HUNGARY

Electoral registration procedures are fair and transparent, and did not change during the period under review. The registration of candidates and parties is relatively straightforward. Only ten founding members are required for registering a party, and a number of parties outside the mainstream are registered. In the 2010 elections, two new parties made it into parliament. However, some problems have arisen with regard to the registration of candidates. For the first time, even smaller parliamentary parties, including the Hungarian Democratic Forum (MDF), struggled to collect the 750 signatures required for candidates for parliamentary elections. One reason was that Fidesz, the main opposition party, tried to crowd-out other parties by collecting much more than the required signatures for their own candidates.

Large sectors of the media in Hungary have a strong partisan bias. However, the existing media pluralism gives all candidates and parties the chance to present their views to the public. The media have paid relatively little attention to the 2010 elections, the outcome of which seemed to be clear in advance. The non-partisan private TV and radio stations in particular tried to stay outside the party battle in order not provoke any conflicts with the incoming Fidesz government. For the first time since 1990, no debates between the main party leaders were broadcasted. Fidesz leader Viktor Orbán refused to debate in public with his political opponents.

In principle, all adult citizens can take part in national elections. However, exceptions hold not only for persons under guardianship, but for convicted prisoners as well. In the April 2010 elections, about 60,000 citizens were not allowed to vote. While there is no postal vote, special provisions for allowing disabled and ill citizens to vote by means of a movable ballot box exist. In a handful of voting districts, voting in the April 2010 elections was complicated by extremely long waiting lines, which resulted in some citizens not exercising their voting rights. The election board (National Electoral Committee, OVB) was aware of the problem in advance, but did not resolve the problem in time.

Party and campaign financing in Hungary suffer from substantial problems. Parties are prone to corrupt and illegal practices because they receive little money from the state, and the regulation of private donations is intransparent and ineffective. A case in point, which attracted much public attention, was the case of János Zuschlag, a young MP of the Hungarian Socialist Party (MSzP), who abused funds for public projects (worth about €280,000) for campaign financing and was sentenced in March 2010 to 8 ½ years in prison. It is well known that parties outspend the official spending limits – tenfold according to some estimates – and submit misleading financial reports to the State Audit Office (ÁSZ). In 2009/2010, Transparency International and Freedom House pushed for a campaign reform bill that aimed at making campaign financing more transparent. However, this bill was rejected by Fidesz, the major opposition party, and thus did not get the two-thirds majority required for passage.

The political affiliation of the media in Hungary is rather strong. This applies to both public and private media. The government’s influence on the media was limited by the fact that Fidesz succeeded in securing a strong position in the public media even before the parliamentary elections in April 2010. The Gyurcsány government infringed upon the independence of media by openly boycotting pro-opposition media. The Bajnai government took a less partisan approach.

Media pluralism is facilitated by a diversified ownership structure with a high degree of foreign ownership. The TV and the radio sectors are characterized by a plurality of providers. In most municipalities, however, only a single local newspaper exists. Media pluralism also suffers from the strong politicization of the public and the private media and the personal ambitions of some media owners, most notably Gábor Széles, one of the richest persons in Hungary.

Hungarian law provides for far-reaching access to government information. The 2008 amendment of the 2004 Act on the General Rules of Administrative Procedures further expanded the access to information about the state of public procedures. In addition, the number and quality of public institutions’ websites have increased substantially. Bureaucratic procedures sometimes disturb the free flow of information. However, violations of the legal obligations are rare, and in most cases, citizens can enforce their right of access to information.

Civil rights are protected by the constitution and other laws, and are widely respected by state institutions. However, the latter have failed to stop the increasing violence against Roma and gay people exercised by the Hungarian Guard (Magyar Gárda), a right-wing paramilitary organization established in 2007. The Holocaust Act, passed in February 2010, criminalized attempts to deny the Holocaust in order to protect human dignity. A more comprehensive initiative to prohibit hate speech was stopped by the Constitutional Court in 2009.

In Hungary, the freedom of expression, the right to assembly and other political liberties are almost unrestricted. The Constitutional Court has taken an extremely liberal position and has rejected a number of attempts to penalize hate speech. The activities of the Hungarian Guard, a paramilitary organization of the right-wing party Jobbik, have raised concerns that the legal provisions might be too liberal. In December 2008, the Hungarian Guard was forbidden. However, enforcing the ban has turned out to be difficult. In the period under review, referenda became an important additional means of articulating interests.

Legal provisions against discrimination are largely appropriate. Hungary implemented all EU anti-discrimination directives in the early 2000s and has a functioning Anti-Discrimination Office, now called the Equal Treatment Authority. Defying international recommendations calling for the independence of this body, the Authority is formally part of the government administration. Despite the comprehensive legal and institutional framework, there is still considerable discrimination. Women face substantial career disadvantages. The Roma population suffers from widespread discrimination in fields like employment, housing, or access to political posts. The accessibility of public buildings and public transport for the disabled is improving only slowly.

Executive actions are largely in accordance with the law. However, legal certainty sometimes suffers from the poor preparation and low quality of legislation. Sometimes, legislation is hectic and single legislative acts address rather different issues. This undermines the coherence of legislation and grants the administration considerable discretion in deciding concrete matters.

