Tag Archives: Transparency International

Financing of Hungarian sports: court rules it must be transparent

Even small victories can lift anti-Orbán hearts nowadays in Hungary. Thanks to the recent decision of the Kúria, Hungary’s highest judicial body, Viktor Orbán was rendered a defeat that must have hit him hard. At risk is what he considers to be one of his greatest achievements, the Felcsút Football Academy.

Transparency International spent a considerable amount of time and energy investigating the government’s lavish support of sports and came to the conclusion that the sports financing system the Orbán government established is rotten to the core. In the course of its investigation Transparency International also ascertained that the “absolute winner of the whole system is the village of Felcsút and its football club.” Felcsút has become the symbol of everything that is wrong in Viktor Orbán’s Hungary. It is a village of 2,000 people with one of the most lavish football stadiums, which can seat 4,500. The club uses all sorts of tricks to entice people to attend the club’s games, usually to no avail. The stadium is practically empty most of the time. In fact, according to those in the know, Hungarian football is dead, and the incredible amount of money that was poured into the game was an utter waste. Hungary’s FIFA standing is the same as it was before.

Over the years people have tried to find out how much money was being spent on sports, mostly football. But the system is intentionally complicated in order to hide the exact amount that comes from two main sources: direct grants allocated for sports in the budget and something called Társasági Adókedvezmény/TAO (Corporation Tax Allowance), introduced in 2011. Corporations can get a tax break if they support one or more of five sports: football, handball, basketball, water polo, and ice hockey. Money allocated to support sports is considered to be part of the tax owed. Thus, all money that is donated to these sports is a direct loss to the central budget. Since 2011, according to the latest estimate, 330 billion forints of corporate tax money was diverted to sports organizations. Or, put another, more shocking way, in the last six years the Hungarian state has given up one out of every nine forints in tax revenue.

From this money 128 billion went to football clubs and 86 billion for handball, while the rest was shared by basketball, water polo, and hockey. Viktor Orbán has been insisting for years that TAO is not public money and therefore no one has the right to learn about the sponsors, the recipients, and the amount of the money donated.

Interest in Hungarian football–Debrecen Stadium, which can seat 20,000. Cost €40 million

Transparency International, being convinced that the tax allowance is public money, asked the ministry of human resources for their allocation figures, which was denied. Transparency at that point sued the ministry. In the first instance, Transparency lost the case. The decision was based on tax secrecy. In addition, the judge didn’t consider the requested data to be of public interest. On appeal, however, the decision was reversed. Tax secrecy as a reason for denying access to the information was discarded, and the court ruled that the TAO monies are, after all, considered to be public funds. The ministry then turned to the Kúria, and on October 25, 2017 the decision of the appellate court was upheld.

Concurrently with Transparency International’s suit against the ministry of human resources, Demokratikus Koalíció (DK) sued Viktor Orbán’s Academy in Felcsút for the release of all contracts for jobs that were financed by TAO money. Felcsút apparently received about 14 billion TAO forints in the last six years. In July 2016 the Székesfehérvár Court ruled in DK’s favor, but Felcsút Academy had no intention of obliging and appealed. In February 2017 the Budapest Appellate Court also ruled in DK’s favor, but for a different reason from the Székesfehérvár Court. While the lower court considered TAO to be public money, the appellate court based its verdict on the non-profit status of Felcsút Academy. Felcsút Academy was obliged to turn over all documents relating to TAO funds within 15 days. Felcsút Academy again appealed the verdict, and thus the case ended up in the Kúria for a final decision. On November 15 the Kúria ruled that Felcsút must provide details of how they spent the enormous amounts of “public” money. The verdict could have been predicted because a month earlier, in connection with the Transparency International case, the Kúria had already declared TAO funds to be a public resource.

Index described the verdict as “the final and humiliating defeat of Orbán’s football academy.” János Lázár’s reaction a day later amply showed what kind of a country Hungary has become in the last six or seven years. During Lázár’s usual press conference on Thursday, when asked his opinion of the Kúria’s decision, he said: “There is a judge in this country who is very angry with Hungary’s government and Fidesz. His name is András Baka. Because of his changed official status, he has been greatly offended, and for some strange reason all TAO cases end up on his desk. I wouldn’t want to suppose that any bias would have influenced the judge, who on numerous occasions publicly criticized Fidesz and the government.”

