Hungary is one of the loudest opponents to the federalization of the European Union. The success of the Euroskeptic Fidesz party in the country's general election shows that many Hungarians support the party's positions on issues such as EU integration and immigration. In our 2018 Second Quarter Forecast, we wrote that the April 8 election would not lead to a significant change of direction in Hungary, but we warned that the country's position in the European Union could become more fragile in the future.
Euroskepticism is in good health in Hungary following the nationalist Fidesz party's landslide victory in the country's April 8 general election. Now that most votes have been counted, the party could end up controlling a two-thirds majority in the Hungarian parliament. Since taking office in 2010, Fidesz leader and Hungarian Prime Minister Viktor Orban has maintained a consistent platform: His party is critical of the process of EU integration, defends anti-immigration positions and has introduced controversial measures in areas such as the banking sector, media and judiciary. Fidesz's strong victory on Sunday, in which it received more than 48 percent of the vote, suggests that voters approve of these actions.
The outcome will encourage the Hungarian government to continue its policies. Budapest will remain critical of European integration and seek support from its partners in the Visegrad Group (which also includes Poland, the Czech Republic and Slovakia) in its opposition to EU federalization. Hungary and Poland will continue backing each other in their disputes with the European Commission, each likely threatening to veto any proposed sanctions against the other. Moreover, Hungary will avoid making any moves to join the eurozone and will remain insistent on improving relations between the European Union and Russia.
Fidesz's strong performance is a reminder that Euroskeptic and anti-immigration parties can still win elections in EU member states and exacerbate divisions within the bloc. Like-minded parties such as France's National Front and Alternative for Germany welcomed the results. However, Hungary is a small country with limited political impact on the rest of the European Union; Fidesz's influence on voter sentiment in larger EU member states will probably be modest at best.
As Hungary forges ahead with its current policies, it could become increasingly isolated from its partners in Western Europe, as well as from the European Union's main decision-making bodies. For example, Hungary's nationalism could make the union less inclined to continue providing much-needed EU funds. The bloc's next multiyear budget will be implemented in 2021, and the European Commission and member states such as Germany have suggested that future money disbursements be linked to respecting EU rules and principles. Money from the union has been crucial to Hungary's robust economic growth over the past decade and a half. Hungary's economy could suffer if the bloc decides to sever its structural and agricultural funds on the grounds of insufficient cooperation.
Markets have adapted to Fidesz's confrontational governing style, but policies that extend government control over political and economic institutions could threaten Hungary's access to foreign direct investment, another pillar of the country's economic growth. In addition, Hungary's aging population, low birth rates and high rates of emigration could lead to a smaller workforce, putting additional pressure on the country's pension and healthcare systems.
The growth of nationalist sentiments could amplify social tensions within Hungary, especially for minorities such as the Roma, who constitute roughly 3 percent of Hungary's population. And frictions with neighboring countries with ethnic Hungarian minorities, such as Slovakia and Romania, could increase. Ultimately, while Fidesz has many reasons to celebrate the widespread approval of its policies and approach, Hungary's governing party is also setting up potential roadblocks to its own success.