Orbán’s reaction to the 2019 local election defeat became clear early on: revenge and punishment of renitent cities. And the pandemic lent him an excuse. The worst hit city, and the one getting the full force of Orbán’s wrath, is Budapest.
For most of 2020, Orbán has been bogged down in Brussels, so his punishment was mitigated by that. His minions can grandstand, threaten and flout ideas in his absence – but the decision is made when Orbán is in the house. After his performance in Brussels, the infamous veto, Orbán returned to Budapest and turned his attention to cities (and shoveling money to cronies at a hitherto unprecedented rate – the two sometimes overlaps). The full force of his punishment will probably only be seen in 2021, but we have seen enough. Orbán is at war against Hungarian cities. He is punishing them. Because that’s what an autocrat allows himself.
The worst hit was Budapest. Apart from the ‘tax stop’, making parking free by decree to deprive cities of the parking revenues on top of everything else, the government demanded extra contributions from them. In Budapest’s case, the government even walked back of previous promises to co-finance the long-overdue renovation of the city’s oldest bridge – then the Orbánist media ran a campaign on how unfit the new mayor was, he can’t even renovate the bridge. They also ran a smear campaign against him, accusing him of Covid-19 deaths in retirement homes.
During a relatively relaxed summer in terms of lockdowns, the government realized that the absence of foreign tourists only hits Budapest, while the hotels and hospitality in the countryside flourished due to domestic guests having no other choice. The countryside also happen to be the place where Orbánists have bought up hotels in great numbers, especially around lake Balaton.
There is even an anti-corruption app, helping you avoided crony-owned hotels. It is not easy, because these hotels don’t spend on investment or renovation, sometimes not even on staff because the EU finances all of that in the glorious name of employment, village tourism, palace renovations – so corny-run hotels don’t have to make any business sense at all, don’t have to make sure their prices or the number of guests (if any) would cover their costs. They don’t have any. No non-corny business can compete with that.
In September the borders were suddenly and inexplicably closed for foreigners, leaving the Budapest hotel and hospitality businesses reeling in pain. Sure, there was some program announced for them. There were Kafkaesque conditions to ask for help, if they are still employing people for some weird reason, and help tended to come after the period concerned, so you never knew if there would be any. Unless you were politically close, that is. Same happened to restaurants and the rest of the hospitality sector. Political loyalists were bailed out and thrived – they didn’t even have to bother to keep their staff. Others were pushed out of business – or keep bleeding out heroically trying to save staff. But the country is closed for foreigners for as long as it takes.
Apart from making hotels cheaper targets for potential takeovers – and there will be interested cronies who’d love to occupy more of Budapest – the border closure shot Budapest Airport in the leg. Budapest Airport has been a sore spot for Orbán for a long time, as he prefers to see everything “in Hungarian hands”, meaning one of his allies. When Budapest Airport turned to the EBRD for a EUR 50 million emergency loan, the government simply blocked it.
It took until late December before Orbán could turn his full attention to his domestic enemies but when he finally returned to Budapest, he summoned the representatives of the mayors’ alliance to “discuss” a further cut in their revenues. In truth, it has been floated for months by Orbánists, only the degree of the cut was unknown. The only opposition mayor at the table later claimed that he was only allowed in for a photo-op, he was escorted out before the real negotiations started.
Then Orbán announced the deepest blow yet, that he would cut back on one of the most important revenue of cities, the local corporate tax (hipa) by 50% on certain businesses. Local corporate taxes are an important source of revenue for towns and cities – mostly because everything else has been taken away from them during Orbán’s earlier moves against local autonomy. But they were still allowed to collect up to 2% of tax from corporations on their territory – accounting for up to 77% of cities’ revenues. They have to beg to the government for every other resource, including permissions to win EU tenders (the permission being contingent upon their election results). Cutting hipa was not a real help for businesses (it is a revenue-based tax and only accounts for 1-2% of their entire tax burden), but it sends the local authorities in question into bankruptcy.
Orbán then announced that he wants to see every city mayor one by one to discuss a possible compensation. Naturally, all the cities with Fidesz mayors got compensated. Budapest and the other opposition cities were not. The logic of an autocratic regime built purely on economic tools is that those who are not against us, must not eat. Economic tools – most notably disposition over the EU funds into the country – have been Orbán’s miracle weapon to silence dissent, buy loyalty and bend backbones.
It is a telling sign that Fidesz mayors (who were scared by the cut of hipa themselves) were delighted when they were compensated. One posted about the compensation on social media and called it a “Christmas gift” from Orbán.
Not killing them arbitrarily, in a petty revenge against his own country, is now a “gift”. I guess that’s what counts as gift in autocracies. Once you allow your rights to be taken away and the rule of law to die, you feel tearful, jubilant gratitude every time the autocrat could have finished you – but graciously chose not to. That’s the state authoritarians are working hard to reach.
An outsider would ask silly questions like whether “people” know that Orbán is behind the bankrupting of their towns. But that is not the real question. The question is whether this demonstration of power will be interpreted as a reason to stop resisting – or the opposite, that they should resist harder.
The Budapest mayor made an appeal to the EU to send some of the pandemic recovery money straight to cities – at least some relief from Orbán who uses the EU’s billions as a weapon against democracy, civil rights and any kind of independence. Naturally, the EU can only do damage – not fix it. And at any rate, that money would be taxed by Orbán at 120%, even if it arrived directly to the city.