Let’s stop here for a moment and go back to 2011, when the Hungarian Supreme Court became the Kúria. The chief justice at the time was András Baka who, prior to his appointment in 2008, had been a judge at the European Court of Justice for Human Rights for 17 years. Although he was considered to be a conservative judge, he became worried about Viktor Orbán’s so-called judicial reforms. He objected, for example, to the forced early retirement of judges, which gave the government a free hand to fill about 300 positions that became vacant as a result of the new law on retirement. Orbán desperately wanted to get rid of Baka and eventually came up with a good excuse. Baka hadn’t been a judge in Hungary for five years. His 17 years with the European Court of Justice were not considered relevant. Baka turned to the European Court of Human Rights and eventually was awarded about 100,000 euros, which naturally the Hungarian government, or to be precise Hungarian taxpayers, had to cough up. Baka couldn’t return to his old post, which had been filled by someone else, but he was reinstated, I’m sure grudgingly, as one of the leading judges in the Kúria.

The Kúria’s answer to Lázár was brief and to the point. They will not comment on politicians’ statements concerning their activities, but the spokesman explained that the assignment of cases is determined a year ahead and given to judges according to their professional specialties.

Unfortunately, I’m not at all sure that this is the end of the story because János Lázár intimated at the press conference that it was time “to make order” as far as TAO is concerned. To make order to me means that they will most likely come up with some modification to the law that would prevent the public from learning where that incredible amount of money has gone.

November 17, 2017

Hungary has been steadily becoming more corrupt

Here we go again. Transparency International’s (TI) 2016 report has been published and, as usual, the message to the Hungarian government was not complimentary. Hungary’s rating dropped under the psychological level of 50, coming in at 48 points. Of the 28 member states of the European Union, Hungary is one of the five most corrupt. Hungary is tied with Romania. But while the Romanians’ efforts to curb corruption have propelled the country to increasingly better scores since 2013, Hungary’s numbers have been declining since 2012, when its score was 55. Admittedly, corruption in Italy, Greece, and Bulgaria are even greater than in Hungary, but surely that is no reason to rejoice, especially since outside of Europe Hungary is in the company of countries like Jordan, Cuba, Saudi Arabia, Montenegro, and Oman. The most detailed analysis of the part of the report that concerns Hungary was published in napi.hu.

In the introduction to the report, the editors emphasized that “this year’s results highlight the connection between corruption and inequality, which feed off each other to create a vicious circle between corruption, unequal distribution of power in society, and unequal distribution of wealth.” They further stressed that “the interplay of corruption and inequality also feeds populism. When traditional politicians fail to tackle corruption, people grow cynical. Increasingly, people are turning to populist leaders who promise to break the cycle of corruption and privilege. Yet this is likely to exacerbate—rather than resolve—the tensions that fed the populist surge in the first place.” In the wake of Donald Trump’s victory, Transparency International published a detailed analysis of “Corruption and Inequality: How Populists Mislead People.”

The reason that I called attention to TI’s emphasis on populists who after acquiring power become themselves beneficiaries of corruption is because it seems that the Orbán government has taken TI’s severe criticism of populist duplicity as proof of its disapproval of their own system. At least this is what I sense from reading Magyar Idők’s touchy reaction to TI’s references to populism and corruption. Clearly, the government was mighty upset over the direct references to Hungary and Turkey, where after the introduction of populist-led governments corruption grew substantially.

Magyar Idők tries to make light of the changes in Argentina where, according to the article, “after the fall of the populist government, miracle of miracles, thanks to the blissful activities of the new liberal leadership the corruption situation has improved.” I assume that no one who is familiar with the Hungarian government’s truthfulness will be surprised to learn that this is not at all what TI’s report said about the Argentine situation. TI reported: “Recently elected President Pauricio Macri said in his inauguration speech that he ‘will be implacable with corruption.’ He has made the fight against corruption a top priority for his administration. In order to fulfill this promise the new government must urgently implement laws and reforms to improve transparency, accountability, and oversight of public institutions.” A far cry from Magyar Idők’s version.

And while we are on the topic of the Orbán government’s fabrications, we might as well point out another falsehood in the very same article. According to Magyar Idők‘s headline, Transparency International is “Soros’s organization.” It is true that in the body of the article this claim becomes less categorical. There the paper describes TI as an organization that is “also supported by George Soros.” So, I became curious about the financial backers of TI. I can assure you that the list is very long. It begins with a large number of government agencies, like the Department of Foreign Affairs and Trade of Australia, the German Foreign Office, Foreign and Commonwealth Office (UK), and the US Department of State. (I wonder how long Trump’s State Department will contribute to TI. I have the feeling not for long.) There are also several multilateral institutions that support TI, like the European Commission and several offices of the United Nations. Ten foundations support TI, among them–yes–Soros’s Open Society Institute Foundation and the Open Society Initiative for West Africa. In addition, five corporations, including Siemens, Shell, Ernst & Young, and PriceWaterhouseCoopers, are contributors. So much for TI being Soros’s organization.

