From “Returning to Europe” to “Occupying Brussels”
First published at Rosa-Luxemburg-Stiftung.
Over the past decade, Hungarian Prime Minister Viktor Orbán has emerged as one of Europe’s most important — and controversial — politicians. This is no small feat for the leader of a country whose economic weight and strategic importance both in Europe and on the world stage remains, well, modest.
Having established himself as a point of reference for the far-right worldwide, Orbán has also become an object of constant criticism, misunderstanding, and sheer fantasy across the political spectrum. True to form, he campaigned on a platform of “no migration, no gender, no war” in the run-up to the 2024 European election and called on his supporters to “occupy Brussels”. It was thus to be expected that Hungary’s assumption of the rotating presidency of the EU Council in July 2024 would not be without turbulence.
Council presidencies are generally expected to serve as “honest brokers” between the EU’s 27 member states — but Orbán’s first steps only seemed to heighten the bloc’s internal contradictions. Commentators aligned with his brand of “illiberal" nationalism celebrated his Trumpian slogan, “MEGA” (short for “Make Europe Great Again”), while pundits and politicians from centre-right to centre-left were incensed by his unannounced diplomatic trip to Moscow and founding of a new far-right group in the European Parliament. Left-wing voices pointed to his focus on creating a “business-friendly environment”, opposition to the European Green Deal, and closeness with other far-right leaders. There was however, a central element missing in most commentary: the current tension between Brussels and Orbán is only part of a longer, intertwined history, in which both parties have enabled each other more often than not.
By 2024, Orbán had ruled Hungary for the majority of its post-1989 history. Yet despite being in power for nearly two decades, mainstream media regularly portrays his regime as an anomaly within the European Union, perhaps best explained by the authoritarian personality of a leader who capitalizes on the EU’s disunity, smelling blood at each sign of dysfunction. This narrative might be reassuring for European liberals, but if we look beyond the ever-increasing, highly publicized clashes between Orbán and the European Commission over questions like the rule of law, the rights of sexual minorities, freedom of speech, or, more recently, Ukraine, a more complex image emerges — one of mutually reinforcing interests, in which mediatized spats serve one purpose, and capital flows another.
Orbán’s rise cannot be separated from Hungary’s integration into the EU, but his story goes beyond the specific case of a small Eastern European country. The emergence of a semi-authoritarian state in the heart of the Union reveals a lot about the changing nature of contemporary capitalism, the role of European institutions, and the process of uneven Europeanization in recent decades.
Hungary was a willing forerunner in the regional implementation of neoliberal ideas during the 1990s. A few years later, Orbán’s rise to power and subsequent state-building provided a new model for right-wing governance. After he returned to the prime minister’s office in 2010, a steady inflow of EU funds helped cement Orbán’s rule. Placed against this backdrop, the Hungarian regime appears less as an anomaly within the EU project — and more like its logical result.
Eastern Europe’s (very) long transition
Commentary on contemporary Hungary often exhibits a degree of puzzlement. Had Hungary not executed a peaceful capitalist transition and effective market reforms? By the time it joined the EU, the country appeared poised for seamless integration. Yet in the two decades since, it has mostly made negative headlines: bailout packages, neo-Nazi militias, hate crimes against Roma, an increasingly rogue prime minister, and endless wrangling between Budapest and Brussels. Where did it all go wrong?
The roots of the Orbán regime can be traced all the way back to Hungary’s last years as part of the Soviet-led Eastern Bloc. Contrary to the dominant narrative, Eastern Europe’s economic integration with the West did not begin with accession to the EU or even the fall of the Berlin Wall. By 1989, most ostensibly “socialist” countries had been integrated into world markets to various degrees for decades. This process accelerated with the end of the Bretton Woods system, the defeat of alternative globalization projects, and the rise of neoliberalism. Of all Warsaw Pact members, Hungary opened up the most to global capital flows, as it sought to become a “bridge” between West and East, financing technological upgrading with Western loans.
