Hungary's 'junk' rating prompts political backlash
Eager for action and anxious about the future, Hungarians will take to the streets this week to protest a gradual overhaul of the country’s key organs of democracy.
A day before the planned demonstrations, eastern Europe's most indebted nation faced another unexpected obstacle after Standard & Poor’s became the second ratings agency to cut its debt to “junk” status.
The move, which followed a similar decision by Moody’s Investors Service, piles pressure on Hungary’s strained finances, making it more expensive to raise money to refinance existing obligations.
The vicious cycle has been exacerbated by a steady and significant decline for Hungary’s currency - the forint - which has lost 13% of its value against the euro since June.
Hungary’s financial fortunes have been mixed for some time.
Yet the country’s political and economic outlook has soured surprisingly quickly.
Current Prime Minister Viktor Orban came to power in April 2010. Orban’s landslide victory permitted his Fidesz party to rule without coalition partners for the first time since the fall of communism.
Armed with a comfortable two thirds majority in parliament, the new government set about cutting red tape.
But critics say that after less than two years in power, Orban’s iron grip over crucial (and supposedly independent) institutions is tightening.
Next year’s changes to the constitution have some Hungarians up in arms amid concerns they will curtail freedom of the press.
The moves follow proposals to re-jig governance at the country’s central bank - new legislation which will be put to a series of votes this week and next (despite warnings from the European Union and the European Central Bank).
As a former First Deputy Foreign Minister, Matyas Eorsi helped steer Hungary towards EU accession. From Budapest he told CNN he fears his nation is now becoming isolated.
“You cannot run such a small country in the middle of Europe by claiming an independence war against everybody around you,” he said.
Eorsi urged the Prime Minister to either change his domestic policies now or to resign. Failing that, he said, Orban’s party has a duty to oust him at the next parliamentary vote.
If Orban is facing resistance at home, he can hardly look outside Hungary for help.
Fraught relations with the International Monetary Fund, which rescued the country in 2008, mean the world’s bank of last resort is unlikely to be as forthcoming with a new package if and when Hungary needs it.
Recent negotiations with both the IMF and the EU broke down amid concerns about Hungary’s domestic policies.
The government has “declared a freedom fight against international institutions like the IMF,” says Eorsi, while at home, “it has systematically dismantled the checks and balances of independent institutions.”
With the current set up Hungary risks a “catastrophe,” he says.
So, what is the solution?
According to Eorsi, the ruling party has two options - but they must choose fast.
He says Fidesz must come to the conclusion that they do not want to risk the future of Hungary and its children. As such, Hungary needs a new prime minister. “Either that or the prime minister changes his policies. There is no third option.”