On the verge of bankruptcy, with a weakened currency and several thousands of people protesting on the streets, Hungarian leaders cannot afford to uphold the rogue constitutional reforms that entered into force on the 1st of January.
Much talk on the new in-progress intergovernmental treaty for the Euro-zone has been going on, particularly on the controversial power to be given to the European Commission to sanction states that don’t keep their budget deficits in check. Cries of loss of sovereignty for countries being supervised by an external power capable of applying penalties are heard from the eurosceptics, while others mistrust economic sanctions as an effective way to spur on already broke countries.
But the truth is that sanctions are not an unheard mechanism in the EU. In fact, the treaties declare expressly the power of the EU institutions to fine and suspend political privileges, e.g. voting rights in the Council, for member states who misbehave gravely and stray from the shared and agreed European values.
Currently, Hungary faces such rarely-used sanctions. The European Commission has already warned Hungarian leaders to revoke the constitutional reforms approved in December 2011 that are considered to threaten some European principles enshrined in the treaties.
One of these reforms is a law approved in December as part of the constitutional changes that curbs the independence of the Hungarian central bank. Under EU legislation, all national central banks must be completely independent from political or any other type of pressure. Limiting the autonomy of the Hungarian central bank thus is a blatant disrespect of this principle. Another grave concern spurred by the recent constitutional reforms in Hungary is the control of the judiciary by the government through several routes. The Hungarian government can now dismiss the chief judge – a power which it has already used – and it can choose which court is to hear a certain case. More concerning though is the creation of a governmental body whose function it is to supervise the judicial system.
The deliberate interference of the government in the judiciary and the clear disrespect of a fundamental democratic principle that is the separation of powers have raised great fears of a return to the one-party monopoly that existed in Hungary during the Communist period. Several thousands of people have flooded the streets of Budapest in angry protest against the new constitution that entered into force on the 1st day of 2012.
Hungarian Prime Minister Viktor Órban faces pressure from both the European Commission and the Hungarian people to revoke the new constitutional provisions. His room for negotiation is limited. After a tough year for its currency, the florin, which lost a fifth of its value over six months and on the verge of bankruptcy, Hungary was forced to ask for a bail-out from the IMF and the EU, the second in 4 years (Hungary received an IMF loan in 2008 after the world economic crisis first broke out).
Due to the refusal by the Hungarian government to revoke the law that diminishes the independence of its central bank, the preliminary talks with the IMF and the European Commission for the terms of the bail-out were suspended. It is not yet certain whether the meeting of 11th January will take place.
Hungary is currently at the end of the rope. With its credit status rated as junk by the Moody’s rating agency, the government cannot afford to miss the IMF/Commission bail-out; otherwise the state would be forced to declare bankruptcy and scrap its debt obligations, erasing the last remnants of trust of creditors and investors in the ability of the country to pay its debts. The European Commission should not lose the opportunity to compel the Hungarian government to steer its constitution back to compliance with European shared values and principles.