The latest on Hungary from my Princeton colleague Kim Lane Scheppele, below the fold.

The Unconstitutional Constitution

Kim Lane Scheppele

On New Year’s Day, the new Hungarian constitution became law. The Hungarian parliament has been preparing for this event by passing a blizzard of “cardinal” – or super-majority – laws, changing the shape of virtually every political institution in Hungary and making the guarantee of constitutional rights less secure. In the last two weeks alone, the parliament has enacted so many new laws that it has been almost impossible to keep up. And to top it off, there was also a huge new omnibus constitutional amendment – an amendment to the new constitution even before it went into effect. By one commentator’s count, the Fidesz government has enacted 359 new laws since it came to power 18 months ago.

All of the laws connected to the new constitutional structure kicked into action yesterday if they hadn’t already taken effect. As a result, with the new year, Hungarians began living in a new constitutional order. In this new order, all of the escape hatches that would permit reentry into a constitutional democracy have been bolted shut. If constitutions are supposed to guarantee checks on political power and ensure the rights of citizens, this is an unconstitutional constitution.

I’ve already explained in an earlier post the major features of the new constitutional order. In this post, I’ll catch you up on the new laws passed in the last two weeks that crucially affect how the new constitutional order works. The new laws have been uniformly bad for the political independence of state institutions, for the transparency of lawmaking and for the future of human rights in Hungary.

Ignoring stern warnings from European Commission President José Barroso, the Fidesz government just pushed through two cardinal laws on financial matters. The new law on the central bank (the Magyar Nemzeti Bank or MNB) gives the prime minister the right to appoint all vice-presidents of the bank, when previously the president of the central bank initiated the nominations process himself. No longer. He must now work with the vice-presidents that the government provides for him without having any input into the process of selecting them. Because the law creates a new third vice-president for the bank, Prime Minister Viktor Orbán can name one of these vice-presidents immediately. The new law also expands the number of members on the monetary council. The monetary council, which – as the name suggests – sets monetary policy and interest rates, will grow to nine members, of which fully six already were or soon will be put into office by the Fidesz government.

The central bank law was changed in small ways at the last minute to respond to the EU warnings that Hungary must maintain the independence of the bank. As a result, under the new law, the current embattled MNB president, András Simor, keeps his job at the head of a stand-alone bank. But appearances are deceiving.

On the same day it passed this law, the parliament passed a constitutional amendment that also affects the status of the central bank. According to the amendment, the parliament may merge the central bank with the existing Financial Supervisory Authority (the bank regulator) to create a new agency (unnamed in the law), within which the central bank would be just one division. The government would then be able to name the head of this new agency who would effectively become the boss of the president of the central bank, reducing the bank president to a mere vice-president in the new agency.

The constitutional amendment doesn’t actually complete the merger – it just lays the constitutional groundwork for this change in the status of the bank. So the government can honestly claim it has not done anything that harms the MNB – at least not yet. But the legal authorization is there, waiting for parliament to flip the switch and make the central bank a subdivision of the Agency that Cannot be Named.

The new Economic Stability Law – also a target of EU criticism – creates a permanent flat tax, requiring all personal wage income to be taxed at the same rate, starting in January 2013. While the law does not specify the rate of taxation, the very flatness of the tax sets limits on how much the rich can be made to pay. As one observant commentator has noted, Prime Minister Orbán has been very dependent on a group of wealthy Hungarians to support his media operations and his political party. The personal income flat tax will protect their wealth from future progressive taxation.

The flat tax will be extended to corporate profits in 2015, when a new provision kicks in to require equal taxes to be levied on a corporation’s “achieved results.” Given these constraints on the shape of new taxes, Hungary is unlikely to be able to balance its books for the foreseeable future. This is why the EU strongly urged Hungary not to enact this law. But the Fidesz government went ahead and did so anyway.

Why is the Hungarian government doing this? For some years now, the Hungarian government has been in financial trouble. It borrows in foreign currencies, and the debts balloon each time the forint (the national currency) falls. Between June and December, the Hungarian forint fell 13% against the euro and 18% against the Swiss franc (in which much of Hungary’s private debt is denominated). Under the previous Socialist government, national debt expanded, causing Hungary at the start of 2008 to turn to the IMF for emergency support.

When the Fidesz government came to power in 2010, swept into office at widespread public disgust with the Socialist party, the economy was stable but fragile. As economic conditions worsened with Fidesz’s new policies, however, the government insisted it did not need to go hat-in-hand to the international financial institutions for assistance. Instead, it started to plug the budget holes using unconventional one-off solutions. After effectively nationalizing private pension funds, imposing extraordinarily steep taxes on targeted foreign-owned businesses, and requiring banks to accept repayment of private loans at a substantial loss, the Fidesz government has been considering further unconventional economic measures which the MNB has attempted to block.