Along with Poland and Romania, Hungary joined the International Monetary Fund (IMF) in the 1980s, contracting its first World Bank loan in 1982. Joint ventures with foreign firms were legalized as early as 1972, and by 1989, much of the regime’s technocratic elite had already been converted to the merits of the free market, with thousands of foreign companies operating in the country. Nevertheless, this gradual marketization neither alleviated domestic tensions nor substantially improved the country’s global economic standing. Hungary stumbled into its post-socialist transition saddled with substantial debt, cut off from the Comecon trading bloc, and without a coherent strategy to move forward.
There were both antecedents and continuities on either side of 1989: Eastern European countries remained dependent economies, already partially dependent on a Western-dominated, increasingly financialized global order. The transition to all-out capitalism nonetheless marked a qualitative break. As the “end of history” dawned, the region emerged as a new frontier for capital, where willing local elites, international intervention, and a shifting global landscape combined to enact a radical transformation.
Each country took on specific trajectories. The Baltic states went the furthest in their neoliberal restructuring, while Slovenia is often cited as the country that best managed to protect its welfare institutions, state capacity, and labour’s bargaining position. Some countries, regions, and even specific cities fared better, but over three decades into the former Eastern Bloc’s transformation, none have managed to break away from the kind of semi-peripheral status that subordinates their development to the decisions of external investors and great powers.
By relentlessly pushing for a specific set of market reforms, the European Community (since 1993, the European Union) only reinforced existing structural inequalities and path dependency. These policies transformed Central and Eastern European countries into “ competition states” engaged in a race to the bottom to provide (overwhelmingly Western) multinational corporations with the most amenable conditions. The price paid for these changes would be steep: recent estimates have put the number of excess deaths during the “lost decade” of the 1990s at upwards of 7 million. The politics championed by Viktor Orbán have not substantially addressed any of these processes’ root causes — but he has proven particularly skilful at capitalizing on the resentment caused by this experience in order to mobilize large swaths of society for his state-building project.
Actually existing social Europe
The transformation of Hungary into a neoliberal testing ground was part and parcel of global changes that also thoroughly transformed societies on the other side of the Iron Curtain. By 1990, Western European economies had largely abandoned the Keynesianism that produced much of Western Europe’s post-war “golden age”. By the time “actually existing socialism” collapsed, the Washington Consensus — policy prescriptions based on a credo of market stabilization, liberalization, and privatization — was already firmly entrenched in the core of the EC.
In the absence of fiscal harmonization, the European single market pitted the continent’s respective welfare states against each other. For all of the talk of building a “Social Europe”, the 1992 Maastricht Treaty establishing the EU effectively constitutionalized the free movement of capital and labour while simultaneously reducing states’ fiscal flexibility by setting hard rules regarding budget deficits and sovereign debt. The treaty’s social provisions might have made references to “social dialogue”, but its vague contours were neither mandatory nor have they been prioritized since.
The 1990s were also a pivotal moment in establishing the EU’s economic architecture. “ Disciplinary neoliberalism” — a commitment to low inflation and fiscal discipline — was hardwired into the treaties at the heart of the EU’s Economic and Monetary Union (EMU), while at the same time, “ American deregulatory and competitive pressure was applied on Europe’s bank-based financial system”. Central banks were in effect “ de-nationalized”, becoming key institutional nodes in the spread of an increasingly financialized system. The former were key actors in the establishment of commercial banks’ subsidiaries in Europe’s Southern and newly opened Eastern peripheries. In Hungary, as in other neighbouring countries, these subsidiaries were hardly incentivized to boost domestic production, allowing them to engage in increasingly high-risk activities, with yields channelled back to the Western core.
The economic integration of Eastern European economies such as Hungary offered a fix to the crisis of wage-led growth facing Western European economies at the time. By insulating economic decision-making from democratic oversight and by radically opening up Eastern Europe to transnational capital, it offered new models of accumulation for Western economic elites, whose interests increasingly determined institutional policy. Under the cover of integration, the EU engaged in wide-ranging institution-building in candidate countries. This “Europeanization” was not restricted to the transfer of legislation concerning minority rights or administrative capacity — in preparation for their entry to the EU, candidates (including Hungary) had to conform to the austerity measures prescribed by the Maastricht Treaty.
