The Orban Effect, or Why the EU Needs to Take a Hard Line on Anticorruption Backsliding

After Viktor Orban’s election to the Hungarian premiership in 2010, he set Hungary on a course to become an “illiberal democracy.” As part and parcel of that vision, Orban began to increase corruption in Hungary, building a new class of oligarchs (including his family and friends) dependent on crony capitalism. Indeed, Orban’s Hungary is now one of the most corrupt states in Europe (see here, here, and here), with government and EU funds regularly misappropriated, wasted, or flat-out stolen. And while one must always be careful about drawing strong conclusions from changes in a country’s Corruption Perception Index (CPI) score, it’s certainly notable that Hungary has dropped 10 spots on the CPI ranking since 2011, the first full year of Orban’s rule. These developments are not only worrisome in and of themselves, but many worry that Orban’s approach—not only his far-right politics, but the entrenched oligarchic corruption he has fostered—might become normalized not only in Hungary but throughout the region.

That worry is well-founded. Orban’s ideas have not been contained to Hungary. The spread of the “illiberal state” and of corrupt quasi-authoritarian oligarchy has precipitated a crisis across Europe. What should international actors—particularly the EU—do in response? Two things:

First, the EU should use its financial leverage to prevent the growth of corruption. Indeed, the EU should have used its financial leverage more aggressively and much earlier, as soon as the scale of Orban’s corruption began to emerge. The EU sent 163 million Euro to recipients in Hungary in 2017 alone (spread over various programs), while total EU spending in Hungary in 2017 topped 4 billion Euro, even though the EU was more than aware by then of the theft and misuse of its funds. True, the EU has made some attempts to limit the flow of money into corrupt enterprises and to encourage Hungary to prosecute corruption cases, and the EU’s office for investigating fraud regularly alerts Hungary to cases of suspected corruption. But those referrals typically lead to lenient punishment or no action at all, and the EU lacks the power to do much following a referral. Despite this, business between the EU and Hungary continued apace, implying to observers that disregarding corruption investigations was acceptable. By continuing to invest money in the government and Hungarian enterprises despite clear corruption, the EU sends a message that corruption does not merit serious consequences.

To its credit, the EU has recently taken steps toward using its financial leverage more seriously and effectively. The EU significantly cut cohesion fund spending on Hungary in 2018 and strengthened the link between cohesion funds and “EU values,” including anticorruption. Furthermore, the European Commission has proposed a mechanism, potentially to be part of the 2021 budget package, which would allow the EU to cut funding to a state if there are systemic deficiencies in the rule of law. This would allow the EU to protect itself from financial loss, and to demonstrate both inside Hungary and outside that the EU takes corruption seriously. Continuing to move in this direction will send a strong message to other EU member states that corruption at Hungarian levels is not normal, not acceptable, and will have significant economic and political repercussions.

That said, critics will say that this is all easier said than done; there are some good reasons why the EU has been reluctant to pull financial support. The political costs and logistical difficulties of sanctioning a member state are quite high. The perception that Western European states use the EU as a tool to interfere in other countries’ sovereign affairs is normatively powerful and could risk further empowering Orban’s anti-EU party, stoke similar anti-EU sentiments in other member states that have high corruption, and could potentially even lead to Hungary’s withdrawal from the EU. However, leaving the EU would also be difficult for the Hungarian government politically, logistically, and economically, and is therefore unlikely. Policymakers should not use blunt force when it isn’t necessary, but also should not allow the fundamental values their organization seeks to promote to slide down the drain in the name of unity.

Second, multilateral organizations need to use their political and diplomatic leverage to send a message that deviation from anticorruption standards is unacceptable. In the case of Hungary, the EU hesitated too long before seriously considering its most serious diplomatic consequences. The EU has a procedure under Article 7 of the Treaty on European Union, sometimes known as the “nuclear option,” that allows the EU to punish member states that have infringed on fundamental rights, including rule of law. A state subject to Article 7 sanctions can lose any of its membership rights, including voting rights.

Since as early as 2013, commentators have been arguing that the EU should begin Article 7 proceedings against Hungary (see here, here, and here), but it wasn’t until 2018 that the EU initiated Article 7 proceedings against Hungary due to concerns over the deteriorating human rights and rule of law situations. (The EU also initiated Article 7 proceedings against Poland in 2017, which likely influenced the decision to initiate proceedings against Hungary.) While these proceedings are considered unlikely to actually result in formal sanctions, they send an important signal of how seriously the EU takes rule of law. The EU should not hesitate to use Article 7 much sooner in future cases where rule of law is eroding and corruption is growing. Moreover, where the situation demands it, EU members should not be afraid to implement Article 7’s formal sanctions as a backstop on growing corruption.

The key idea here is that international organizations should act faster and with more definitive steps to slow corruption where it has begun to erode norms. This is helpful for addressing corrupt governments everywhere, but it’s especially key to preventing backsliding and the erosion of regional anticorruption norms when national norms have begun to go. The EU should be more strident when confronting the next Orban, in order to prevent a proliferation of such corrupt states within its borders.

This entry was posted in Commentary and tagged , , , by Susannah Marshall. Bookmark the permalink.

About Susannah Marshall

Susannah Marshall is a student at Harvard Law School specializing in international law and diplomacy. In law school, she has worked for the American Bar Association Rule of Law Initiative in Yerevan, Armenia, and for the American NGO Protect Democracy. Before law school, she worked in the United States Senate on matters related to energy, the environment, and international trade and labor issues. Susannah is from Minneapolis, Minnesota and speaks Spanish and Mandarin Chinese.

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