Hungary for change

Last year when Hungary was taking over the rotating Council presidency, the Fidesz government was bringing in a controversial media law which we launched a blogging action over. Though the law was revised after discussions with the EU, EU law in the area is mostly market-based. This time around the independence of the Hungarian Central Bank is under threat and is the source of a dispute between Hungary and the IMF:

"Hungary, the EU's most indebted eastern member, already saw its credit rating downgraded to junk in December and initiated talks for a standby loan from the International Monetary Fund (IMF).

But the centre-right government led by Viktor Orban has pursued controversial legal changes to some of the country's independent institutions, including the central bank and media bodies, prompting IMF negotiators to walk out of talks.

The laws came into force on 1 January, prompting tens of thousands of people to take to the streets on Monday and repeated warnings from the EU commission that it may take Hungary to court."

The markets haven't reacted well to Hungary's course either:

"The forint fell to 319.4 against the euro, a record low after a gradual depreciation of 20 percent in the last six months, while 10-year bond yields spiked to 10.5 percent, the highest since April 2009."

At the moment Orban's government seems intent on sticking to it's course despite protests and pressure from the EU and IMF - perhaps the plan is to use the bank to print more money to avoid the necessity for the IMF loan. Fidesz's two-thirds majority in the Hungarian parliament allows it to change the constitution, and it's been making full use of the opportunity. Orban has made it clear that he sees these changes as the end-point of Hungary's post-Communist path:

"In Orban's view, the new legal text "marks the end of the country’s transition to democracy from Communism" - as he explained in an interview with the Magyar Nemzet newspaper on 24 December.

Foreign journalists are "right when describing what happens in Hungary not just as simple governance, but a regime change," he told the newspaper.

"They say this in a disparaging way but I think this is a compliment. We Hungarians have failed for over a hundred years to show western Europe our own virtues.""

It seems pretty odd to be portraying the rapid expansion of executive power as an anti-Communist evolution, particularly when former Communist dissidents are protesting against Fidesz's constitutional changes. Orban's rhetoric also smacks of Hungarian exceptionalism and is reminiscent of the talk of differing values and rights from the media law debates last year (not that anyone explained how Hungarian rights should differ from those set out in the European Convention on Human Rights or the values in the EU treaties).

As the EU deals mostly with internal market, security and environmental matters, and the Council of Europe's Convention and Court of Human Rights deals with human rights law and standards, the EU isn't well equipped or experienced enough to deal with Member States drifting away from the standards required for membership. Article 7 TEU gives us a nuclear option of sanctioning a Member State who risks breaching the values of the EU, but it would require a four-fifths majority of Member States and a majority in the European Parliament, which is unlikely to be reached (and would need to be focused on the health of Hungary's democracy and media rather than the central bank).

It does raise an interesting question though: what "red lines" should the EU have for Article 7 action, and how much constitutional change can be brought about before the EU starts questioning whether a country is still membership material?