These processes were all conditioned by the gravitational pull of Germany’s powerful manufacturing sector and its export-driven growth model. Buoyed by the absorption of East Germany and the incorporation of Eastern European economies as de facto satellites, the Federal Republic of Germany asserted its dominant position within the bloc, decisively shaping the form the latter would take during the 1990s. This was particularly true in Hungary, and remains the case today: Germany is Hungary’s biggest trading partner, accounting for nearly a quarter of its total foreign trade.
“Returning to Europe”
In the spring of 1994, Hungary became the first former Warsaw Pact member to officially request EU membership. It would take nearly four years for official accession talks to begin and another four years of negotiations before membership was overwhelmingly approved in a national referendum in 2003. Hungary entered the Union one year later, together with several of its Eastern European neighbours.
EU institutions played a determining role in determining Hungary’s trajectory both before and during accession. Strict membership conditionality was used to reshape domestic policies and the Hungarian state’s structure, while “national investment promotion agencies” pushing the opening of local economies to international investors were directly financed by the EU. Established in 1990 with the stated goal of facilitating European integration, the European Bank for Reconstruction and Development (EBRD) was also an important actor in this process, intervening in policy areas and predicating its loans on the involvement of private capital. In parallel, the bank established and maintained benchmarks and “transition indicators” to measure countries’ “progress” on the road to privatization.
The resulting process was the very opposite of the East Asian-style developmentalist path, in which state-run development banks played a crucial role in advancing coordinated industrial policies. It was also diametrically opposed to Western Europe’s own post-war recovery, premised as it was on active state intervention and national industrial policies. When Hungary’s (conservative) government sought to alter the manner of privatization in order to favour domestic bidders in 1993–4, the response of the EU, the EBRD, and the IMF was swift — they condemned the government’s effort to insulate itself from “foreign penetration”and suspended scheduled financial aid. This led to an immediate worsening of Hungary’s credit score on international markets, making it more difficult and costly for the state to refinance.
By the end of the decade, key industrial assets as well as much of the banking, telecommunication, and energy sectors had been transferred to foreign ownership. Foreign takeovers of state-owned enterprises (SOEs) effectively downgraded capacity in many sectors. To prevent unwanted competition, many former SOEs were either broken up or simply killed off — others were penalized by a system that effectively favoured foreign investors through cheap loans, tax cuts, and subsidies. As Hungary’s economy was restructured around export-led specialization, only about a quarter of existing domestic companies survived.
Campaigning on a promise of “privatization done right” and mending relations with European partners, the Socialist Party (the de facto successor to the former ruling party) won an outright majority in the 1994 elections, putting an end to the short-lived (and chaotic) experiment of the previous government. In the following years, the Socialist-led government would impose massive cuts to education and welfare. The EBRD finally released withheld funds in 1996, after an IMF bailout mandated a deepening of the privatization process, a reduction of the state apparatus, and the restructuring of the tax system. An agreement with the EU doubled down on the government’s commitment to privatize banks, telecommunications, and energy utility companies.
These macroeconomic choices had a drastic effect on social policy. The crunch in savings, pensions, and real wages was not an unforeseen consequence of mismanagement, but the logical corollary of the EC, IMF, and the EBRD blaming “excess demand” for distorting the market. EU leaders concurred with Hungarian economist János Kornai’s assessment that the country had a “premature welfare system”. Rather than viewing the social security institutions of the previous regime as a foundation upon which to build a resilient society, they were too often seen as the bloated heritage of a system whose soft budgets and over-generous welfare had led to its demise. As the state’s welfare capacities declined, facilitating citizens’ access to private credits increasingly became a means to reduce social tensions.
