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Hungarians are holding daily protests as a plunging currency and the threat of a Russian cut-off of natural gas shipments to Europe forces Prime Minister Viktor Orban to embrace unpopular austerity measures.
A few thousand demonstrators rallied by the Danube river in Budapest on Saturday evening, according to local media reports. Protesters then blocked a bridge for a fifth consecutive day since the cabinet unveiled tax hikes for hundreds of thousands of Hungarians.
Orban’s administration also announced this week $1.4 billion in spending cuts and funding freezes as well as a cap on decade-old subsidies that have kept household utility bills at a fraction of current market prices. Starting next month, millions may face a steep rise in the cost of gas and electricity that exceeds average consumption.
The measures rank among the biggest policy shifts by Orban since he launched a campaign to consolidate power and win popularity via generous social handouts and a state-backed propaganda juggernaut when he returned to office in 2010. They’re also jarring for Hungarians after Orban’s lavish pre-election spending and a pledge to leave the utility subsidy system untouched helped him to a fifth term in the April ballot.
“This will be the first real stress test of Orban’s system,” said Peter Kreko, director of the Political Capital research institute in Budapest. “This shows that economic populism eventually hits its limit.”
Hungary’s reliance on Russia for most of its oil and gas consumption makes the country among the most vulnerable in the European Union to a potential cut-off of Russian supplies.
The forint has plunged almost 10% against the euro since Russia’s invasion of Ukraine in February, the biggest drop among emerging market currencies, while the yield on the five-year government bond also climbed past 10% for the first time in a decade.
Orban is partly reversing the election spending that deepened twin trade and current account deficits. He’s also weighing concessions to unlock more than 15 billion euros ($15.1 billion) of crucial pandemic-recovery funds that the European Union has frozen over graft and rule-of-law concerns.
Late Friday, Orban signed a government decree setting up a government anti-corruption task force. His cabinet has also broached accepting the jurisdiction of the EU’s chief prosecutor. Orban had previously considered that a red line, and joining the program may expose the ruling elite to graft probes that are otherwise unlikely due to tight political control of his ruling Fidesz party.
“Viktor Orban is playing an active part in this,” Hungary’s EU Funds Minister Tibor Navracsics told Mandiner weekly in a report published Thursday. “He’s the one calling the shots.”
(Updates with protest in second paragraph.)
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