April 19 (Bloomberg) -- The European Union is worried about the rule of law in Hungary and the economy there is stuck in recession. Prime Minister Viktor Orban is doing his best to turn that to his advantage in next year’s election.
As Orban spars with Brussels, at home he’s focusing on curbing what he calls the “luxury profit” of energy companies including RWE AG and GDF Suez SA with a cut in household energy prices. The backlash from the EU is a “smokescreen,” with the “real reason” behind it being the lobbying from energy companies, Orban said in a public radio interview aired today.
It’s working, polls show. Orban, who turns 50 next month, has thrived on adversity since his days as an anti-communist student leader. In more than two decades as a front-line politician since then, he has learned to outmaneuver his opponents while strengthening the loyalty of his followers.
“Orban is at his best when he can rally his voters against an enemy,” Attila Juhasz, an analyst at Political Capital in Budapest, said by phone. “This enemy can be the EU, multinational companies and this may make him stronger in the short-run, until the elections.”
While investments are forecast to drop this year to the lowest level since 1992, according to International Monetary Fund estimates, bond managers are tuning out the rhetoric and instead focus on the premium Hungarian debt offers as unprecedented global monetary easing fuels risk appetite.
The government yesterday sold 30 billion forint ($132 billion) of three-year bonds at a record-low 4.65 percent. The forint has dropped 2.5 percent this year to 298.7 per euro. It rose 8.1 percent last year.
The unprecedented centralization of power with the help of Orban’s two-thirds parliamentary majority -- including a move last month to use a constitutional amendment to override court decisions and limit legal interpretation -- has sparked criticism from Brussels to Washington.
The amendment added to concern that checks and balances are eroding under Orban, whose lawmakers have ousted the chief justice of the Supreme Court, set up a media regulator led by ruling-party appointees and named allies to independent institutions, including the Constitutional Court bench.
The European Parliament in Strasbourg on April 17 discussed the “the constitutional situation” in Hungary. EU Justice Commissioner Viviane Reding told the chamber that the 27-nation bloc’s executive will take action “where relevant” to rein in Hungary once a legal assessment is finished. Germany and three other countries have proposed cutting EU funding to member states that violate the bloc’s democratic values.
“The criticism that the rule of law in Hungary has been fundamentally undermined is baseless,” government spokesman Ferenc Kumin said in an April 17 phone interview. Broad criticism usually narrows down to a few issues, he said.
Amid the tussle with the EU, shifting the debate back home to issues like utility bills is proving a panacea for Orban.
With elections scheduled in a year, the opposition is fragmented as former Prime Minister Gordon Bajnai and Socialist Party Chairman Attila Mesterhazy compete for its leadership.
Backing for the Socialists, who governed from 2002 to 2010 and left office with the highest government debt in the EU’s east, fell to a decade-low 9 percent among eligible voters, according to a March 14-18 survey by the polling company Tarki, which asked 1,000 eligible voters. No margin of error was given.
A March 8-14 Ipsos poll of 1,500 people showed the ruling party pulling ahead as a record number of undecided voters, coveted by opposition parties, flocked to Orban’s Fidesz. Its support jumped to 24 percent from 18 percent while the share of undecided voters dropped to 44 percent from 55 percent, according to the poll published March 18. The margin of error was 2.5 percentage points.
Ipsos’ April poll published yesterday showed Fidesz’s support unchanged from March while backing for the Socialists fell to 15 percent from 16 percent in the previous month, MTI state news service reported.
“With the latest gain in Fidesz popularity, the government would likely ensure a simple majority in the parliament if elections were held today, even if opposition parties formed an alliance,” Eszter Gargyan, a Budapest-based economist at Citigroup Inc., wrote in a report last month.
Orban’s ability to maintain his poll lead shows his experience in channeling voter angst and recasting criticism of his government as attacks on the country’s sovereignty.
Fresh from his 2010 victory, Orban rejected extending an International Monetary Fund loan, saying it was blocking his “economic freedom fight” to cut the eastern EU’s highest debt level by self-described unorthodox measures. They included the effective nationalization of private pension funds and the imposition of Europe’s highest bank tax.
Last year, Orban covered Budapest with posters telling voters he won’t give up Hungary’s independence for an IMF loan.
The EU, the source of 95 percent of funding for infrastructure investments in Hungary, blocked aid talks citing concern for central bank independence. Orban in response compared Brussels officials to Soviet oppressors, telling a March 15 rally that his government won’t live by the “dictates of foreigners.”
That parallel harkened back to Orban’s student-leader days, when he shot to prominence on June 16, 1989 as a scruffy 26-year-old who called on Soviet troops to leave Hungary.
“The attack on large corporations owned by foreigners -- who are allegedly protected by that shady Soviet-style power in Brussels, to borrow from Viktor Orban’s recent parlance -- meshes perfectly with the grand narrative of Fidesz’s struggle against global capitalism and foreign domination,” Tamas Boros, the director of Policy Solutions in Budapest, said in an April 2 report. “This potent combination makes Fidesz’ latest move particularly suave.”
The next election will serve as a referendum on Orban’s concentration of power, according to the opposition. The result will be about “the next 20 years,” Bajnai’s office said in e-mailed comments.
“I wouldn’t call it cementing” my power, Orban said in an April 15 Die Welt interview. “I’d call it the stability of the constitutional system.”
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