As a result of these policies, real wages fell by a quarter, the national pension fund lost one third of its value, and both agricultural and industrial production fell by over 30 percent. By the middle of the decade, over 1 million jobs had been lost and organized labour practically ceased to exist. Hungary’s public housing stock was almost entirely privatized.
However widespread, the effects of this transformation were not distributed equally. The historically wealthier western parts of the country did not experience the precipitous decline in living standards that unfolded in some north-eastern regions. The Roma minority and women were particularly hard-hit. At the same time, this period saw the rise of a “comprador class” invested in the local implantation of transnational capital, to whom it provided technical and managerial services. The personal aspirations, connections, and acumen of this group largely determined the politics of this period.
None of these processes were inevitable. Hungary might have had an outstanding amount of public debt even compared to its neighbours, but its abandonment of any pretence to industrial policy and its adoption of no-strings-attached privatization were political choices. Hungarian elites’ short-sightedness, naivety, and self-interest were important factors, but these were not solely internally driven decisions — they necessitated the active intervention of European institutions.
Stumbling into the new millennium
Hungary’s EU accession sparked a degree of optimism. The preceding decade had been difficult, but the country had “ finally returned to Europe‘” in the words of then-PM Péter Medgyessy. There was much talk of new beginnings, and the notion of Hungarians opening pastry shops in Vienna became a popular trope. For the first time since the transition, Hungary experienced several years of sustained economic growth. The Socialist-Liberal coalition government elected in 2002 even appeared willing to address some of the worst effects of the previous decade’s social policies.
Beneath the surface, however, the deep fissures caused by the transition had only been papered over. About one third of Hungarians remained at risk of poverty. Population numbers had steadily declined since 1989. For all of the sacrifices of the 1990s, sovereign debt had only just inched below 60 percent of total GDP. The adoption of the EU’s Common Agricultural Policy had proven disastrous for most cooperatives and many small- and medium-scale farmers.
As Hungary underwent drastic social changes, its economy became increasingly vulnerable to international capital flows and more dependent on (predominantly German-owned) car manufacturing — by 2008, the share of trade in terms of total GDP jumped from around 65 to 160 percent. Yet much of the foreign direct investment (FDI) that poured into the country during these years did not result in significant technological transfers or the upgrading of Hungary’s position within global value chains.
A similar asymmetry defined the highly unregulated financial sector: by 2005, over 80 percent of bank assets in Hungary were held in foreign banks. After government subsidies for housing loans were scaled down, these banks jumped in, flooding the market with foreign currency loans. Coupled with the absence of a coherent social policy, this would prove a disastrous prelude to the social crisis that ripped through Hungary in the mid-2000s — and in which EU institutions would again play a determining role.
Elected in spring 2006 on a promise of “reform without austerity”, Socialist PM Ferenc Gyurcsány quickly began implementing harsh austerity measures with the full support of Brussels. Despite massive demonstrations triggered by a leaked speech in which he admitted to lying about the country’s finances, the government pushed on, drastically reducing spending on public services and administration. Hungary’s economy was brought to a standstill.
Yet, if anything, the implementation of austerity in 2006–7 only made the country more vulnerable to the 2008 financial crisis. In autumn 2008, speculative attacks against the Hungarian forint resulted in a dramatic depreciation of the currency. Household debt rose to 40 percent of total GDP — 80 percent of which consisted of foreign currency loans. Hundreds of thousands of indebted households were suddenly confronted with exponentially rising mortgages and debt. The number of those living in precarity exploded, and homelessness and emigration rose sharply. Evictions became a common sight.
The Troika moves in
In autumn 2008, a troika of the IMF, the European Central Bank (ECB), and the European Commission stepped in to stem Hungary’s economic freefall. The intervention was significant — in many ways, Hungary served as a testing ground for the EU’s catastrophic reaction to the eurozone crisis a few years later.
