Late last month, in a speech in Transylvania, Hungarian Prime Minister Viktor Orban announced nothing less than his government’s break with liberal democracy. Orban’s words have made waves across the West, and his defenders have been busy insisting that he was only dismissing what he called “the liberal understanding of society”: in essence, ruthless capitalism and selfish individualism. But Orban clearly gave notice that he was also done with political liberalism and its emphasis on accountability and checks and balances. Most important, by proudly embracing “illiberal democracy,” a term famously coined by the journalist Fareed Zakaria in Foreign Affairs in 1997, he signaled which side his government has chosen in the new geopolitical and ideological struggle between Russia and the West. Orban endorsed Putin’s model of populist leadership and an unrestrained executive based on assertive nationalism. Earlier this year, Russia gave a huge loan to Hungary. Moscow is already getting a political return on its investment.

As I argued in an earlier article for Foreign Affairs, Orban has taken a leading role in a process of political backsliding in eastern Europe that seemed unimaginable when the majority of countries in the region joined the EU in 2004. Since the election victory of his Fidesz party in 2010, Orban has restricted media freedoms, systematically dismantled checks and balances, and delivered much of the economy to Fidesz-friendly oligarchs. In April, he won another term in office in an election that the Organization for Security and Cooperation in Europe called “free, but not fair.”

Fidesz has now abandoned all self-restraint: Orban’s government is trying to eliminate the last sources of opposition and comprehensively remake society in its own cultural image. Despite massive protests from inside and outside the country (from Jewish organizations in particular), the government erected a memorial to Germany’s 1944 occupation of Hungary, in the Budapest city square where the U.S. embassy is located. The memorial depicts an angel (Hungary) that is about to be attacked from behind by an enormous black eagle (Germany). The memorial’s critics claim that it denies Hungarians’ collaboration in the Holocaust. Citizens have now improvised a protest site in front of the statue, leaving stones, shoes -- a particularly potent symbol of the Holocaust in Hungary -- historical pamphlets, Stars of David, tattered EU flags, and a giant mirror, which is meant to encourage Hungarian society to interrogate itself about how such blatant historical revisionism could literally be put in stone.

The erection of the statue -- late at night, under heavy police protection -- coincides with two drastic measures consolidating the illiberal state: the government is attacking civil society organizations, denouncing them, as in Putin’s Russia, as foreign agents. Orban is also trying to force the last major television channel that is not toeing the government line, a subsidiary of the German company Bertelsmann, out of business through steep tax increases on advertising revenues. In response to the critics of such measures, Fidesz has regularly accused liberals of helping multinational businesses, in contrast with Orban’s heroic defense of ordinary Hungarians.

But when it comes to choosing between the liberal West and what Orban now calls his illiberal “work-based” state, ordinary Hungarians have also been voting with their feet: about 500,000 have left the country since his election. The EU’s open borders make it easy for the politically despairing and the economically discontented to exit. At least on this score, European unification is great news for authoritarians. In the old days, dissidents would have been kicked out and created an international outcry; now the constituency for opposition parties leaves voluntarily (and voting from abroad can always be made very burdensome, as Fidesz demonstrated effectively in the elections this past spring).

Orban is now confident enough in his vision that he wants to proselytize. In his speech in Transylvania, he declared that world politics is at a watershed moment -- comparable to the ends of the First and Second World Wars and to 1989. The financial crisis of 2008 underscored what Hungarians had learned in the years since 1989: liberalism in practice, in contrast to what the West had promised in theory, often only serves the strongest. Hungarians thought that joining the EU would secure freedom and equality. Instead, they got exploitative mortgage contracts from Austrian banks.

Orban and the ideologues who surround him -- a motley crew of hard-line nationalists, disillusioned liberals, and disciples of the reactionary political philosopher Leo Strauss -- think that a global race for a new form of state has begun and that illiberalism is in the lead. They claim that Hungary (a country that the turn-of-the-century Hungarian writer Endre Ady famously described as a “ferryboat-land” between East and West, “roaming back and forth between two shores”) can play a special role in this race. It would borrow from the West -- Orban has pointed to Obama’s alleged devotion to “economic patriotism” -- but especially from authoritarian countries in the East. China, Russia, Singapore, and Turkey are Orban’s great teachers.

In fact, Orban has been rhapsodizing about the inspiring “wind from the East” for some time. In practice, however, what Fidesz learned from Eastern models is not how to achieve rapid growth but how to create an economic system in which success depends on political connections. Moreover, like Putin, Orban is playing with fire by stoking nationalism in order to distract from economic failure. The front of the Parliament building in Budapest no longer displays the EU flag alongside the national one; instead, it features the banner of the Szeklerland, a region of Romania with a large ethnic Hungarian population. Given the large Magyar minorities in several of Hungary’s neighbor countries, there is potential for many more such provocations.

Orban confidently announced in his speech that the EU could do nothing to prevent the creation of an illiberal state -- or, as a regime critic put it, “a black hole” -- in the midst of Europe. It is true that attempts by the European Commission to safeguard media freedom and the independence of the judiciary have met with limited success. Brussels has few means to protect the Union’s core political values. At best, it can use EU law to get at a rogue government indirectly: when Fidesz lowered the retirement age of judges in order to staff the courts with its own appointees, Brussels sued for age discrimination. The European Commission won its case, but hardly any of the judges were reinstated. Still, there is the possibility of suspending a country’s voting rights in the EU altogether -- a measure so drastic that it is often called the “nuclear option.” It depends not on the Brussels bureaucracy but on EU member states having the political will to condemn one of their peers.

Up until now, even European politicians who were paying attention to developments in Hungary -- German Chancellor Angela Merkel, for example -- believed that they didn’t have any political capital to spare amid the euro crisis. It was difficult enough for European leaders to bully Greek governments into drastic spending cuts; they didn’t want to be seen lecturing small central European nations on democratic norms as well. But given the current perception, right or wrong, that the continent’s financial crisis is no longer acute, Brussels and Europe’s bigger states may finally get serious about Orban. They should understand that the new ideological conflict -- liberal versus illiberal Europe -- is a greater danger to the foundations of the EU than the euro crisis. Of course money matters -- but a rising antiliberalism inside the EU, inspired and materially supported by Putin, could tear the Union apart morally and, ultimately, politically. Orban has done the rest of Europe a favor by spelling out his illiberal intentions so openly -- and making it clear just how high the stakes are.