Hungary Censured as European Showdown Over Populism Takes Shape

(Bloomberg) -- Hungarian Prime Minister Viktor Orban received an unprecedented European Union censure as a looming showdown over the bloc’s rising nationalism took shape.

Hungarian stocks and the forint weakened after EU lawmakers called for Orban’s government to face possible sanctions for eroding democratic standards. The recommendation now goes to EU governments, which are likely to spare Hungary the most serious sanction of suspending the country’s vote in the bloc as that would require unanimity and Poland has pledged to shield Orban.

The European Parliament verdict on Wednesday highlights the clash between pro-EU forces and populists as both sides gear up for bloc-wide legislative elections in May. In tandem speeches before the vote, German Chancellor Angela Merkel and European Commission President Jean-Claude Juncker both warned of rising nationalism and the threat it poses to the EU.

Hungary Censured as European Showdown Over Populism Takes Shape

The EU Parliament mustered the two-thirds majority needed for a proposal saying Hungary poses “a clear risk of a serious breach” of principles including the rule of law.

The 448-to-197 vote in the assembly reveals exasperation across Europe with Orban’s years of assault on civil liberties, judicial independence, educational freedom and media plurality. In his third consecutive term as Hungary’s leader, he has boasted about creating an “illiberal” state, thumbed his nose at the EU and helped thwart deeper European integration.

Unchecked Nationalism

Juncker, in his last major policy speech before stepping down next year, told lawmakers before the vote that growing political intolerance is challenging the European peace project a century after the end of World War I.

“Let us decry knee-jerk nationalism, which attacks others and seeks scapegoats rather than looking for solutions,” he said. “Unchecked nationalism is riddled with both poison and deceit.”

The forint weakened 0.4 percent to trade at 325.93 per euro at 1:34 p.m. in Budapest. The benchmark BUX stock index fell 0.5 percent.

“This is foremost about the rights of Hungarian citizens,” Judith Sargentini, a Dutch member of the Greens who steered the recommendation through the 28-nation Parliament, said after its vote in Strasbourg, France.

‘Slap in the Face’

Numerous members of Europe’s Christian Democratic faction, which includes the Fidesz party of Orban, abandoned him in the roll-call vote that became a litmus test with EU Parliament elections looming next May. That expanded support for the move against Hungary from Socialists, Liberals, Greens and the post-communist left.

In a raucous debate on Tuesday in anticipation of the vote, Orban said the EU Parliament’s planned move “insults the honor of the Hungarian nation” and was “a slap in the face.” He also described the initiative as an attempt to “blackmail” Hungary into softening its hard-line opposition to migration.

Guy Verhofstadt, leader of the Liberals in the chamber, said Orban was bent on wrecking the EU in tandem with the likes of populist Italian Deputy Prime Minister Matteo Salvini and the goal of the proposal against Hungary was to “stop this nightmare.”

The split within the assembly’s Christian Democrats casts doubt about Fidesz’s future in the group and raises the prospect of new European alliances as French President Emmanuel Macron urges pro-EU forces to unite against nationalists, who gained ground most recently in Swedish elections on Sunday.

“It’s a blatant show trial,” Hungarian Foreign Minister Peter Szijjarto told reporters in Budapest. He said charges against Hungary were “unjustified and untruthful.”

Authoritarian Shift

Scrutiny of democratic standards within the EU has moved up the bloc’s agenda steadily for two decades as policy makers have sought to tackle a discrepancy between the norms demanded of aspiring members and those enforced on existing ones.

Orban’s push for ever-more political control over state institutions has sparked fears in the EU of a shift toward authoritarian rule that communism’s collapse in eastern Europe more than a quarter century ago was deemed to have ended.

The EU Parliament vote scales back the political protection in Europe that Orban has enjoyed as a result of Fidesz’s membership of the bloc’s Christian Democratic club, which is called the European People’s Party. The EPP, which has about 30 percent of the assembly’s seats, also includes German allies of Merkel.

Article 7

With its verdict, the EU Parliament has done to Hungary what the commission did to Poland last year.

The commission, the EU’s regulatory arm in Brussels, proposed in December that the bloc’s national governments trigger Article 7 of the European treaty against Poland because of an assault on domestic judicial independence by the governing Law & Justice Party.

Were at least four-fifths of EU governments to endorse such a move, a subsequent possibility would be for the bloc’s leaders acting unanimously to declare the existence of “a serious and persistent breach” of values and for national governments acting by a weighted majority to impose sanctions including the suspension of voting rights.

Because pursuing this route would be politically divisive, EU governments have left the commission proposal against Poland largely on hold and sought to win more time for a negotiated settlement with the government in Warsaw.

Meanwhile, Poland and Hungary face a separate EU threat over democratic backsliding as a result of their reliance on European funding that has helped them overcome the economic legacy of communism. As part of plans for the EU budget after 2020, policy makers are weighing whether to make billions of euros in development aid for member nations conditional on their respect for democratic norms.

©2018 Bloomberg L.P.