The ”other” twenty seven

Just a coincidence

A new subscriber, also a friend (and incidentally an economist), was wondering what the twenty-seven so-called milestones are that the European Union is setting in front of the Hungarian Government as the condition of restarting the transfer payments, that are presently withheld. (The terms of conditionality are laid out in the Country Specific Report 2022, and can be found in the document attached at the end of this article.)

It is a mere coincidence that the number of the members in the Union is the same as the so-called super-milestones set out for Hungary to pass. The ”magic number” is twenty seven.

It is generally known that Hungary has led the Union by the nose for an entire decade, promising all kinds of improvements in the increasingly less democratic state organization, getting further and further from the rule of law. At the same time, since the European Union’s money ceaselessly kept on pouring into Hungarian government coffers, and in turn from there to private pockets, the Orban government became enboldened year after year in their brazen mishandling of the funds, as the members of the ”family” are getting richer beyond measure.

In my opinion, it is not that the European Union was blind to the Hungarian government’s directed thievery, they probably were not, but rather waited for the turn around when finally the enrichment will be enough and the moneys of the EU finally will be invested in some useful purposes. Nobody wanted to instigate any discord if it could be patiently avoided. But it could not be avoided, because Hungary long ceased to be the country that qualified as a member; it has sunken far below the criteria set for any democracy hoping to be accepted as a country for admission to the EU, should it apply now.

The introduction of this system of demands for the rule of law in Hungary by the European Commission was an arduous two-year long process. They called it the rule of conditionality, and it was made ”interesting” by the protestations of Hungary claiming what an exemplary democracy she is and how impeccable her rule of law credentials are, at the same time resisting tooth and nail to make even the slightest adjustment to satisfy the EU’s conditions. Instead, Hungary embarked on a time-consuming court case against the EU, claiming that their national sovereignty was at stake and that is why they, the sovereign country of Hungary, has maintained its defensive (or, rather offensive) position; it can’t even give an inch. The Orban government laid all the blame at the feet of the European Union, claiming unfair treatment and outright persecution.

This legal tug of war took the better part of two and a half years. Hungary lost every challenge, and was not at all humbled in the end; it stood defiant as all financial transfers were suspended at last, as was predicted by the European Commission in case of non-compliance. The chief irony of the matter was that the government, if it would show some good faith in its dealings with the European Union, could have satisfied all the Milestones in one sunny afternoon had it wanted to. The small, evasive, and perfunctory measures they took were really not convincing anyone.

It is truly important to note here that the yearly compounded transfer payments from various European Union programs to Hungary were the equivalent roughly of 5% of GDP. However, the actual growth of GDP was hovering around 4-5% annually. In the last few years, without the transfer payments, the Hungarian economy would have actually been stagnating and all growth was attributable to the transfers. Contrary to the many years of propaganda, the painful evidence is that the economy is declining; the inflation is higher than anywhere else in Europe (16.4%); and the Hungarian Forint is continually losing its value. The budgetary deficit is unbelievably high, (instead of the planned and desirable  3%, it is 6.2%), and the accumulated national debt is at an unprecedented level. (In the first eight months of the year, it was 3.299 trillion forints, or $9.18 billion). This sudden drop of performance, combined with the insane spending habits of the government, foreshadows nothing but an accelerating spiral of economic decline. An analysis of the reasons why the government is not complying with the EU’s demands for reform can only remain for another article to discuss. But a detailed list of the ”Milestones” of reforms demanded from the government in exchange for the releasing of the funds can be found here, in the form of the EU Country Specific Report 2022. (CSR). The list is long and damning.

Sandor Kerekes