In mid-December, the Fidesz government approached the IMF to discuss a new loan. But the IMF walked out of the negotiations when the government refused to budge on the Economic Stability Law and the law on the central bank.

The markets have seen the economic distress signals for some time. After both Moody’s and S&P downgraded Hungarian debt to junk status over the last two months, the rates on long-term Hungarian debt have skyrocketed to unsustainable levels. Just last week, the Hungarian government abandoned sale of its three-year bonds because it got no offers it could accept, and the price of ten-year bonds rose to 9.7%.

But the central bank is not the only independent agency to be brought under political control in the new constitutional order. The independence of the judiciary was dealt a final death blow with the new constitutional amendment of December 30, the last day of the parliamentary session. In it, both the head of the National Judicial Office and the public prosecutor, both people very close to the governing party and elected by the Fidesz parliamentary supermajority, can choose which judge hears each case in the country’s courts. The constitutional court had previously found unconstitutional a law that permitted political officials to assign cases like this. To avoid further constitutional questions, the government simply put the new powers to assign cases directly into the constitution itself. The constitutional amendment passed without dissent from the Fidesz super-majority in the parliament.

The same constitutional amendment also listed the crimes committed by communist party officials during the soviet period, extended the statute of limitations for these crimes, branded the former communist party a criminal organization, and designated the current Socialist party (Fidesz’s primary opposition) as the legal successor to the communist party, responsible for all of its crimes.

In the last two weeks of the year, parliament passed so many major laws that it was nearly impossible for anyone – including, presumably the obedient government MPs themselves – to keep track of what they were voting on. On multiple occasions over the last two weeks, the parliament met late into the night and often voted on several major laws in one sitting. The actual texts of the laws on which they were voting were often unclear at the time that the governing party voted en masse for them. Major amendments were introduced at the last minute and then not debated. There was no dissent from within the governing parties and almost no votes from any of the opposition parties. (The far-right Jobbik deputies voted for the central bank law, however.) On both December 23 and December 30, the Socialists and the LMP deputies walked out in protest, a fact marked in the public record only by the unanimous votes recorded for many of these laws.

Inside the parliament: Fidesz deputies napping as their late-night marathon sessions took a toll.

To solve the problem of having too many laws to pass, the Fidesz deputies voted on December 30 to amend the rules of parliamentary procedure. From now on, if 2/3rds of the deputies agree, a bill can move directly from its introduction to a final vote without the need for any debate.

Many other cardinal laws were passed in the last two weeks as well. The cardinal law on local governments introduces a number of measures that will make Budapest itself – the primary opposition stronghold – harder to govern as a coherent whole. A separate law on government property transfers all property of the regional governments into the hands of the national government, which means that ownership of virtually all of the schools and hospitals in the country will come into national hands for the first time since the end of communism. The local government reforms are complicated and spread over many laws — but it seems clear that they, too, point in only one direction: toward more centralization of power.

Last week, the Constitutional Court, which was pronounced dead when its ranks were expanded and packed with government supporters earlier in the year, lumbered back to life with three new decisions that appeared to deal strong blows to the Fidesz government. The Court struck down part of the media law, invalidated the controversial law on the status of churches and said that it was unconstitutional for the public prosecutor to have the power to pick which judges would hear the criminal cases he brought.

But by week’s end, all of those decisions had been shown to be ineffective at actually stopping any of the government’s drives to centralize power. The government addressed the Court’s decision on the public prosecutor’s power to select judges for specific cases by amending the constitution to permit him to do it. The Court’s decision on the media law touched only a tiny corner of the vast web of media regulation and avoided the larger questions it had been asked to decide about whether the media board could be brought entirely under the governing party’s control. The ineffectiveness of the Constitutional Court’s decision was revealed when the media board took away the broadcast license from the last independent radio station, KlubRadio, two days after the Constitutional Court decision was announced. And the law on churches, where the Court’s only objections had been that the parliament had engaged in procedural errors while passing the law the first time, was reintroduced into the parliament and passed again with its content almost unchanged. The Court had been asked to address many constitutional issues in the substance of the law on the status of churches, but it left those questions unanswered.

The Constitutional Court then never issued the decision it had said it would publish on the effective nationalization of Hungarian’s private pensions. The pension law, passed last spring, eliminated the state-provided pensions that Hungarians had paid into all of their working lives, in a move equivalent in the US to the abolition of social security. But the law abolished social security payments only for those who refused to transfer their private pension funds into state hands. Given that prior decisions of the Constitutional Court had said that people had a property interest in the payments they had made into the state pension system, the new pension law was surely unconstitutional under the standards that the Court had previously set. But rather than reiterate its previous arguments, the Court simply said nothing.

