Review

Democracy Digest: Hungary Throws Down Another Gauntlet to EU

Hungary's Prime Minister Viktor Orban at the first day of a Special European Summit on Ukraine at the European Council, in Brussels, Belgium, 30 May 2022. EPA-EFE/OLIVIER HOSLET

Democracy Digest: Hungary Throws Down Another Gauntlet to EU

Budapest is blocking a deal on a global minimum tax in another open challenge to the EU.

According to the agreement, countries would retain their sovereign right to offer lower corporate tax rates, but if that rate is lower than 15 per cent, other countries would have the right to collect the difference. Hungary currently has the lowest corporate tax in the European Union, at 9 per cent; in this case, the home country of a taxed company would be entitled to levy a 6-per-cent extra tax . As a consequence, Hungary would likely have to raise the tax rate to the 15 per cent minimum not to lose out on taxing rights.

Ireland and Estonia, the two other low-tax countries in the EU, have also raised criticism but the offer of a 10-year transition time appeared to win them over.

A week ago, Hungarian Prime Minister Viktor Orban warned that Hungary would still veto the European tax directive, which would pave the way for the introduction of the global minimum tax in the EU.

“Europe is in deep enough trouble without the global minimum tax,” Foreign Minister Péter Szijjártó said. “We’re not supporting a hike in taxes for Hungarian companies and we’re not willing to put jobs in danger.”

Szijjártó also told US Secretary of State Antony Blinken that the 15-per-cent tax would strike “another low blow at European competitiveness” in the middle of the war in Ukraine, even though the deal is meant to be applied at the global level, not just to Europe.

Economist Zoltan Pogacsa argues, however, that Hungary’s fundamental problem is that its corporate sector is not properly taxed.

“If we do not collect taxes, the state will not have enough revenue. It would be much better if we had regular, high but predictable taxes like in  Western Europe, other than introducing new, windfall taxes whenever there is a budget problem,” he said in an interview.

Some say that besides the technical concerns, Hungary is playing a similar game to Poland before. Warsaw also threatened to veto the global minimum tax but seemed to give up its reservations once Brussels announced that Poland could have access to its Recovery and Resilience Fund.

Hungary’s resistance may also be smoothed with some money, some say, although the European Commission seems determined to keep Hungary’s 7-billion-euro slice of the recovery fund and 9 billion in loans frozen due to lack of anticorruption guarantees.

Orban’s constant fights with the EU, meanwhile, encourage some Hungarian politicians to come up with unlikely suggestions on to transform the EU and its decision making.

Hungary’s Prime Minister Viktor Orban at the start of an Extraordinary virtual summit of NATO Heads of State and Government on the security situation in and around Ukraine at the NATO headquarters in Brussels, Belgium, 25 February 2022. Photo: EPA-EFE/STEPHANIE. LECOCQ

Four ruling Fidesz party MPs, including Speaker of the House Laszlo Kover and Deputy Prime Minister Zsolt Semjen, tabled a draft resolution in the Hungarian parliament which suggests eliminating the European Parliament in its present form in favour of a chamber of directly elected politicians, arguing that national parliaments delegate members to the reformed parliament.

Fidesz MPs would also give veto rights to national parliaments on certain EU issues, strengthen national sovereignty und reject pan-European movements. The proposal goes against current mainstream calls for further strengthening the European Parliament and perhaps offering voters pan-European lists instead of only national lists.

In the debate about the future of Europe, Prime Minister Orban is expected to mention some of these ideas as the Hungarian contribution to the debate. Opposition MEP Klara Dobrev from the Democratic Coalition, Socialists and Democrats warned on Facebook that such ideas might pave the way for Hungary’s departure from the EU – “Huxit”.

“We will not let it happen. Hungarians are pro-European,” she wrote.

But most experts doubt that Orban, who has repeatedly stressed that he sees Hungary’s future in the EU, would seriously contemplate leaving the bloc, especially, in the current global situation. The resolution could serve to rally Fidesz voters and help the government in its anti-Brussels narrative but will stop short of openly breaking ranks with the EU.

