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Hungary’s New PM Magyar Picks Karman to Lead Fiscal Recovery

Hungary’s state-heavy ‘Orbánomics” is officially over. Enter Péter Magyar, who wishes to ‘mend relations’ with the EU.

Now that Péter Magyar has taken office as Hungary’s new prime minister, he will look to András Karman, his nominee for finance minister, to execute a rapid fiscal pivot, dismantling 16 years of state-heavy “Orbánomics” and restoring investor confidence in the Central European hub.

Real GDP is expected to grow by 1.7% to 2.3 % this year, with average consumer prices rising 3.8% and the unemployment rate at 4.2%, according to the International Monetary Fund’s April World Economic Outlook.

The outgoing government of Viktor Orbán did not give Karman much to work with, as the first-quarter cash-flow deficit reached 3.4 trillion forints ($11.3 billion). At 80% of the full-year target, leaving the incoming administration with negligible fiscal headroom.

“[Former Prime Minister Viktor] Orbán has always regarded fiscal order as equal with neoliberal ideology or austerity attitude, or ‘something the Left does in office,’” says Péter Ákos Bod, professor emeritus in the Department of Economic Policy at Corvinus University of Budapest and former governor of the Central Bank of Hungary.

Path to Stabilization

Growth is picking up after a three-year post-pandemic stall. Fitch Ratings now projects GDP to rise by 2.3% this year and 2.6% in 2027, driven by a rebound in domestic demand and heavy investment in the auto and battery sectors.

However, fiscal risks persist. While inflation is cooling toward 3.5%, the deficit widened to 5% last year and is expected to hit 5.6% in 2026. This “fiscal slippage” led Fitch to issue a negative Sovereign Outlook in December, signaling the narrow window Karman has to stabilize the books.

A life-long banker, Karman’s immediate task will be to free approximately €17 billion in EU Cohesion Funds and a Recovery and Resilience Facility, which have been frozen since late 2022.

“While the funds ostensibly hinge on meeting 27 ‘super milestones’ around judicial independence, anti-corruption, and procurement transparency,” said Sili Tian, a Central and Eastern Europe analyst at the Economist Intelligence Unit. “We expect a relatively quick disbursement as Mr. Magyar seeks to quickly mend relations with the EU.”

That may be difficult to achieve, he said, as many Orbán loyalists are entrenched across the bureaucracy, the tax authority, the judiciary, and Hungary’s largest enterprises, some with tenure into the 2030s.

Longer-term goals, such as exiting the EU’s Excessive Deficit Procedure, will require Hungary to reduce its budget deficit and its debt-to-GDP ratio. The process will likely take longer than the incoming government’s four-year term.

Justin Keay contributed to this article.

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Péter Magyar sworn in as Hungary’s new prime minister

1 of 2 | Peter Magyar, left, takes the oath of office as prime minister of Hungary during the inaugural session of the new National Assembly in Budapest, Hungary, Saturday. Photo by Tibor Illyes/EPA

May 9 (UPI) — Péter Magyar has been sworn in as Hungary’s new prime minister, ending Viktor Orban’s 16-year, right-wing leadership.

“I will not rule over Hungary — I will serve my country,” Magyar said Saturday after he took the oath of office in parliament, The BBC reported.

Magyar’s Tisza Party now holds 141 out of 199 seats in the parliament. That’s up from none because the party was formed two years ago.

Orbán’s Fidesz party dropped from 135 to 52 seats in the election in April.

Tisza is not a strong swing to the left; Magyar, 44, was once a Fidesz Party operative. But on March 15, 2024, he left the party to join Tisza, then an unknown startup.

Now, Magyar is a center-right politician: not quite a liberal or progressive, and definitely a conservative. But he is pro-Europe and European Union, which Orbán was not.

The EU flag was hung on the Hungarian parliament building for the first time since 2014.

Magyar had invited people to join him to “write Hungarian history” together Saturday and “step through the gate of regime change.” Supporters gathered outside the parliament building, cheering and waving Hungarian flags.

Leftist and liberal parties will have no seats in the parliament for the first time since 1990, when Hungary broke free of the Soviet Union. But Budapest’s liberal mayor Gergely Karácsony said the new regime is still cause for celebration.