The Orbán government pretends that it doesn’t take TI’s report seriously. How can TI dare to pass judgment on Hungary year after year when they themselves, “as we learned from Szilárd Németh,” are afraid of transparency? How can anyone believe TI’s reports when “left-liberal leaders of the financial elite praise” the World Bank’s efforts at curbing corruption? “Is it possible that these people take part in discussions where Christine Lagarde, who narrowly escaped her scandalous corruption case, is also present?” Moreover, the article gleefully says, Zoltán Kovács, the government spokesman, was on target when he pointed out that Transparency International never bothered to unearth the rampant corruption that existed during the socialist-liberal governments prior to 2010.

Of course, Zoltán Kovács, as is his wont, didn’t tell the truth. Already in 2008 TI was talking about the growth of “institutionalized corruption in Hungary,” although at that point it considered “bribery more as a byproduct of democracy rather than its fundamental characteristic.” In fact, both Mihály Varga, minister of national economy today, and Viktor Orbán, then leader of the opposition, quoted the report of Transparency International as proof of the existence of rampant corruption in Hungary. Orbán learned from the report that “Hungary loses 200 billion forints every year due to the corruption that exists in public procurement cases.”

József Péter Martin, executive director of Transparency International Magyarország (TIM), called attention to the harmful effect of corruption on the national economy. He noted the significant overlap between the most competitive countries and the least corrupt countries. Similarly, corruption and reduced competitiveness are often correlated. Even as Hungarian corruption has increased, the country’s competitiveness has been sliding in the past few years. In 2001, Hungary was twenty-first on the list of the World Economic Forum. Today it occupies the sixty-ninth place.

But never mind, the Hungarian government has no incentive to clamp down on corruption, since its politicians and friends are the main culprits. The mafia state is doing well.

January 26, 2017

One of Donald Trump’s first victims may be the Hungarian NGOs

An article appeared today in The Guardian predicting a new crackdown on Hungarian NGOs. The timing is no coincidence. Viktor Orbán’s illiberal government has been emboldened by the election of Donald Trump, who will not raise his voice in defense of critics of the Hungarian government in the name of democracy.

A few hours after the publication of the article, Szilárd Németh, one of the deputy chairmen of Fidesz, announced the government’s intention to get rid of “the pseudo-civilians” of the Soros Empire. In Németh’s vocabulary, “pseudo-civilians” are foreign political agents who represent the “global plutocracy and the world of political correctness above the heads of the national governments. These organizations should be forced back, and, I believe, they should be thrown out. I feel that the international opportunity for such a move has arrived.” The “international opportunity,” of course, is the election of Donald Trump, as Péter Krekó, an associate of Political Capital, a think tank of political scientists, pointed out to The Guardian.

The announcement of the government’s intentions regarding foreign-subsidized NGOs was not unexpected. Just before the holidays Orbán gave an interview to 888.hu in which he was quite explicit about his feelings toward the NGOs critical of his government. According to him, they are being used by antagonistic powers and their agents, like George Soros, to advance their own interests in foreign countries. Therefore, these organizations must be banished. Not only Hungary will move against them, but “all countries” in Europe. The year 2017 will be about Soros in this sense. “One can feel it coming when each country will trace the source of these monies; they will find out what kinds of connections exist between them and the intelligence communities; and which NGO represents what interests…. [2017] will be about the extrusion of the forces symbolized by Soros.” One cannot be more explicit. The only question was just when in 2017 the onslaught would begin.

It is unlikely that Donald Trump will be upset if Viktor Orbán follows in Vladimir Putin’s footsteps. In 2012 Putin introduced a law requiring non-profit organizations that receive foreign donations and engage in “political activity” to register and declare themselves to be “foreign agents.”

George Soros recently wrote an opinion piece in project-syndicate.org in which he didn’t hide his feelings about the president-elect, whom he called “a would-be dictator.” He described Trump’s cabinet as being full of “incompetent extremists and retired generals.” He predicted that “Trump will have greater affinity with dictators,” which will allow “some of them to reach an accommodation with the US, and others to carry on without interference.”