Hungarian courts act independently from government. This applies particularly to the Constitutional Court, which has broad jurisdictional range, and traditionally has enjoyed high esteem within and outside Hungary. In the last years, however, a number of controversial judgments, most notably the Court’s decision to allow the anti-reform referendum in March 2008, have shaken its professional reputation. The Office of the Prosecutor General has also been criticized for favoring Fidesz because of its selective treatment of corruption issues. The lower courts suffer from long, slow and relatively expensive proceedings.

The members of the Constitutional Court are elected by parliament with a two-thirds majority. In the past, this provision has limited the control parties in government have over the appointment of justices, and has contributed to a balanced composition of the Court. However, in the polarized context of the review period in which the major parties have failed to reach a compromise, court seats have remained vacant.

Corruption is rampant on all levels of government and featured prominently in the 2010 election campaign. The existing legislation does not suffice to effectively prevent public officeholders from abusing their positions. The period under review was full of scandals. A spectacular case in early 2010 involved leading officials of the Budapest Transport Enterprise (Budapesti Közlekedési Vállalat, BKV) connected with the mayor’s office. In general, corruption is not only a problem among the political elites, but extends to the lowest ranks of the state administration, with doctors in hospitals, policemen and civil servants involved. Corruption is endemic in the case of infrastructure investments such as the construction of highways and bridges. The Gyurcsány and Bajnai governments did little to address the problems.

Hungary has been an attractive location for foreign investment ever since the early 1990s. However, the country has suffered from severe macroeconomic imbalances several times. At the end of 2008, the Hungarian economy was at the brink of yet another currency crisis. The Gyurcsány and Bajnai governments succeeded in fending off this danger by accomplishing a far-reaching fiscal adjustment. However, the pre-occupation with crisis management also meant that a number of structural problems, including a strong gap between the international and the domestic sector of the economy, could not be addressed. Moreover, the widely anticipated change in government in April 2010 made all changes preliminary.

The Gyurcsány and the Bajnai government refined and expanded active labor market policy. The main instrument was the Road to Work (Út a munkához) project. Introduced in December 2008, it aimed at expanding employment opportunities in the public sector for the unemployed. The Bajnai government tried to stabilize employment in times of crisis by subsidizing businesses for the purpose of creating or keeping existing jobs. The reliance on labor market policy was facilitated by EU funds, but suffered from tight fiscal constraints. The overall effect of labor market policy on employment was limited. The Hungarian employment rate is still among the lowest in the EU, and the readiness of Hungarians to move inside or outside the country for a job is relatively limited as well.

Hungary is among the countries with the highest inward investment. Its economy has been characterized by a strong gap between a dynamic multinational economic sector and a weaker and fragmented sector of small and medium-sized enterprises (SMEs) and about a million self-employed. In the period under review, governments succeeded in attracting foreign investment, but did relatively little to support the domestic sector of the economy. The neglect of the domestic sector was a major point in Fidesz’s campaign against the governing coalition.

The Bajnai government combined the massive fiscal adjustment with a tax reform, partly prepared and announced by its predecessor. This reform aimed primarily at shifting the tax burden from direct to indirect taxes in order to reduce Hungary’s high non-wage labor costs. In July 2009, the standard VAT rate was raised from 20% to 25%. The resulting tax increase was partly compensated by a reduction in social security contributions from 29% to 26%, the introduction of a reduced VAT rate of 18% on some basic foodstuff, and a decline in personal income tax rates from 18% and 36% to 17% und 32%, phased in as of January 2010. Amendments to the corporate income tax, which were enacted in January 2010 only, were more limited. On the one hand, the solidarity tax on corporate income was cancelled. On the other, the standard rate was increased from 16% to 19%.

In the period under review, Hungary continued the radical fiscal adjustment begun in 2007. Despite the economic crisis, the general government fiscal deficit was stabilized at about 4% in 2008 and 2009. Fiscal adjustment helped to fend off a currency crisis in late 2008 and won the Bajnai government much international acclaim. In order to emphasize its commitment to reform, the Gyurcsány government established a Budgeting Council (Költségvetési Tanács) in charge of monitoring the reduction of the budget deficits. Nominated by the president, the Hungarian National Bank and the State Audit Office, its three members were first elected by parliament in February 2009.

The Hungarian health care system has suffered from inefficiencies, rising costs, low quality and an erosion of universal access through an increasing reliance on informal payments. The Gyurcsány government launched a far-reaching and highly controversial health care reform in December 2006. After a central element of reform – the introduction of fees for visits – was rejected by more than 80% of voters in a referendum in March 2008, the government retreated entirely from the health reform project. In May 2008, the MPs of the governing Hungarian Socialist Party (MSzP) joined the parliamentary opposition in cancelling the opening of the market for private health insurance funds adopted by parliament just six months earlier in December of 2007 . Since the health care reform had been drafted by a minister of the liberal Alliance of Free Democrats (SzDSz), this move led to the breakdown of the coalition.

