Orban's coming for you

HUNGARY is under the international spotlight. In January the country takes over the rotating presidency of the European Union. But there is growing alarm about the increasing centralisation of power under the right-wing Fidesz government led by Viktor Orban, Hungary's pugnacious prime minister.

Fidesz won an unprecedented two-thirds majority in April's general election. Since then, say its critics, it has embarked on a power grab, taking over almost every independent institution. Pal Schmitt, an emollient former member of the European Parliament, has been appointed to the presidency. A “statement of national co-operation”, to be placed in public buildings, claims that only now has Hungary regained its self-determination, though it has been a democracy for two decades.

Party nominees have been elected to all five seats on a powerful new media council. This supervisory body will have an unparalleled mandate to impose large fines on print, online and broadcast media for such vague transgressions as offending “human dignity”. Its powers are causing alarm. Magazines and newspapers have published blank front pages in protest, and international bodies such as the Organisation for Security and Co-operation in Europe have called for a rethink. The members of the council insist that they will not be pushed around by the government.

The charge sheet does not end there. The constitutional court's jurisdiction over financial matters has been severely restricted. The government has imposed crisis taxes on banks, energy, telecoms and retail companies, alarming foreign investors. It has raided private pension funds. The fiscal council, which provided independent oversight of the budget, has been scrapped, though it will have a successor.

Follow the fortunes of Fidesz since their election on our interactive timeline

Opposition politicians and civil-society activists hoping that the forthcoming EU presidency would bring outside pressure to bear on Fidesz have been disappointed. The priority in Brussels is for smooth management over the next six months, not bust-ups over press freedom. The government was elected with a clear mandate for change, comments one senior EU official.

Until now, the only body to have kept Mr Orban at bay was the central bank. Andras Simor, the bank's governor, has survived repeated calls from Fidesz for his resignation (as well as a large salary cut). But the government now plans to overhaul the monetary council, which sets interest rates. Mr Simor's powers to appoint two of the council's seven members will be removed, and a new parliamentary committee, which Fidesz will control, will appoint four of them. If the governing party has a majority on the monetary council, it could in effect set interest rates, which would place Hungary in breach of its EU obligations. Jean-Claude Trichet, president of the European Central Bank, has criticised the government's plan.

“We are in an incredibly difficult situation,” says Tibor Navracsics, the justice minister. Few would disagree. After eight years of sloth and corruption under the Socialists, Hungary's economy is in a parlous state. The country has the EU's lowest employment rate, at 55%. During Socialist rule, when party apparatchiks enriched themselves, often at public expense, the eastern half of the country fell behind. One in three Hungarians lives on or below the poverty line; far more among the Roma (Gypsy) minority. About 70% of all household and business debt is denominated in foreign currencies, mainly Swiss francs, making the country hostage to a currency over which it has limited control.

The priority, says Mr Navracsics, is job creation. The hope is that a flat-rate income tax of 16% and a reduction in company taxes will kickstart growth. “We believe that economic growth can create jobs, [and that] jobs can create higher living standards.” This strategy is, Mr Navracsics admits, “very risky”.

Not all the news from Hungary is bad. Support for Jobbik, the thuggish far-right party which won 17% of the vote in April, and the Magyar Garda, its uniformed wing, is sliding as the party fractures amid a welter of mutual recriminations. Growth is projected to reach 3% of GDP in 2011, says Kopint-Tarki, an economic research institute, and the government's budget-deficit target of 2.9% of GDP for 2011 is achievable. The forint remains stable, even after a recent credit-rating downgrade. And Hungary has positive ideas too. It will give priority to the Roma during its presidency, says Mr Navracsics, as an example of an issue that needs a continent-wide strategy. “We can be an ally, and an honest broker.”