Soros’s attack on Trump naturally elicited counterattacks on the financier by the pro-Trump media. Articles appeared with headlines like “Soros and Other Far Leftists Instigate Revolution against Trump,” “Billionaire Globalist Soros Exposed as Hidden Hand against Trump,” “Busted! Soros-Backed Pro Clinton Group Caught Funding Violent Protests,” and many more. Orbán can rest assured that no one will be terribly upset in Trump’s White House or State Department about the harassment of Hungarian NGOs. Under these circumstances Orbán can feel pretty safe.

By the time Orbán gave his interview to 888.hu, initial plans for the elimination of NGOs were already in place. On December 14, Zsolt Semjén, who serves as Orbán’s deputy, sent a modification proposal to a 2012 law on non-governmental organizations to the president of the parliament, which apparently will discuss and most likely enact it into law before April. One of the important changes is that “officeholders of non-governmental organizations” will have to submit financial statements just like members of parliament. What’s wrong with such a requirement? In the first place, salaries of officials of nongovernment organizations have nothing to do with the public purse. Second, knowing the Hungarian government’s practices, it’s likely that the Hungarian Internal Revenue Service would immediately begin to discredit those people who are seen as standing in the way of the government. In addition to this change, there is a vaguely worded reference to “the legal environment of the civic association” that will be rewritten. For the time being, officials of NGOs have no idea what this means, but “in light of the Orbán interview” it is worrisome that the proposal includes references to “the adoption of solutions that have worked” in other countries. The fear is that the Orbán government has Putin’s solution in mind.

NGO officials believe that the elimination of organizations will take place in stages. First, the usual character assassination will take place after the submission of financial statements. Second, the NGOs will have far more administrative obligations, which will take time and money away from their useful activities. As a third step, the government might accuse them of espionage and treat them as sources of danger to national security. They could be accused of treasonous activities against the legitimate government of their own country as agents of foreign powers.

According to rumors, behind the scenes the Hungarian government has been trying to convince George Soros “to limit his presence to the financing of the Central European University” and to stop giving any more grants to the 60 or so organizations that are the beneficiaries of his generosity.

For the time being, it looks as if neither the Open Society Institute (OSI) nor the NGOs are intimidated. They insist that they will continue as before. In the first place, some of these organizations, like Transparency International (TI), receive only a small fraction of their funding from the Soros Foundation. In fact, one of TI’s largest contributors is the European Union. The director of TI, József Martin, can’t imagine that the government would dare to ban TI because by this act “Hungary would remove itself from the community of free countries.” In Martin’s place, I would be less sanguine that Viktor Orbán cares what the community of free countries thinks.

The Hungarian Helsinki Commission gets about a third of its budget from OSI. In addition, it receives financial help from the European Commission and the United Nations High Commission. Its position, I believe, is less secure than that of TI. After all, it deals with human rights, something that leaves Viktor Orbán and his friends cold. The Hungarian Civil Liberties Union (TASZ) is unfortunately heavily dependent on the Open Society Foundation.

Szilárd Németh’s announcement of the government’s intentions to eventually eliminate NGOs prompted the usual protestations from the left. MSZP couldn’t come up with anything more original than the demand that “Szilárd Németh must leave public life.” Sure thing. He will rush to oblige. DK reminded Viktor Orbán that, no matter how strong a feeling of affinity he has for Vladimir Putin, “this place, in the Carpathian Basin, is not called Russia.”

In the past, we kept trying to convince ourselves that surely this or that move of the government would not be tolerated by the European Union, the Council of Europe, or the Venice Commission. Be it the new constitution, the media law, or the building of a nuclear power plant on Russian money by a Russian company that received the job without competitive bidding. And what happened? Almost nothing. A few sentences were changed in the constitution. So, let’s not try to shift the burden to the EU. There is only one way to put an end to this nightmare: to get rid of Orbán and his minions in 2018.

January 10, 2017

Corruption and the Hungarian economy

Frigyes Solymosi, a professor of chemistry and member of the Hungarian Academy of Sciences, has been a longstanding conservative critic of Viktor Orbán’s undemocratic regime. For years he has been writing op/ed pieces in Népszabadság because Magyar Nemzet, when it was still a government mouthpiece, refused to publish his articles. His latest is titled “Where is the hot spot?” The current behavior of Hungarian society reminds him of something that happened in his lab years ago. They were studying some explosives that for a long time remained dormant. At some point, however, a “hot spot” developed within the explosive tablet, and boom! It made quite a mess of their lab.

Solymosi’s article lists some troubling signs in the Hungarian economy, the lack of technological advancement, the neglect of education and healthcare, and the growing exodus of the best and the brightest. They all point to a further deterioration of conditions in the country.