The IMF insisted that the government take out a significantly bigger loan than originally planned, which both increased the country’s dependence on international creditors and worsened its overall indebtedness — the very issue the bailout purportedly sought to correct. The situation was also worsened by the ECB’s refusal to accept Hungarian bonds as collateral for a 5-billion-euro loan, which effectively priced the country out of the sovereign bond markets and forced it to dip further into its already depleted euro-denominated reserves. The Commission, however, emerged as the most hawkish decisionmaker of the trio, demanding immediate rectifications to the budget, setting a hard 3-percent deficit target for 2010–11, and mandating a pension reform more radical than the one requested by the IMF.
This process was further deepened through what came to be known as the Vienna Initiative, which brought together Eastern European governments, the Commission, the IMF, the EBRD, and Western banks with subsidiaries in the region. Instead of disciplining the actors whose predatory lending had led to the “subprime moment” in the first place, the agreement effectively bailed them out. In return for the banks’ promise not to withdraw from Eastern Europe, national governments pledged to implement further austerity. As such, the agreement pioneered a form of joint fiscal governance over several Eastern European countries by Western banks, EU institutions, and the IMF.
The strings attached to these various bailouts and interventions included massive cuts to Hungarian pensions and wages. Taking over from the disgraced Gyurcsány, a “technocratic” administration led by Gordon Bajnai continued to prioritize reigning in public deficits and debt. Its efforts were a failure even on their own terms, as the economy continued to shrink throughout 2009. Amidst a global recession, exports fell by nearly 20 percent and public debt continued to rise. These measures left Hungarian society poorer, more divided, and more unequal than at any point since 1989, but decision-makers in Brussels and Frankfurt labelled it a success all the same.
Orbán’s return
Viktor Orbán’s Fidesz party was not idle during these crisis-ridden years. The party had slowly rebuilt its base while in opposition, amplifying the grievances of foreign currency debtors and an anxious middle-class while forging alliances with segments of domestic capital that felt left out of the country’s FDI-driven growth model. Orbán’s first term had not been characterized by any significant departure from the Europeanization path, but the political landscape in which he achieved a two-thirds majority in 2010 was wildly different. It would become the perfect staging ground for the building of his “illiberal state”.
Within a few years of retaking power, Orbán had in many respects gone further in defying neoliberal orthodoxy than most left-wing governments in recent memory. In 2011, he very publicly refused further cooperation with the IMF and called for an “economic freedom struggle”. From 2013 onwards, his government worked hand-in-hand with a repoliticized Hungarian National Bank, allowing it a degree of economic leeway forsaken by most administrations. Breaking with decades of tradition, the newly empowered governor of the country’s central bank established zero-percent lending rates to boost domestic investment. Sovereign debt was drastically reduced and (re)domesticated. Much of the energy, telecommunications, and banking sector was nationalized. Special taxes on banks were levied, while the latter were also forced to accept a fixed-rate agreement with many foreign currency debtors. A few years later, at the height of the Covid crisis, the government broke another taboo, introducing price controls for certain key products — all while maintaining steady growth, high employment, and facilitating the rise of politically supportive middle and upper classes.
In breaking with key elements of neoliberal doctrine, the regime has doubtlessly shown the European Left that making bold political moves and challenging EU diktats is very much possible. It has also provided an early example for what has been heralded as the “return of the state” in the wake of the Covid pandemic. That said, the Orbán regime’s use of state intervention and renationalization is not in the service of an egalitarian or redistributive vision — if anything, it serves as a warning that such seemingly progressive means can be used for very reactionary ends.
Hungary’s GDP might have steadily increased, but growth has been increasingly decoupled from social welfare and social mobility remains staggeringly low. Life expectancy remains the lowest of the Visegrád countries. Public spending on education and healthcare have been in steady decline, while enrolment in higher education has fallen by nearly 20 points during his tenure. Facilitated by a flat tax rate of 15 percent and the highest VAT in Europe (27 percent), a form of “perverse redistribution” has persistently siphoned wealth upwards. Even the government’s highly publicized “pro-family” policies have in effect favoured middle- and high-earners over working-class families.