With the new year, as the new constitution goes into effect, all petitions to the Court lapse and it becomes much harder for anyone to challenge this law – or any other.

But it is worth lingering on the newly re-enacted law on the status of churches because it is one of the places where we can clearly see the effects of the new constitutional order on the protection of constitutional rights. What does the law on churches do? It creates 14 state-recognized religions, and decertifies the rest. On January 1, over 300 denominations lose their official status in Hungary – including their tax exemptions and their abilities to run state-funded schools. While most of the denominations are tiny, many are not. Among the religions that will no longer be able to operate with state approval are all versions of Islam, Buddhism, Hinduism and Baha’i, as well as many smaller Catholic orders including the Benedictines, Marists, Carmelites and Opus Dei, and a number of major Protestant denominations including Episcopalians, Jehovah’s Witnesses, Seventh Day Adventists, Mormons, Methodists, and all but one of the evangelical churches. One each of the orthodox, conservative and liberal Jewish synagogues are recognized; but all other Jewish congregations are not. A detailed analysis of the original churches law, reenacted essentially unchanged, election law with its gerrymandered electoral districts, MPs from the tiny youth party, LMP, chained themselves together to prevent the cars of Fidesz MPs from parking in their assigned parking spaces at the parliament building. The LMP MPs were detained and taken to the police station for a few hours. Some Socialist MPs, including former Prime Minister Gyurcsány, were also taken into custody when they arrived to lend their support to the demonstration.

But the parliamentary session went on, and passed the new election law anyway. Since the Fidesz supermajority has a quorum as well as all of the votes needed to pass cardinal laws and even constitutional amendments, the absence of the opposition from that parliamentary session made no difference to any of the 14 laws were enacted that day.

The opposition managed to stage other demonstrations too: last week when the license of KlubRadio was revoked and again on New Year’s Eve, thousands of protestors turned up to show their opposition to the government’s policies. The next planned demonstration will take place tonight (January 2), when a gala to celebrate the new constitution is staged at the National Opera House and the political opposition plans to demonstrate outside. Unfortunately, there are also reports that an aggressive far-right paramilitary group may show up as well, and it is promising violence. If the government fails to protect the peaceful protestors against such a specific threat announced far in advance, then we are in a different world. There are a number of signs that the political conflict is entering a more treacherous zone.

With the new year, as the new constitution takes effect, the judiciary is brought under the control of the governing party. Constitutional Court is longer able to hear petitions from ordinary citizens on the abstract constitutionality of laws, as it had been able to do since 1990. More than 200 judges – disproportionally court presidents – are now forced into involuntary retirement, and their replacements chosen by a hand-picked friend of the prime minister. The president of the Supreme Court has been pushed out before the end of his term, because a new law now requires someone in his position to have five years of experience as a Hungarian judge. (András Baka, the outgoing Supreme Court president, had 17 years of experience as the Hungarian judge on the European Court of Human Rights, but that didn’t count.) His replacement may have had more than five years of experience as a Hungarian judge, but he had been turned down for promotion twice before by his fellow judges. Now, however, any judge in the ordinary courts can be elevated or demoted by the same single state official who also has the power to appoint new judges in the first place. All legal cases, both civil and criminal, can be assigned to specific judges by politically appointed officials.

With the new year, as the new constitution takes effect, the independence of the public prosecutor, state audit office, media board, electoral commission, ombudsman, and other previously neutral bodies can no longer be assured because their key offices are filled with loyalists of the governing party. And they all serve very long terms of office, through multiple election cycles, with turbocharged powers that exceed those of their predecessors in those offices.

With the new year, as the new constitution takes effect, the nationalist preamble of the constitution has legal force. The constituent power is proclaimed to be ethnic Hungarians no matter where they live, instead of the citizens of the state whose constitution applies first and foremost to them. The new constitution must now be interpreted in the light of Hungary’s “historic constitution” and the Holy Crown of St. Stephen, both ideas that have gotten the country into trouble with its neighbors before. And the official name of the country becomes simply Hungary. Until the new year, the official name of the country was the Republic of Hungary. The change of country name may be the most honest relabeling in the new constitution.

With the new year, as the new constitution takes effect, Hungary strikes out on its own, dismissing European values and substituting its own nationalist ones in their place. January 1 is officially the starting date of the new constitution, but to many, it feels like the consolidation of a constitutional coup.