Along these lines today I’m focusing on a conference organized by Világgazdaság to deal with the question: “Is this sustained growth?” The Hungarian financial paper invited several finance or economic ministers from earlier years. Two of the participants served in the Antall government (1990-1993). Antall changed finance ministers three times. The first one lasted only a few months (May 24-December 19, 1990). Kupa lasted longer (December 20, 1990-February 11, 1993). I always enjoy listening to him when he is invited for an interview. He strikes me as knowledgeable and level-headed, and he has a wonderful sense of humor. The other participant from the Antall era was Péter Ákos Bod, who served as minister in charge of industry and trade for a short time, after which he became the chairman of the Hungarian National Bank. Attila Chikán represented the first Orbán government, in which he served as minister in charge of the economy (July 8, 1998-December 31, 1999). He was replaced by György Matolcsy, who has since become Viktor Orbán’s right hand. The only “liberal” economist present was István Csillag. He was minister in charge of the economy and transportation during the Medgyessy government.

From left to right: Mihály Kupa, Péter Ákos Bod, István Csillag, and Attila Chickán

From left to right: Mihály Kupa, Péter Ákos Bod, István Csillag, and Attila Chickán

All of the participants agreed that the government propaganda about the robust economy that will not only be sustained but steadily grow is just that. Propaganda. Whatever growth there is is due only to the subsidies received from the European Union. The growth the Hungarian economy is capable of producing on its own is about 1% per year.

The Orbán government likes to compare Hungarian economic growth to the EU average and boast, as he did recently in Mongolia, that Hungary, along with other East European countries, is the engine of the Union’s economic growth. But this is not really relevant. What one has to concentrate on is Hungary’s standing within the region. It should be compared to the neighboring countries: Poland, Slovakia, the Czech Republic, all of whose economies are growing faster than Hungary’s. Romania’s economic development still lags behind her western neighbor, but it is catching up.

According to István Csillag, “Hungary exists only as long as there is the European Union. If the EU ceases to exist, there will be no Hungary.” Of course, this statement is overly dramatic, but we know what Csillag has in mind. He said that even 2014, which was hailed as an unusually successful year with a 3.7% economic growth, still pales in comparison to 2004 when the Hungarian economy grew by 5% with a 7% additional expenditure compared to 2014’s 3.7% growth with an 8% additional expenditure.

György Matolcsy’s efforts at stimulating the economy met with general disapproval by all participants. Such stimulants look promising initially, but their end is usually “painful,” creating economic bubbles.

I left Attila Chickán’s contribution to last because his field of expertise is “competitiveness” and “productivity.” Hungarian productivity is half that of the European average, due primarily to the inefficiency of the institutional structure. For sustained growth a country needs stable institutions, investment in human capital, and a competitive market without corruption. The problem with the present Hungarian economy is that none of these conditions exists at the moment, and there are no signs that the government is making any attempt to remedy the situation.

And that leads us to Transparency International’s “Corruption Perceptions Index 2015,” published yesterday. While a number of countries in the region have improved significantly in the last few years–for example, Austria, the Czech Republic, and Slovakia, in 2015 Hungary’s standing dropped to 50th place out of 168 countries. In 2014 Hungary stood in 47th place among 175 countries, which means that corruption in the country has increased relative to the other countries studied.

The Hungarian government makes no effort to combat corruption, which ensures the further deterioration of the Hungarian economy. Fidesz and the government blithely ignore the problem and accuse Transparency International of bias because—hard to believe but true—George Soros has been supporting this global anti-corruption non-governmental body. The terse reaction of Fidesz to the news of Hungary’s poor performance was: “Transparency International, which is financed from Soros’s money, serves the immigration policy of George Soros. Transparency International’s goal is to exert political pressure on Hungary.”

Alas, that’s not the end of the bad news. More will come tomorrow.

January 28, 2016

Colleen Bell on corruption; Fidesz on Colleen Bell

It is not easy to be the U.S. ambassador to Hungary, especially not since 2010. The Orbán government is outright antagonistic toward the United States, and some of the cabinet members make no secret of their “irritation” at the American ambassador’s critical remarks when, in their opinion, she has no right to meddle in Hungary’s internal affairs. On the other side, the anti-Orbán forces are dissatisfied with her because, in their opinion, she is not critical enough of Orbán’s illiberal democracy. The current ambassador, Colleen Bell, is trying to satisfy both sides by praising the military cooperation between the two countries while criticizing some other aspects of Hungarian political life.