Czech coalition back on its feet, for now

Czech Prime Minister Petr Fiala arrives for an EU Summit in Brussels, Belgium, 23 June 2022. Photo: EPA-EFE/STEPHANIE LECOCQ

Czechia’s ruling coalition appears to have steadied the ship after a corruption scandal at Prague city hall threatened to bring STAN, the second-largest of the five governing parties, to its knees.

Last week’s arrest of Prague’s deputy mayor for his role in a corruption scheme, and disclosure of the underworld-linked lobbyist’s influence inside the party, sparked public scrutiny.

By Sunday, Education Minister Petr Gazdík was gone, and STAN leader and deputy prime minister Vit Rakusan was fending off questions about his future. However, STAN’s coalition allies have rallied strongly to Rakusan’s defence.

Prime Minister Petr Fiala even suggested that Gazdik’s resignation signals the kind of change in Czech political culture that the coalition wants to promote.

But while that looks to have saved the government for now, just how much the affair reminds voters of the blatant criminality of the 1990s and 2000s, which saw voters all but abandon the mainstream parties for populists like Andrej Babis, should become clearer at September’s municipal elections.

Ten years ago, David Rath became the poster boy for that sort of rampant corruption when he was found with a wine box stuffed with cash. And the former Central Bohemia governor was back in front of judges as the antics at Prague city hall hit the front pages.

Having served half of his seven-year sentence for manipulating public tenders, Rath was released on probation in January. But the High Court in Prague this week extended the sentence by a year due to evidence of further crimes, and he’s now back behind bars. The court also confirmed a three-year ban from public procurement and 10 million koruna (400,000 euro) fine for Czechia’s largest construction company Metrostav.

Trust in Slovak media sinking, foreign agents lurking

Photo Illustration: Shutterbug75/Pixabay

Journalism around the world is facing growing challenges, and the media’s struggles are especially accentuated in Slovakia – at least according to a survey conducted by the Reuters Institute for the Study of Journalism.

Only 26 per cent of Slovaks trust the media, the research shows, which is 4 per cent lower than a year ago, and lowest of all the surveyed countries. Falling trust reflects decades of interference of powerful business leaders and politicians in the work of media, the survey says. Only 16 per cent of Slovaks think that journalists are independent of political influence and 44 per cent of people avoid the news altogether.

“Trust in the media hit a new low,” the study’s authors write. Slovakia found itself at the bottom of the institute’s ranking, along with the United States. But Slovakia is not the only outlier in Central Europe; Hungary’s score is only one percentage point higher. Finland came out on top of the survey with a 69-per-cent trust level.

The institute noted that the Slovak government is trying to modernise media legislation and increase the transparency of media funding. To this effect, the parliament passed a new media law on 22 June, with other sweeping changes, including the regulation of online platforms for sharing videos.

While some MPs are busy enacting new legislation, others might be more preoccupied by flirting with foreign intelligence services, Defence Minister Jaroslav Nad suggested on Wednesday.

Foreign secret services are working hard to influence events in Slovakia by reaching out to local MPs, Nad was quoted as saying by the Slovak Spectator. He added that Slovak Military Intelligence had singled out Russian and Chinese intelligence services and aims to eliminate their local activities, including contact with senior state officials and high-ranking members of the armed forces.

“We have this information andare working with it. I used it in parliament to warn MPs to be careful,” Nad told the media.  He added that officials often accept invitations to events “in good faith”, without realising that they’re being targeted by foreign intelligence groups.

This spring, Slovakia reduced the staff of the Russian embassy by 35 people. Russia’s hybrid activities have intensified across the board in Slovakia, the Slovak Information Service wrote in its 2021 report. Russia had tried to influence political decisions and penetrate state structures while spreading propaganda to divide society, the report confirmed.

Tim Gosling