The bitter feud between the Fidesz government and Hungarian municipalities

Victory out of the blue

13 October 2019 was a turning point in Hungarian political history: Viktor Orbán's Fidesz suffered its first electoral defeat after nine years in power. Although Fidesz did win most votes cast in the local elections, the ruling party was defeated in several strategic seats and lost control of about half of the major regional centres, the capital itself, and most of the districts of Budapest.

For Fidesz, the defeat came as a rude awakening. It had already been clear beforehand that the ruling party would not be able to repeat its success of 2014, when it won in almost all the municipalities, but Gergely Karácsony's victory could not have been predicted even though he was running in the capital, the opposition's stronghold. Most of the mayoral candidates never expected that they would come out on top in the local elections, either. However, the shock inside the Fidesz camp was even greater: According to our sources, the weekly and fortnightly large-scale opinion polls produced for the ruling party showed an outright Fidesz lead of up to 15 percentage points even in the cities where the opposition eventually won by a large margin. In many places, the outgoing Fidesz mayors had already been in power for several terms and were so confident in their coming triumph that they practically stopped campaigning in that last week before the election. "I believed he didn't even have a remote chance - and now he is the mayor instead of me," a former Fidesz mayor vividly summed up the situation in an interview with the Hungarian portal Index.hu.

In the wake of those elections, Viktor Orbán still spoke of a victory, arguing Fidesz had won more than half of the votes cast on party lists, but his former top minister János Lázár conceded defeat in 2020. Since voter motivations are difficult to measure, we will in all likelihood never know to what extent the literally spectacular sex scandal involving the Fidesz mayor of Győr, Zsolt Borkai, tipped the scales. The image of a yacht stocked with prostitutes and, presumably, drugs blatantly contradicted the conservative values espoused by Fidesz, and one can only suspect that the Borkai affair added fuel to the fire among those suspecting the party of hypocrisy. Furthermore, opposition parties with wildly diverging values had learned to work together, if not to play the political game effectively, by 2019; this, combined with the disillusionment with Fidesz's often arrogant cult of power, has led to this surprising result.

Heic noenum pax

After the municipal elections, Orbán promised peace. In the case of Budapest, for example, he hastened to state that all the agreements made by the government with the city's former Fidesz mayor would remain in force and that no new buildings were going to be constructed against the will of the people of Budapest. Those who doubted the credibility of his words were not mistaken to do so: The peace lasted barely a few months before the systematic financial bloodletting of local authorities began. The Fidesz government's retention of its two-thirds majority in the unicameral Hungarian Parliament provided a good opportunity for this, as it means Orbán can change the national legal framework regulating local government as he likes, especially since the Constitutional Court, vested with the power to veto legislation, is composed of judges carefully handpicked by him, as is the staff of the Office of the President of the Republic.

First, the Orbán government made it impossible for municipalities to locally levy taxes on personal vehicles, then the government quadrupled the so-called solidarity tax contribution to be paid by the wealthiest municipalities, and then, citing the COVID-19 pandemic, the government required parking to be free of charge from spring 2020 until May 2021, depriving municipalities of yet another revenue stream. The government also halved local taxes on businesses and abolished the fees to be paid to local authorities by open-air cafés using public space, also in response to the coronavirus crisis. All of the above involve local government revenues; the Orbán government has deliberately managed the crisis at the expense of local governments.

In addition, the rights of municipalities have been curtailed: The transfer of building authority powers to the government means that municipalities cannot now decide what is built on their territory. This is particularly painful after Mr. Orbán promised no new structures would be built that the majority of Budapest's citizens do not want. However, some cities have been deprived of important oversight rights - and, of course, tax revenues - through the designation of special economic zones. Another much-used government tool is the option to declare certain construction projects “priority investments” so local authorities cannot prevent or block them.

In addition, the abolition of municipal housing (affecting more than 40,000 apartments in Budapest alone) was announced in May 2021. At the time of writing, the government seems to be backing away from this proposal, and it seems that Fidesz might require municipalities to sell "only" the most valuable properties located in World Heritage areas to their tenants at prices between 10% and 30% of their market value.

Political implications

It cannot be said that the opposition's reaction to the above (obviously influenced by the coronavirus outbreak) has been overwhelmingly strong. The Hungarian government, like other European governments, declared a state of emergency at the time of the outbreak, which included a ban on referendums and gatherings. Apart from a few press statements, the opposition mostly resigned themselves to what was happening to them; they knew full well they had no legal recourse against the two-thirds majority and that opposition leaders had failed to turn the national administration’s capture of municipal revenues into a political rallying cry. In their defence, it should be said that people are usually only willing to move when their wallets are at stake, and Fidesz has also banned local governments from raising local taxes or fees, so they have been unable to pass on the costs of these cuts to Fidesz-affiliated businesses, for example, which are currently becoming the sole dominant players in more and more economic sectors in Hungary.

In other words, the curtailment and financial looting of local governments ran through Hungarian society like a knife through butter. It is true that strictly speaking, this is not a new process: The weight of local governments in Hungarian politics had declined steadily since the 1990s, and 2012 saw an even more pronounced disenfranchisement than the current one: The central government stripped local governments of the right to run schools and hospitals, irrespective of whether they were seriously afflicted by this role, or happy to bear the burden of it in the knowledge that they could locally provide better-quality services for students and patients than the national average.

However, we cannot say that the battle between the municipalities and the Fidesz government has ended here. On the one hand, the process is still ongoing, and on the other hand, there will be a decisive battle in April 2022, at least if Mayor Gergely Karácsony gets involved. He is one of the candidates for prime minister in the opposition’s primaries next spring, from which Viktor Orbán's challenger will emerge. At this point, apart from him, the most likely candidates are Jobbik's far-right-turned-conservative leader, Peter Jakab, and perhaps Klára Dobrev, MEP for the Democratic Coalition. At the moment, opinion polls - which have lost some credibility recently - show a neck-and-neck contest or a slight Fidesz advantage. In other words, for the first time since 2010, the opposition has a chance of winning parliamentary elections in Hungary.

The big question, of course, is whether such a victory would leave the country governable given that Orbán is de facto in control of all state institutions, from the Constitutional Court to the Fiscal Council - these two institutions could, for example, work together to dissolve Parliament even if the majority coalition behind a new government is stable. In addition, the outsourcing of governance to institutions whose heads have been personally appointed by Orbán over the last nine years remains in full swing, so in the event of a change of government, the former PM would still retain control in a wide range of areas, from gambling supervision to universities and state concessions.

So far, we have not heard any convincing plans for how the country would be governed in the event of an opposition majority - although if such scenarios exist, politicians would be well advised not to make them public. In the event of an opposition victory, the big question is whether the new prime minister who comes to power will rush to wipe out the legacy of Fidesz or try to find some kind of compromise with the old guard. While Mr. Karácsony seems willing to compromise, and the other candidates, from Mr. Jakab to Momentum leader Mr. András Fekete-Győr, seem to be a bit tougher on this issue, we will only be able to say for sure when one of them comes to govern the country. That in itself will be no easy task.   

/Translation by Bálint Pinczés, proofreading by Gwendolyn Albert/