In the last week or so we could witness the predicament in which Bell finds herself. On December 2 she visited the Pápa military base where she agreed to a fairly lengthy interview with one of the reporters of M1, the government’s main propaganda channel. Although the interview was aired only on December 5, Magyar Idők triumphantly announced on the 3rd that, according to Bell, “Hungary is a sovereign nation that has the right to defend its borders.” What Magyar Idők neglected to report was that Bell at the same time stressed the necessity of a common European solution to the migrant crisis and said that the asylum seekers are not terrorists. In fact, they are the ones who are escaping from the people who are committing terrorist atrocities in Iraq and Syria.

When the interview was broadcast, the few Hungarians who actually watch M1 could see an antagonistic reporter accusing the United States of double standards and wanting to know Ambassador Bell’s opinion of the”American-Hungarian billionaire’s involvement with the migrants.” The interview was, as far as I can judge, favorably received by the government and much less so by the opposition, where the opinion was that Bell was not forceful enough even in her defense of the human rights of the asylum seekers and far too effusive about military cooperation.

A few days later, on December 9 and 10, the Hungarian branch of Transparency International organized a two-day conference on corruption. The occasion was Anti-Corruption Day, which has been observed on December 9 ever since 2003 when in Merida, Mexico the United Nations Convention against Corruption was signed. Colleen Bell was one of the principal speakers.

I don’t think that I have to say much about the United States’ commitment to fighting corruption. After all, last fall the sticking point in U.S.-Hungarian relations was precisely the widespread corruption in Hungary and the Hungarian government’s reluctance to tackle it. So, it was expected that the U.S. ambassador would say something important on the subject and that in her speech there would be a fair amount of criticism of the Hungarian government’s attitude toward corruption. U.S. diplomats are keenly aware of the systemic corruption that ensnares the whole government, starting with the prime minister and his family.

Colleen Bell pretty well repeated the negative ramifications of corruption that she had outlined in her much-criticized speech in October. In addition, she spoke of problems specific to Hungary. Here are a couple of examples: “America’s commercial relationship with Hungary is healthy and bilateral trade is on the rise, but I’m told by some American business executives that perceptions of corruption in Hungary impact the investment climate and directly affect American businesses, and as a result, our trade. When public procurement decisions are made on the basis of favoritism instead of on the basis of merit, our companies will often just stay home. American businesses should not be asked to compete in a public tender against a company owned by the relatives of decision-makers. That is why this practice is banned in many countries.”


The ambassador also had something to say about transparency which, as we know, is in short supply in Orbán’s Hungary. “Administrations, too, can increase transparency by allowing citizens open access to information that affects their lives, and that enables them to make informed and educated decisions about policies made in their name. For example, the United States applauds the recent Capital Court of Appeals decision requiring documentation regarding the Paks contracts.” And finally, she stressed that “prosecutors [should be] empowered to investigate and prosecute officials suspected of crimes of corruption.”

It was expected that János Lázár in his Thursday press conference (“government info”) would strike back. Indeed, we didn’t have to wait for long. He hit below the belt. After explaining that the new law on public procurement is fair and the Hungarian government will not discriminate against any U.S. firm in favor of relatives of public officials, he added that “we don’t guarantee an advantage to anybody because we are not in America where somebody can become an ambassador just because he/she supports a party.” This ad hominem attack on Bell was not only boorish, it was also a blatant lie as far as the Hungarian situation is concerned. By now the great majority of ambassadorial posts are given to strong supporters of Fidesz who frequently have no diplomatic experience. Moreover, very often they are handpicked by Viktor Orbán himself.

Some key members of the government were also present at the conference. They tried to convince the audience, without much success, that the law on public procurement which allows government officials’ relatives to compete in government tenders is the strictest in all of Europe. When Péter Polt, the chief prosecutor, tried to convince people that the number of anti-corruption cases is growing, people in the audience snickered. Sándor Pintér, minister of the interior, and László Trócsányi, minister of justice, also rose in defense of the government.

Magyar Idők reported on the conference as a government mouthpiece ought to. The headline reads: “The new law on public procurement helps the struggle against corruption.” In this article even Colleen Bell’s remarks sounded positive, although at the end of the article there was one sentence that said that “the ambassador in connection with transparency mentioned among other things the importance of making the documents related to Paks public.”

Meanwhile the wholesale expropriation of the nation’s wealth continues, including the agricultural land currently in the hands of the state.