Hungary has seen a tendency towards social polarization for some time, with about one-third of the population being left behind in socioeconomic terms. While income inequality declined somewhat in the mid-2000s, it increased strongly during the economic crisis. Poverty islands have emerged in the (north-) eastern part of the country, and the Roma issue has become very serious. Pre-occupied with fiscal consolidation, the Gyurcsány and Bajnai government did little to address these problems. One unconventional measure has been the adoption of a new Code of Conduct for Public Utilities (Közüzemi Kódex). Introduced on April 1, 2010, it contains provisions on how public utilities should deal with poor customers and delays in payments.

In Hungary, traditional notions of the family have been strong, with the female employment ratio being one of the lowest in the OECD. The Gyurcsány and the Bajnai governments stressed their emphasis on improving female labor market participation and the reconciliation of employment and work. When the Bajnai government cut the maximum duration of paid parental leave from three to two years in 2009, it cited fiscal reasons as well as the disincentives such policies entail for female employment. In large part due to electoral reasons, the main emphasis in family policy rested on combating child poverty through improvements in family allowances.

Hungary has had since 1997 a three-pillar pension system with a mandatory private second pillar. The Bajnai government increased the sustainability and the intergenerational equity of the scheme by abolishing the “13th month pension” introduced in 2003, and by increasing the retirement age from 62 to 65. The adopted decrease in social security contributions might help reduce tax evasion and increase employment rates, thereby improving the medium-term financial situation of the public pillar and even increasing overall pension claims in the future.

Hungary is still primarily a transit country and has only gradually become a destination for migrants. Policies towards migrants have focused either on security aspects or on the support of ethnic Hungarians from neighboring countries (i.e., “diaspora politics”). By contrast, the integration of migrants is not yet seen as a means of overcoming labor market shortages and alleviating the effects of an aging and shrinking Hungarian population.

Given its geographical location and its membership in NATO and the European Union, Hungary’s external security risks are widely perceived as low in the country. Sensitivity to security issues is weaker than in most other European countries, and the interest in foreign affairs largely focuses on the Central European region and on the plight of the Hungarian minorities abroad. The recent attempt at fiscal consolidation contributed to a further decline in military spending. The number of tanks in services has been reduced, and a large number of garrisons have been shut down. However, Hungarian troops have participated in a number of military missions, including those in Afghanistan, Cyprus, and Bosnia and Herzegovina.

While international cooperation within the framework of the Schengen border control agreement has operated smoothly, the internal security situation has worsened, with the state, at least partially, losing its monopoly on the use of violence. For one thing, Hungarian police forces have failed in dealing with the street riots and the political violence of the extreme right. For another, the number of small thefts has increased throughout the country. As a reaction, most municipalities have asked for, and have been ready to support financially, additional police actions. Moreover, several municipalities have also set up civil guards (Polgárőrség) alongside the state police. These activities have helped to protect individual property, but at the same time have further nourished the widespread feeling of rising internal insecurity and a broken public order. The worsening internal security situation can in part be attributed to the lack of action taken by the Gyurcsány and Bajnai governments. However, part of the responsibility also rests with Fidesz, whose accusations and intimidation exacerbated the politicization of the police.

Environmental policy has gained further importance in Hungary. The general awareness of environmental issues has increased, not the least because of conflicts with Austria over cross-border pollution. EU requirements and funds have helped to address issues such as waste management, canalization or sewage systems, as well as to formulate and to develop medium-term strategies. A good case in point is the National Energy Saving Programme (Nemzeti Energiatakarékossági Program) within the framework of the National Strategy of Renewable Energy for 2008 – 2020. At the same time, however, environmental policy has suffered from tough fiscal consolidation. The tight public finances have become a strong restraint on any expansion of environmental policy in Hungary.

Research and innovation policy has not yet received the proper support and attention in Hungary. The Gyurcsány and Bajnai governments were preoccupied with other issues and largely counted on economic development through foreign direct investment. The National Office for Research and Technology (Nemzeti Kutatási és Technológiai Hivatal, NKTH), established in late 2004 in order to coordinate the government’s research and innovation policy, had been given to the liberal coalition partner as part of the coalition game after the 2006 elections and thus did not play a major role. A 2009 act on the Hungarian Academy of Sciences (Magyar Tudományos Akadémia, MTA) failed to overhaul Hungary’s basic research institution. It concentrated on strengthening the power of the president of the Academy, thereby creating a row in the scientific community. Hungary also succeeded in becoming host country of the European Institute of Innovation and Technology (Európai Innovációs és Technológiai Intézet, EIT), an EU agency established in September 2008. However, the EIT has not yet given a major push for R&D in Hungary.

The education system has continued to drift. The marked local and social disparities in primary and secondary education, caused by the local financing of schools, have further increased. Despite the large unemployment among unskilled young people as well as the “over-production” of academics, vocational training has further eroded. Universities have suffered from a lack of resources because funds have not kept pace with the number of students. Neither the Gyurcsány nor the Bajnai government dared to tackle these issues. After the lost referendum in March 2008, the former retreated from its original plans to improve the financial situation of universities by introducing tuition fees.