[Analysis] Hungary’s power-grab to stay one step ahead of EU

The parliament approved the creation of more than a dozen such new foundations, whose endowments include state assets ranging from real estate, stakes in blue-chip companies, and a football stadium. Bloomberg financial newswire estimated their value to run into billions of euros.

The majority of the foundations will oversee state universities, and their boards include Orbán’s close allies – in some cases government ministers.

“This is the organised theft of the assets of the Hungarian people,” Gergely Arato, an opposition MP, said during the parliamentary debate.

Daniel Hegedus, a fellow at the German Marshall Fund in Berlin told EUobserver that the government has three aims: “diverging public assets so that even after an election they can hold onto them, making it more difficult for the EU’s anti-fraud agency [OLAF] to scrutinise the use of EU funds, and reforming higher education – which also effectively means keeping it under party control”.

The Orbán government argued that the move is a much-needed modernisation of the higher education system.

The Hungarian government’s communications office, in a statement to EUobserver, said that “all the assets that these foundations have can only be used for public purposes, for the activities of higher education, and they do not become private property in any form”.

Government officials have also said the reform has nothing to do with the 2022 elections.

EU tracking?

But MEPs also voiced concerns that the foundations will make it impossible to track EU funds planned to bolster Hungary’s higher education.

In its draft recovery plan, Hungary wanted to channel a fifth of the EU grants available from the bloc’s recovery fund to the modernisation of universities, which would be overseen by the foundations.

A dozen MEPs from green, liberal, and left-wing parties sent a letter to EU Commission president Ursula von der Leyen on Monday (26 April) warning her that 20 percent of EU funds from the bloc’s recovery fund available to the country would “disappear in opaque funding structures” and “which have the purpose of further destroying academic freedom and institutional autonomy in Hungary”.

They called on the commission chief not to allow EU funding to go through these structures.

French green MEP Gwendoline Delbos-Corfield, one of the signatories, told EUobserver that the parliament already has “great concerns” on the use of EU funds, where “transparency is a huge problem”.

Hungary has repeatedly headed OLAF’s list of member states where irregularities have been found in EU funds between 2015 and 2019.

“We will have difficulties how to prove the misuse of EU money – it is very clever on their part, if we can bluntly prove it, we can fight it. If they do this system, it is much more difficult to fight it,” the MEP said.

Delbos-Corfield added that the move fits into the Orbán government’s track record of using “hybrid organisations” to avoid scrutiny.

She cited the example of KESMA, the massive media foundation close to Orbán, which runs a conglomerate of almost 500 media organisations, and which has escaped EU inquiry because market distortion could not be proven.

EU leaders last December approved a new mechanism, making EU funds conditional on the respect for the rule of law if EU funds are directly involved.

However, the mechanism is stuck after Budapest and Warsaw only agreed to the recovery fund and the long-term EU budget if the mechanism is not implemented before the European Court of Justice rules on it.

Poland and Hungary challenged the mechanism at the Luxembourg-based court, and even with an expedited procedure, it is unlikely to be triggered before the Hungarian elections next spring.

“The Hungarian government has been one step ahead of the EU for 10 years, and in the beginning it was understandable, but for the last one-two years, their moves could be anticipated,” Delbos-Corfield said.

‘Hybrid regime’

The education overhaul comes after the Budapest government effectively forced the Central European University to leave, relocating to Vienna.

Meanwhile, the Orbán government is planning to build a Budapest campus of the Chinese Fudan University with Chinese contractors, financed by a €1.25bn loan from China.

Freedom House has said in its reoport on Wednesday that Hungary has undergone the biggest decline ever measured since the US-based NGO began evaluating states of democracy in 1995.

It said Hungary has witnessed an “unparalleled democratic deterioration over the past decade”.

Hungary’s international communications office dismissed the report’s findings, by calling Freedom House a pro-migration organisation funded by US billionaire George Soros, the long-time critic of Orbán.