Transparency International: Systemic government corruption in Hungary

It’s time to recall what U.S. Ambassador Colleen Bell had to say about corruption in her much discussed speech: “Corruption stalls growth, stifles investment, denies people their dignity, and undermines national security…. Wherever systemic corruption has effectively undermined fair governance, it creates an environment ripe for civil unrest, resistance to the government, and even violent extremism.” It looks as if the U.S. government came to the conclusion that corruption in Hungary is no longer the ordinary “garden variety” of corruption where government or municipal officials offer favors for cash but the kind of corruption that affects the entire body politic.

A case in point is the corruption that surrounds the disbursement of European Union subsidies, which the government tolerated and perhaps even encouraged. Or at least this is the conclusion we can draw from the latest Transparency International study titled “Corruption Risks of Union Sources in Hungary.” In this study there is a telling table that lists reports of alleged corruption cases in connection with EU subsidies in 2014. While in Belgium the authorities reported 28 cases of the possible misuse of Union funds (compared to 25 private actions), in Hungary all 28 complaints came from individuals and none from central or municipal governments. Even in the very corrupt Romania there were four instances in which the authorities themselves turned to OLAF, the organization that investigates corruption cases.

burning euros

One of the important findings of the study is that the abundance of money coming from the EU is a major reason for the systemic corruption that exists in Hungary. The second Orbán government in 2010, right after the elections, stopped all projects that were underway and began reorganizing the agency that handled EU funds. As a result, for almost two years nothing happened, even as the country was nearing the end of the seven-year budgetary cycle. The money had to be spent and in a great hurry. As a result, in the 2013-2014 period the government wasn’t terribly fussy about what project would be funded or how much it would cost. The only aim was to spend the money before Hungary lost a large chunk of it. Just to give you an example of the superabundance of money during this period, here is a shocking figure. The amount of money that was spent during 2013-2014 was 10% of the Hungarian GDP. That is an enormous amount of money. Almost three times the amount that Hungary normally receives yearly, which is 3.5% of the GDP.

It is a well-known fact that 95% of all government investment comes from Brussels, without which there would be no economic growth whatsoever. In 2014 the Hungarian government could boast an economic growth of over 4%, which was hailed as a turning point and the beginning of a soaring economy. As if from here on growth would be consistently over 4%. Orbán at times even talked about 5-6% economic growth, which would make Hungary the leading economic power of the region. If you consider, however, that the Union subsidies during that period were 10% of the GDP, then the 4.2% growth is not at all impressive.

This period’s overabundance was unusual, but even the average amount of money that comes from Brussels is substantial. And unfortunately most of it seems to be wasted, at least as far as trying to lay the groundwork for sustained economic growth is concerned. Just to give you an idea of how much money we are talking about, here are a couple of figures. During the budgetary cycle between 2007 and 2013 Hungary received 26 billion euros, a large chunk of which was spent in the final few years. In the next cycle (2014-2020) an additional 19 billion euros can be used. What does Hungary have to show for all this capital infusion? The results are pitiful.

Transparency International found that, on average, companies that win contracts for EU projects overprice their products by 25% and that the authorities know all about the practice but don’t complain. It is considered to be the normal way of doing business. Dickering over price takes time, which the government, in its rush to spend, doesn’t have. Checking on wrongdoings is also time consuming. Of course, the overpricing of products and services can sometimes be staggering. Ákos Hadházy of LMP, the vet from Szekszárd, has ferreted out some such extraordinary cases. In one instance the contractor billed five times the market price for pieces of machinery.

During his research the author of the study, László Kállay of Corvinus University, noticed that the rate of the overpricing doesn’t seem to grow over time. “As if there is some kind of control in the system.” As if there was some kind of understanding between the government and the providers of the services. As long as they are not too greedy and stick to the 25% overpricing, the government will not raise objections.

Meanwhile OLAF is investigating 13 of the 28 complaints coming from individuals. With this number Hungary is in second place in the list of countries whose handling of EU subsidies is suspect. Only Romania has a worse record with 36 questionable cases.

And now a piece of news I spotted in The Financial Times back in September. According to the article twelve EU member states might be in trouble for failing to meet the required standards for public procurement: Bulgaria, the Czech Republic, Greece, Croatia, Italy, Latvia, Hungary, Malta, Poland, Romania, Slovenia, and Slovakia. If EU procurement standards are not met by the end of 2016, the auditors said, “the [European] Commission should use its powers consistently to suspend payments to member states, until such time as they have rectified the shortcomings.” Some of the monies have already been withheld, as was reported by the Hungarian media back in August and September.