The country’s “democratic backsliding” is thoroughly documented — hegemonic government control over the media, a systematic takeover of educational institutions at every level, a compliant judicial system, and the near-complete entanglement of party and state have led to a form of managed democracy in which more and more sectors of government are removed from public oversight and control. Much has also been written about Orbán’s perpetual fanning of culture wars, the incessant hate speech spewed by pro-government actors, and the very real effects these have on the public sphere, social minorities, and political opponents.
Since 2015, an increasingly belligerent anti-EU rhetoric plays a central role in Orbán’s strategy. Yet even if European institutions regularly express concerns and doubts, the overall response has been dithering and toothless. More importantly, the very architecture of the EU has played a key role in enabling the regime.
Europe’s reliable partner
Orbán’s much-publicized break with the IMF — as well as some of his governments’ more “unorthodox” measures — might have caused alarm in Brussels, but the Hungarian leader proved to be a reliable partner when it came to the EU’s fiscal and economic policy through much of the 2010s. He included a mandatory debt brake in his 2011 constitution, and supported the EU’s 2012 Fiscal Compact that further constitutionalized austerity. Domestically, the government’s Economic Stability Act hardwired fiscal discipline down to municipal governance, both tightening government control and reinforcing the neoliberal paradigm.
During years marked by ongoing turbulence in Southern Europe and the 2015 standoff with the Syriza government in Greece, Hungary appeared as a safe destination for investment. A reform and modernization of tax collection services bolstered Orbán’s credibility in the eyes of bond investors and Brussels. Indeed, since 2013, Hungarian bonds have successfully been sold at regular intervals on international markets.
Orbán’s first years in power benefitted from a more favourable global conjuncture, quantitative easing, and an uptick in industrial investment. But his economic project is also highly dependent on the direct inflow of EU funds, which only started pouring into the country in a major way after 2010.
Constituting around 4 percent of total GDP, they have fuelled government-engineered housing and construction booms. Distributed with little oversight, they have also allowed the ruling party to centralize and verticalize power: in addition to widespread cronyism and corruption, vertical relations of dependence are institutionalized at every level. This is particularly apparent in small towns and village, where local Fidesz potentates use the massive inflow of Rural Development Programme (RDP) payments to consolidate their power. The centrality of EU funds to the regime’s survival was underlined when large amounts of cohesion funds were frozen as part of ongoing rule of law disputes between Budapest and Brussels: the forint’s exchange rate rapidly deteriorated, construction projects were halted around the country, and the government was forced to borrow at highly unfavourable rates on the international market, steadily raising the very sovereign debt it had taken such pride in reducing.
The German connection
During the past decade, Orbán has styled himself as the relentless defender of national interests and the frontiers of “white” Europe against shadowy globalist cabals of refugees, homosexuals, and warmongers. But his success has not been the product of canny domestic manoeuvring and EU funds alone.
For all the national sovereignty talk, his governments have overseen a deepening of the country’s dependent integration into global supply chains, in effect establishing a two-tier system: on the one hand, state intervention in sectors with little export value such as banking, telecommunications, and energy facilitated the emergence of a national capitalist class deeply wedded to the government. On the other, the regime facilitated and profited from the expansion of (predominantly German) manufacturing to the region during the 2010s.
As such, the EU’s lenience regarding Hungary cannot be separated from the government’s deep ties with German industry, whose interests are pushed by the Christian Democrats and Christian Social Union (CDU/CSU), and by extension, the European People’s Party (EPP), the largest and most powerful grouping in the European Parliament. Faced with growing competition predominantly from East Asia, Germany’s automotive industry has pursued an aggressive relocation strategy in Eastern Europe over the past decade. Pliant local governments, subsidies, low labour costs, and the convenient presence of EU funds earmarked for local infrastructural development have allowed a significant ramping-up of nearshore production.
