The Hungarian government’s map of Europe is dotted with stark warnings of “no-go zones” it claims are patrolled by violent immigrants, six in the UK clustered around London alone.

The poisonous graphic, in a leaflet handed out to voters ahead of a controversial referendum on refugees, pays no heed to facts or geography but its message is clear. It forms part of an expensive and expansive campaign by authorities in Budapest that is whipping up xenophobic sentiment at home, and sowing tension far beyond Hungarian borders.

The ballot, conceived and championed by prime minister Viktor Orbán, is ostensibly about whether parliament should allow the European Union to set a quota for refugee resettlement within the country. But critics contend that he is using groundless fear to bolster his position at home and shore up a challenge to Europe.

They point out that the ballot comes as Europe is backing away from the mandatory quota system that officially inspired the campaign: there are just a few thousand refugees in Hungary today, and that number is unlikely to rise. Syrians, Afghans and others crossing into Europe are not drawn by dreams of a Hungarian future.

“One has the suspicion that this referendum is not about the refugees, that it is rather about the manipulation of the voters, and some kind of strengthening of positions within the EU,” said pastor Gábor Iványi, a one-time ally in the anti-Communist movement who baptised two of Orbán’s children. “Hungary is not a target country in this refugee crisis.”

A campaign that is already spreading hate at home risks having serious fallout for Europe as well, further fracturing leaders already split over everything from the refugee crisis to the euro’s woes, and potentially consolidating Orbán’s efforts to challenge the status quo with a bloc of other eastern nations.

The language has been so violent that it fuelled demands from one European leader that Hungary be expelled from the union for stirring up hatred.

Even stalwart supporters of Orbán’s initiative often admit they have had no interaction, much less trouble, with outsiders. “I’ve only met foreigners who are tourists and not had any problems,” said cheery retiree László Czeto, 87, firmly committed to supporting the government. “I just don’t want a lot of people to come to Hungary. I think they are not real refugees.”

Yet there are clear political advantages to focusing on refugees – a target largely absent and unable to respond – at a time when Hungary is grappling with concerns from rampant graft to failing public services, critics say.

Viktor Orban has been accused of stirring up hatred. Photograph: Joe Klamar/AFP/Getty Images

A recent survey found that four in five young Hungarians think the state is riddled with corruption, and more than half have encountered it themselves. The country comes 50th in Transparency International’s ranking of corruption worldwide, and the state has been taking power away from anti-corruption bodies.

“They don’t want people to speak about problems like corruption, and healthcare, they want people to talk about the nonexistent migrants,” said Gergely Kovács of activist group Two-Tailed Dog, a party originally launched as political satire that put pooches up as candidates, with manifestos promising free beer and eternal life to mock empty promises.

But as the political landscape in Hungary grew bleaker, its founders were forced to become more serious, although humour is still used as their main weapon. “I’ve never seen so much hate in this country before,” said Kovács. “They have brought evil out and that’s why we felt we should do something.”

A crowdfunded advertising campaign uses ridicule and well-chosen statistics to show up government fear-mongering. A poster warning that a million people in Libya want to come to Europe is matched by one reminding voters that a million Hungarians want to go to Europe; others warn of “dangers” ranging from the risk of drinking water spiked with LSD to medieval bear attacks.

There is also a more serious campaign to persuade voters to spoil their ballots, perhaps the only way to fight back against Orbán because, in a country with a long history of unease with migrants and extensive government influence over the media, he is guaranteed an overwhelming majority.

The only way that victory will be undermined is if turnout fails to meet the relatively high threshold needed for it to be legally binding. A history of voter apathy may be one reason for the aggressive campaign, opponents speculate.

The government denies allegations of racism, and says the campaign is strictly factual. Yet it struggles to defend many of its claims, among them the “no-go zone” allegations which have echoes of claims made about Paris by US news channel Fox. Questioned about the map, government spokesman Zoltán Kovács claimed it was based on public statistics, but could not provide them to the Guardian and admitted it was deceptive.

“It relates to London. The picture is a bit disproportionate,” he said, when asked about which areas were covered by the warning signs on the UK, sprinkled roughly from Peterborough to Southampton. He went on to cite riots in London’s south-east in 2011, before the Syrian war had begun in earnest, much less the refugee crisis it has sparked.

And the campaign is already spreading poison across the country, said Demeter Áron from Amnesty international, who leads a group of charities monitoring hate crime. “One young boy, 14, from the poorest part of the country said ‘migrant’ had already become the playground insult of choice, replacing anti-gay and anti-Roma slurs,” he said.

And it has made many of Hungary’s small minority population even more uncomfortable, both on the streets and in a society they already felt was ambivalent. “I don’t want to pay tax so people throw a referendum against me,” said Iranian refugee Behruz, 31, who has lived in Hungary for the past five years. “You are serving a society that is arming against you.”

Immigration offers more opportunity to Hungary than its government will admit, because it has developed a labour crisis more or less in parallel with Europe’s refugee crisis. With hundreds of thousands of young people heading west, there is a huge shortage of workers. András Kováts, of charity Menedék, which has been working with refugees for more than 20 years, says that for the first time there are no problems finding jobs for new arrivals. “This is not about moral obligations, businesses need workers.”

But immigration sits at the heart of Orbán’s challenge to Europe, and so economic growth is not a priority. “We don’t want to fill [jobs] with migration from other cultures,” Kovács added.

Orbán has emerged as the most high-profile leader in a group of eastern European countries known as the Visegrád four – Hungary, Poland, the Czech Republic and Slovakia. They have a combined population equivalent to that of the UK and are increasingly vocal about their frustration with the status quo.

In the continent’s current struggles with Brexit and the refugee and economic crises, Orbán has seen particular opportunity, talking openly this summer of an eastward shift in Europe’s centre of gravity.

“If there is such a thing as an ‘old Europe’, it is here,” he told a student conference. “If we talk about how we envisage the capital of Europe, Budapest comes to mind more often than Brussels does.”

Perhaps one reason that seems plausible is Orbán’s own dramatic political transformation, a full 180-degree turnaround from when he was a firebrand liberal opponent of communism and critic of Moscow, to a man whose economic and political project aligns closely with Russian president Vladimir Putin.

“I think he is pretty much aware of the fact that this referendum can contribute to the destabilisation of the EU when it is not in a good state and he knows that Putin will be grateful for that,” said Péter Krekó, an analyst with Hungarian thinktank Political Capital.

In October, Orbán will be claiming a victory of sorts, even if his opponents or apathy manage to keep turnout low, as the majority polls show he is virtually guaranteed victory. But it will have come at the price of Hungary’s social fabric, and may prove dangerous for Hungary as well as Europe.

“The main message of Christ was against hatred and fear,” said Pastor Iványi. “Someone who is building on these evil feelings is unleashing things which he or she will not be able to manage.”