Of course, the Prime Minister’s Office simply doesn’t understand what Transparency International is talking about. There may have been problems in the past, but since August 2013 János Lázár himself has been supervising the disbursement of EU subsidies. He has been the foremost advocate of transparency and clean hands. His new deputy, Nándor Csepreghy, announced the other day that there was nothing new in the study published by Transparency International. I’ll bet that most people will disagree with him and will find plenty of new information in László Kállay’s study on systemic corruption in the Orbán government.

Further restrictions on freedom of information in illiberal Hungary

The Hungarian government has been dissatisfied with the current provisions of the Freedom of Information Act. Already in 2013 the government tried to limit ordinary citizens’ access to public information, but that attempt failed since it was obviously unconstitutional. Now, two years later, the Ministry of Justice has come up with a new scheme.

Up until now, a person requesting data of public interest had to pay only photocopying fees. In practice, that meant that a few days after the request was submitted the appropriate government office informed the applicant of the approximate copying charge and asked whether he was still interested in pursuing the matter. But now, if parliament passes a series of amendments Justice Minister László Trócsányi submitted, the interested citizen will have to pay the complete cost of the release of the documents. What is included in the “complete cost” is not spelled out. Certainly not merely copying costs. As 444.hu semi-jokingly said: “Who knows? It might also include the price of electricity.” Moreover, there is no provision to tell the information seeker ahead of time about the possible cost. It may happen that the bill is millions of forints, which NGOs or investigative journalists are not prepared to pay. This amendment itself might be unconstitutional, since the constitution states that “assurance of freedom of information is the duty of all government organs.”

But that’s not all. Another amendment distinguishes between ordinary government documents and copyrighted documents. The latter cannot be copied and given out to seekers of information; they can only be shown to the interested person. On the surface, this practice seems defensible–until we take a look at a specific case. I’m thinking of the billions the government spent on studies prepared by the associates of the pro-government think tank Századvég. Initially the prime minister’s office that ordered the studies refused to release them, appealing to copyright laws. The newspaperman pursued the case, went to court, and won. If the amendment is passed, the government will put a stop to this practice.

The amendment would also modify laws governing data that are still being considered by the government in such a way that any data that might be the basis for future decisions couldn’t be released. For all intents and purposes, all data would be under government protection.

In addition, there is a fudge-factor sentence that allows the government to prevent the public from accessing material that it doesn’t want to be revealed. “If so much extra work is required of the employees that they are prevented from taking care of their major duties, the request might not be fulfilled completely.”

For some reason the government wants these amendments to become law as soon as possible. Deputy Prime Minister Zsolt Semjén, who originally asked László Kövér to make sure that parliament would be prepared to vote on the amendments in October, wrote a new letter in which he asked for immediate discussion of Trócsányi’s proposals. Naturally, Kövér readily agreed. Parliament will most likely vote on the amendments on Monday.

Being able to ask the government how it spends taxpayer money is an important instrument of democracy. For example, people have the right to know how much the government spends on anti-refugee billboards or how much János Lázár’s trips abroad cost. Given the Fidesz government’s track record, it’s no wonder that Viktor Orbán, his oligarchs, and corrupt government officials are greatly bothered by the uncomfortable questions posed by NGOs or investigative journalists. HVGs take on the issue is that the Trócsányi amendments serve to cover up widespread fraud and corruption.

piggy bank2

Four anti-corruption organizations–Transparency International Magyarország, K-Monitor, Átlátszó.hu, and Energiaklub–are trying to stop the proposed changes in the law. They jointly wrote to László Trócsányi, to the Authority of National Data Protection and Freedom of Information, and to members of parliament to protest the move. Attila Péterfalvi, president of the Authority of National Data Protection, originally found nothing wrong with the proposed amendments, claiming that eventually the practice of obtaining data would be satisfactorily solved. A few days later, however, he changed his mind and released a statement in which he emphasized that “acquiring data of public interest is a constitutional right, the great achievement of the regime change, the guarantee of democratic rule of law, and the control of public spending.” It is hard to know at the moment what Péterfalvi’s next move will be.

Transparency International released a statement in which they called the law vague and one that severely restricts access to information. They also pointed out that the newly amended law will “create a serious risk that corruption by public officials will go unchecked.” Transparency International believes that government offices cannot charge more than a nominal fee when people would like to find out how their taxes are being spent. Anna Koch, director of Europe and Central Asia at Transparency International, fears that “the government is quickly pushing Hungary toward full state control of public information.” The vote will be tomorrow, and I have no doubt that it will pass.