The example of Audi is telling: speaking in June 2020 at a plant in the western Hungarian town of Győr, Orbán called the factory “the pride of Hungarian industry” and assured it would remain open throughout the pandemic, even as strict lockdowns were enforced countrywide. By the time he made that announcement, successive governments had already awarded sizeable direct subsidies to Audi on six occasions. The factory was established in 1998, but has significantly ramped up production since Orbán’s return to power, producing its two-millionth car to much fanfare in 2023. The direct subsidies did not arrive in a vacuum: at 9 percent, the Hungarian corporate tax rate is the lowest in the EU. With subsidies and various forms of government support, the effective rate paid by companies such as Audi is closer to 3.6 percent.
During the 2010s, the “pride of Hungarian industry” generated 5.7 billion euro in profits for its German-based headquarters; 5.4 billion was siphoned out of the country and directly paid out to its — overwhelmingly German — shareholders. Despite employing more than 10,000 workers, only a fraction of the factory’s hundreds of suppliers are actually Hungarian.
When Audi’s parent company, Volkswagen, faced a diesel emission scandal in 2015, it emerged that many of the faulty engines had been produced in Hungary. In the following months, the Hungarian government went to great lengths to shield the company at the European level. German car manufacturer grandees reportedly bragged about their direct access to the Hungarian PM. Hungary, in turn, has emerged as one of the biggest clients of the German defence industry in recent years — many of the weapons sported by Hungarian army patrols while enforcing strict Covid lockdowns through 2020 and 2021 were of German origin.
Hungary’s deepening integration into these industrial production chains has profoundly reshaped labour law and relations in the country. Over the past 15 years, the number of workers employed by temporary agencies has increased five-fold. It has become nearly impossible for public sector workers to go on strike. The 2018 “slave law” permits up to 400 hours of overtime and three years of salary payment delays. These changes are not sui generis — they are the outcome of an overall framework pioneered and enabled by the EU catering to Germany’s export-led economy, in which countries such as Hungary mostly serve as cheap, disposable manufacturing sites, and providers of a mobile, flexible labour force.
A new frontier for “green” industries
Despite his boisterous claims and carving out of an outsized reputation on the global stage, Orbán has recently faced an increasingly challenging domestic situation. Widespread dissatisfaction is reflected in the rise of Péter Magyar, a former Fidesz insider whose upstart Respect and Freedom Party (TISZA) garnered nearly 30 percent of the vote in the European elections.
Orbán’s difficulties, much like his previous successes, have largely economic roots. Since the start of the pandemic, Brussels’s halting, piecemeal freezing of EU funds has jeopardized the Hungarian growth model. Continuous emigration imperils demographic stability, while the lack of investment in healthcare, basic infrastructure, and education is feeding growing domestic discontent. Beginning in 2022, Hungary’s central bank drastically raised interest rates, the government reduced much of its “pro-natalist” policies, and substantially scaled down its most popular measure, the household utility subsidy scheme. Inflation spiralled out of control, driving up the prices of hard foodstuffs and basic necessities.
But shifts in both EU and global investment patterns, the implementation of the European Green Deal, and the rise of industrial frameworks for the “green transition” have allowed Hungary to move towards a new cycle of accumulation. By 2024, the country emerged as Europe’s second-largest producer of electric batteries.
Like most shifts in Hungary’s history since 1989, this latest twist has also been driven by external forces: the EU’s Green Deal and the rise of East Asian electric battery manufacturers. What is touted as the EU’s flagship environmental policy remains in effect a derisking frameworkoffering price signals in lieu of a coordinated industrial strategy. The outsourcing of investment decisions to private actors has in effect meant that EU funds earmarked for the green transition have allowed transnational corporations to further harness European integration to their benefit.
The Hungarian government has also sought to turn this situation to its advantage, betting simultaneously on its relations with East Asian partners and the EU’s strategic weakness — and subsidies. Within just a few years, electric battery plants constructed almost exclusively by East Asian firms popped up around the country. This development largely occurred outside the official remit of the EU’s Green Deal funds, but Western manufacturing companies have largely profited from it — just as their Hungarian factories have profited from subsidized Russian gas or recently established Chinese-built photovoltaic plants. In turn, European companies are seeking to catch up, with numerous investments buoyed by EU funds planned throughout Hungary.
