As Europe rang in 2012 with cautious optimism that new financial reforms may usher in a better year, Hungary's right-leaning conservative government enacted a new constitution which, opponents say, threaten the country's standing in the European Union -- and that, in turn, could further damage Hungary's ailing economy. Hailed by Prime Minister Viktor Orban as a form of "regime change" that signals Hungary's formal completion of the post-Communist transition it began in 1989, the document has triggered dire warnings from international critics and a chorus of protest from the nation's once disparate opposition parties.
On Jan. 2, tens of thousands of protestors took to the streets in Budapest to rage against the constitution authored and passed by the ruling Fidesz party, whose sweeping 2010 electoral victory gave it the two-thirds majority needed to enact constitutional reform. Organized by the opposition -- including the liberal LMP, the Hungarian Socialist Party (MSzP) and the Democratic Coalition movement -- the protests in front of the Hungarian Opera House were a rare example of consensus and cooperation among parties that until now have been unable to see eye-to-eye. (See how a Center-Right win means changes for Hungary.)
Opposition leaders say the document is only the latest effort by the Orban government to extend its control over the various levers of Hungarian society, such as the once independent Central Bank and court system. "With the new constitution, Fidesz has practically cancelled the results achieved in the 1989-1990 [transition from Soviet-imposed communism]," says David Dorosz, an MP with the LMP party. Former Prime Minister Ferenc Gyurcsany, who left the MSzP to form the Democratic Coalition, charges that the constitution removes essential "checks and balances" from the Hungarian democratic system. "I am worried about the future of freedom and democracy in this society," he says.
Equally worrisome is the criticism of the Orban government coming from abroad. On Wednesday, the international markets reacted with a historic fall in the value of the Hungarian forint against the euro. According to analysts, the forint's drop was linked to investor pessimism that Hungary will be able to gain badly needed financing from the International Monetary Fund, especially after talks in December stalled when the government passed regulations diminishing the autonomy of the Central Bank. (Read about Europe's march to the far right.)
And while it weakens Hungary's economy, the government's move could also imperil the country's membership in the E.U. Former U.S. Ambassador to Hungary Mark Palmer was quoted by the Hungarian newspaper Nepszabadsag as stating that "Hungary's ejection from the European Union is now no longer unthinkable." Former Prime Minister Gyurcsany sees Palmer's words as a shot across the bow. "It is a warning message to Hungary," he says. "'If you don't understand what democracy and western living means, you can't be part of this western club.' ... It would be a real historic defeat if we were excluded from the E.U. It would be a drama for Hungary beyond question."
Gyurcsany says Hungary is in no position to go it alone outside of the E.U. "The change of regime in 1989 was one of the most important achievements in Hungarian history," he says. "And part of that is membership in NATO and the E.U. I have no message for Hungarians other than the western way of life is the only way to make our lives better." (See pictures of immigration in Europe.)
Since the fall of communism 23 years ago, Hungary has worked hard to forge ties with western Europe and the U.S. It joined NATO in 1999 (during Orban's first term as Prime Minister), the E.U. in 2004, and the Schengen treaty in 2008, opening Hungary's borders to the other 25 members of the treaty zone. Until the recent economic crisis, Hungary was on a steady track for joining the common currency.
For leaders like Gyurcsany, Hungary's departure from the E.U. would fly in the face of these accomplishments. And according to Mirco Tonin, an economics professor conducting research at Budapest's Central European University, while a dramatic economic downturn in Hungary would not have the same dire impact on the euro zone as the collapse of an economy like Greece or Italy, an economic crisis in Hungary "may have a stronger impact on E.U. countries outside of the euro." The financial collapse of even a small E.U. member could cause a ripple effect leading to another crisis in investor confidence. The E.U.'s determination to stop that happening appears to be behind the IMF's willingness to press forward with talks with Hungary, which are scheduled to resume in Washington next week.
But if Hungary does not soften its stance on issues such Central Bank autonomy, an IMF deal may not be possible. Former PM Gyurcsany says he is not certain the government will enter its talks with the IMF with a willingness to compromise. "I don't know if Orban wants to cooperate with the IMF and the E.U. or if he is playing a game to buy time to expand his position in Hungary," Gyurcsany says. If a game, "it is a very dangerous game, more or less a suicidal game." (Read: "Europe's Voters Reward the Right.")
Despite all the warnings, there is little indication that the government is willing to step back and every indication that a line in the sand has been drawn between the government and its opposition, which has vowed to take to the streets and continue demonstrations. "[Street protests] are the only way to send a message," says Gyurcsany, noting that the Fidesz's massive majority makes traditional opposition in parliament all but redundant. "The only place we can show our power is in the street."
-- With reporting by Bea Klukon / Budapest
Read: "In Hungary, Voter Anger Boosts Extreme Right"
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