“Teachers fired, civilians and journalists humiliated, small churches torn apart,” Karácsony wrote on social media. “We can finally leave this era behind us — but first, let us remember the everyday heroes and express our gratitude with a farewell to the system.”

“This is the first time I feel like it’s good to be Hungarian,” Erzsébet Medve, 68, from Miskolc in northeastern Hungary, told The Guardian. “I feel like I could cry.”

Orbán and the Fidesz government cut education funding in Hungary. “The government had enough money, but they didn’t spend it there,” said Medve, a teacher.

Marianna Szűcs, 70, said she hoped Hungary would become more livable. “Now we feel like our children and grandchildren have a future here.”

New Tisza ministers said that while there will be no revenge against Orban’s people, those guilty of financial crimes will be held accountable. There will be a new office created to “recover stolen assets.”

“I don’t think that we should talk about a guillotine,” said Zoltán Tarr, incoming minister for Social Relations and Culture.

“We are talking about investigations and actions which are totally in line with the rule of law. Interestingly enough, the current chief prosecutor, and the police, have started certain investigations which they did not start before the election. They are questioning people.”

The Magyar government plans to convince the EU to release $20 billion in funds that the EU had held back from the Orbán government.

“I’m not worried, I’m excited,” Tarr said. “We are serving the country. We are serving the people. We are not here to rule. We are here to serve. We are here to fulfill a mandate.”

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From Insider to Insurgent, Péter Magyar Topples Orbán’s Illiberal System

The rise of Péter Magyar marks one of the most significant political shifts in Hungary’s modern history. His victory over Viktor Orbán ends a 16 year era defined by centralized power and strained relations with the European Union.

What makes Magyar’s ascent particularly striking is that he did not emerge from outside the system, but from within it.

From insider to challenger

Magyar was once closely associated with Orbán’s ruling Fidesz party and initially echoed many of its political themes, including nationalism and scepticism toward liberal European norms.

His turning point came in 2024, when he publicly broke with the government and sharply criticised corruption and the concentration of power. This positioned him as a credible reformist with insider knowledge of how the system operated.

Dismantling an illiberal model

Orbán’s “illiberal democracy” was built on gradually consolidating control over key state institutions, including the judiciary and media. Over time, checks and balances weakened, allowing the ruling party to dominate political life.

Magyar’s understanding of this structure allowed him to directly challenge its foundations, particularly by focusing on corruption and institutional accountability, issues that resonated with voters.

Building a broad coalition

Over two years of campaigning, Magyar evolved politically. He travelled extensively, engaging with voters across the country and broadening his appeal beyond a narrow ideological base.

According to Zsolt Enyedi, Magyar became a unifying figure for pro democracy forces, offering a platform that different groups could rally around. This ability to bridge divides proved crucial in defeating a deeply entrenched political machine.

A more pragmatic approach to Europe

Magyar is not an uncritical supporter of the European Union, but he is expected to take a more constructive approach than his predecessor. Economic realities, particularly the need to unlock suspended EU funds, will push his government toward cooperation with Brussels.

This creates a pragmatic dynamic where reform is driven not only by political vision but also by financial necessity.

A difficult transition ahead

The transition of power is likely to be complex. Magyar has already expressed concern about actions taken by elements of the outgoing administration, suggesting resistance within the system he now seeks to reform.

Rebuilding institutions, restoring trust, and dismantling entrenched networks will take time and political capital.

Analysis

Péter Magyar’s victory highlights a key dynamic in political change within entrenched systems: transformation often comes from insiders who understand the machinery of power.

However, electoral success is only the first step. The deeper challenge lies in restructuring institutions that have been shaped over more than a decade. This process is inherently slow and politically sensitive.

Magyar must navigate competing pressures. Domestically, he faces a conservative and somewhat eurosceptic electorate. Internationally, he is expected to repair relations with the European Union and align more closely with its standards.

This balancing act will define his leadership. While his victory opens the door to democratic renewal, the outcome will depend on whether he can convert political momentum into lasting institutional change.

With information from Reuters.

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