Europe

Hungary’s Orban, a Scourge of Liberals, Faces a New Foe: Economics

BUDAPEST — He has won four consecutive elections, bent the judiciary and the news media to his will, rewritten the Constitution and turned a small East European backwater into an unlikely beacon for “America First” Republicans and an outsize liberal bugbear.

But Prime Minister Viktor Orban of Hungary and his governing party, Fidesz, now confront forces resistant to his implacable political will: the laws of economics as the government struggles with a big budget deficit and ordinary Hungarians with soaring inflation.

“Reality is suddenly knocking on Orban’s door,” said Peter Bod, a former minister and the governor of Hungary’s central bank under a previous conservative government. Hungary now has such a poor credit rating, he added, “we are between Botswana and Tobago,” referring to Trinidad and Tobago.

Widespread grumbling over Hungary’s economic woes, particularly inflation and a rapidly depreciating national currency, and regular street protests in Budapest, the capital, do not threaten the government: It does not face a general election until 2026.

Customers lined up to buy produce at a market in Budapest on Tuesday. There is widespread grumbling over the country’s economic woes, particularly inflation and a rapidly depreciating national currency.Credit…Akos Stiller for The New York Times

But they have put Europe’s most vociferous critic of the European Union and a stalwart defender of national sovereignty in an uncomfortable position: going cap in hand to Brussels to beg the “Eurocrats” he has spent years reviling to cough up tens of billions of dollars whose payment has been stalled by his defiance of the bloc’s rules.

At the same time, Mr. Orban has started to roll back the budget-busting measures — popular but very expensive price controls on electricity and gasoline — that helped Fidesz secure a landslide victory in an April election.

“Everybody here voted for Fidesz, but a lot of us now feel betrayed,” said Robert Abraham, 48, a professional drummer in Retsag, a down-at-heel town in a district that gave the Fidesz candidate 60 percent of its vote in April

Mr. Abraham is not really bothered by the expected jump next month in electricity prices when the government scales back subsidies: He heats his family’s home and stove with firewood. But the price of that, he said, had doubled since Election Day.

To try to calm anger among people like Mr. Abraham, the government recently relaxed restrictions on tree cutting in forests. But this infuriated green activists and others, who protested this week in defense of Hungary’s threatened forests.

For Ilona Debre, a Christian from a nearby village who said she was disgusted by Mr. Orban’s self-declared role as a defender of Christian values, the economic mess provides hope that “God will finally punish this government.” That, she added, is a long shot because “Hungary is a nation of sheep,” but “we are still hoping that Brussels will knock Orban on the head by not giving him any more money.”

A market in Retsag, Hungary, this month. “Everybody here voted for Fidesz,” Prime Minister Viktor Orban’s party, said Robert Abraham, a professional drummer there. “But a lot of us now feel betrayed.”Credit…Akos Stiller for The New York Times

Unlike other European countries, Hungary has kept the supply of oil and natural gas relatively stable, thanks to a policy of cozying up to the Kremlin at a time when the rest of Europe is trying to wean itself off Russian energy.

The Hungarian energy market, however, has been distorted by the government’s pre-election decision to impose a cap on the price of gas paid by consumers. Last week, Dallas, a small gas station outside Retsag worried about running out of supplies, placed a 2.6 gallon limit for each customer, except for those willing to pay a much higher market price.

“This is typical socialist economic policy — price fixing always leads to shortages,” said Lajos Bokros, an economics professor and a former finance minister who presided over a harsh 1990s austerity program and helped privatize state assets like electricity companies. Those companies are now back in the state’s hand after Mr. Orban nationalized them.

Feted as a hero by free-market Republicans in the United States, Mr. Orban has been flexible in his economic ideology, promoting a mishmash of socialist price controls and state work programs, crony capitalism and extremely low corporate taxes that dismays Hungary’s free-market champions.

Lajos Bokros, a former finance minister of Hungary, in Budapest. “Orban never likes to talk about financial issues or budget issues,” he said, adding that the leader preferred to discuss “the decline of the West.”Credit…Akos Stiller for The New York Times

He rarely misses a chance to taunt Germany and boast about protecting homegrown businesses but has for years wooed German companies, particularly its carmakers, with sweetheart deals, while stamping on local business people who cross him.

“I was amazed that they loved him so much in Texas,” Mr. Bod, the former central bank governor, said, “There is no free market here.” On top of that, he added, “You can’t carry a gun here, but you can get a free abortion.”

Hungary’s inflation rate of nearly 14 percent in July, higher than the July average rate of nearly 9 percent in countries that use Europe’s common currency, the euro, has been driven in part by the war in Ukraine. But economists say that inflation in Hungary, fueled by loose monetary and fiscal policies, was on the rise long before Russia invaded Ukraine in February.

Those policies juiced economic growth, forecast at around 4 percent this year, higher than in most of Europe, but left the government with a big deficit, high debt-servicing costs and no obvious way to fill the hole other than with money from the bloc.

In an assessment last week, the credit rating agency Standard & Poor’s revised Hungary’s economic outlook to “negative” from “stable.” The agency warned that without money from Brussels, Hungary’s economic growth rate and its government accounts could suffer badly.

Another rating agency, Fitch, provided

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