant increase in outward labour migration.
This is partly motivated by the economic hardships of the global financial crisis. Although the share of people living in severe material deprivation declined after 2015, Hungarian households’ living standards are among the lowest in the EU. Opportunities for social mobility have not improved much either, despite the unfavourable starting position at the time of accession. This reflects the policy priorities and performance of Hungarian governments, as well as the limited effectiveness of the European Social Fund over the last 20 years.
Public attitudes toward the EU
Hungarian society continues to have a generally positive view of the European Union. The main pillar of the high level of support for EU membership (still above 70%) is the strong economic legitimacy of the EU. The majority believe that it is still worthwhile to be an EU member and Hungarians see the role of EU funds in economic development as one of the most important benefits of membership.
However, our research on Hungarian attitudes shows a slow erosion of the economic legitimacy of the European Union. One reason for this is that while there is undoubtedly demand for Euroscepticism in Hungarian society, arguments criticising the EU on economic grounds have gained momentum in recent years, blaming the EU for Hungary’s economic difficulties. The Orbán government’s ability to shape public narratives has had an empirically demonstrable impact on what Hungarians perceive to be the disadvantages of EU membership.
A deeper analysis of Hungarian society’s attitudes towards the EU suggests that the high level of support for EU membership is not in itself a suitable indicator of the complexity of Hungarian attitudes towards the EU. Deepening European integration is not widely accepted in Hungarian society, as there is a strong desire to maintain national sovereignty. The majority of both government and opposition voters agree that Hungary’s place is in the European Union, but they have a very different understanding of what they want the EU to be.
Perceptions of Hungary’s membership are closely linked to how well-informed citizens are about the EU. The more informed they are, the more likely they are to support Hungary’s EU membership. Therefore, the information and narratives that Hungarian society receives from the political elite about the European Union, and whether the pool of citizens who are informed about EU affairs grows over time, are crucial for long-term public support for Hungary’s EU membership.
Hungary’s impact on the EU
Ironically, Hungary’s undermining of the EU’s democratic values and its escalating rule of law disputes with the European Commission have contributed significantly to the development of the EU’s sanctioning capacity. Previously, the EU was powerless when a member state violated democratic principles and the rule of law. But because of Hungary’s and (Poland’s) questioning of these principles, the EU adopted a rule of law conditionality mechanism, which carries real sanctioning power in the form of a suspension of EU funds.
While Hungary’s intensifying conflict with the EU is generating reactions at the European level that point to the development of a more cohesive political community, Orbán’s ambition is to change the EU from within, reverse these tendencies and push the EU towards looser, more intergovernmental cooperation. Without powerful allies, however, this effort is unlikely to succeed.
Future outlook
Hungary’s conflictual relationship with the EU is likely to continue at least until the Hungarian general elections in 2026. These conflictual relations are rooted in the country’s democratic decline. They reflect wider political and economic divides within the EU, which challenge the EU’s legitimacy and internal integration capacity. However, because Hungary is so deeply embedded in and dependent on the European market and the sources of external financing closely linked to EU membership, more dramatic scenarios remain unlikely.
This article is part of a series organised by Eli Gateva on Rethinking Europe’s East-West Divide – 20 Years since the Big Bang Enlargement.
Note: This article gives the views of the authors, not the position of EUROPP – European Politics and Policy or the London School of Economics. Featured image credit: rarrarorro / Shutterstock.com
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