The reality of these battery plants reveals the true face of Europe’s market-driven “transition”. Established without consulting local communities and shrouded in secrecy by government contracts denoting them as sites of “national interest”, they have been shown to cause significant harm to local land and water. Working conditions have been described as harrowing, with workplace accidents — and even deaths — a regular occurrence. The workforce is increasingly composed of workers from the Global South employed on fixed-term contracts, making labour organizing — or even oversight — particularly difficult. Just as with traditional car manufacturing, profits are not redistributed locally, nor has this development contributed to an upgrade in Hungary’s position within value chains.
The outcome of the EU’s green policies have thus had a triple effect in the country: worsening labour conditions, polluted aquifers and soils, and strengthening Orbán’s hold on power.
A small country with a big footprint
Two decades after Hungary’s accession to the EU, domestic support for membership remains high. Opposition parties compete to prove their “pro-European” credentials and pledge to introduce the euro as soon as possible. Nevertheless, the country neglected to mark the twentieth anniversary of its membership in any significant way, reflecting a deeper malaise regarding the way integration has unfolded. Even the most pro-EU commentators noted with a certain bitterness the jarring contrast between expectations in 2004 and the current reality — as it turns out, only a few Hungarians ended up opening pastry shops in Vienna.
But if European integration failed to live up to Hungarians’ expectations, Viktor Orbán’s subsequent rise to power should not be seen as its inverse. The way European integration unfolded was key to the creation of the unequal, crisis-prone society that emerged in Hungary during the 1990s. Later, EU institutions played a decisive role in the catastrophic response to the economic crisis of the late 2000s, paving the way for Orbán’s unchecked accession to power. These same institutions have facilitated his regime’s enduring rule — today, they promote industrial policies enacted in the name of the green transition that reinforce structural inequalities, short-termism, and the centralization of power and profit among a small elite.
Hungary’s trajectory cannot, of course, be blamed on Brussels alone — the failure of Janez Janša in Slovenia or the Law and Justice party (PIS) in Poland to establish similar regimes underlines the specificities of the Hungarian case. But that does not mean Orbán should be treated as exceptional. His government has provided a blueprint for “illiberal” governance around the world — in effect, the periphery has begun restructuring the centre.
Since 2015, his regime has played a decisive role in shifting the EU’s position on refugees and migration, normalizing the elevation of hate speech to the level of policy. When it comes to economics, he has proven that state intervention can be wielded strategically, while leaving the core of neoliberal governance untouched. Meanwhile, Brussels’s condemnation of Orbán’s dalliance with autocrats has little credibility given the EU’s own partnerships with Azerbaijan’s Aliyev or Egyptian dictator el-Sisi, while calls for free speech in Hungary increasingly expose its own double standards given the crackdowns on pro-Palestinian voices across Europe. Even his labelling as a far-right exception loses credence given the newfound acceptance of Giorgia Meloni.
What lessons to draw from Orbán’s example? His rise might have been facilitated by the EU, but it also contains valuable insights for the Left. After all, his success is also a symptom of the Left’s failure to offer an alternative to globalized neoliberalism, to articulate a coherent vision out of the 2007–8 financial crisis, and ultimately to offer a viable political project capable of wielding power at the nation-state level without losing sight of an internationalist horizon.
It is crucial to understand the detrimental role played by European institutions in our current predicament — but that does not mean breaking out of them offers a ready or desirable fix. Ironically, defeating Orbán and charting a different path for Hungary and Europe will require learning from him — for better than most centre-left governments in recent decades, he has understood how to use the state to implement policy on his own terms and defy central elements of EU orthodoxy. Any future left-wing project will have no choice but to do the same.
Áron Rossman-Kiss is a Budapest-based researcher, artist, and activist in Szikra, a left-ecological political movement in Hungary.
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