Hungary quietly capitulates to Norway's demands

December 23, 2015

norway

“There is a message in this for the EU in that it shows that it is possible to handle such cases in a principled way.  It pays off to stand up for fundamental values. We are under so much pressure externally that it is even more important to ensure internally that we hold each other to account in Europe. The EU should learn from that.” – Vidar Helgesen, Norway’s minister for EU affairs

“How any of this means that rule of law exists in Hungary is difficult to understand.” – 444.hu

Translation of “The government concluded a secret agreement with the Norwegians, conceding everything to them” (Titkos alkut kötött a kormány a norvégokkal, mindenben engedtek nekik)

The Norwegian and Hungarian governments have worked things out. Hungary can now call down the funds that Norway contributes to Hungary’s development. The reason why no one knew about the terms of the agreement was because the Hungarian government asked the Norwegians to keep the details under wraps.

News of the agreement quickly spread to the other Scandinavian governments and it was soon the talk of the European diplomatic circles that Hungary had given written assurances that it would never ever again attack the NGOs funded with Norway’s money.

This agreement is significant because it is an admission on behalf of the Hungarian government that it did indeed use political force to get Hungarian authorities to go after NGOs in Hungary. The terms of the agreement seem to suggest this as well. According to 444.hu’s information, the terms of the agreement 

  • the NGOs will have their tax ID numbers restored
  • no criminal proceedings will be launched against the NGOs
  • KEHI (Government Inspection Office) will close the case it opened to bring the issue to NAV (National Tax and Customs Authority)

The government of Norway lifted its suspension of the development to Hungary on December 9th in accordance with an agreement signed on November 24th in Brussels. Politico.eu obtained the minutes of the November 24th meeting and posted it on their website.

The details of the agreement were hashed out on November 23rd when the Hungarian government’s delegation, led by PMO undersecretary Zsigmond Perényi, settled the dispute with Norway. What is interesting about the agreement is that the government of Hungary finally agreed to the conditions that it found completely unacceptable only thirteen days earlier.

The Hungarians capitulated pretty quickly. Norway’s ambassador in Budapest said in early November that the suspension would only be lifted if the Hungarian government stopped harassing the NGOs.

Responding to the ambassador’s statement, PMO undersecretary Nándor Csepreghy appeared on state-run television and said Norway’s terms “resemble blackmail” and were unacceptable. He even threatened the Norwegians by saying “it is worth considering what kind of legal ramifications Norwegians position could bring”.

It is no surprise, therefore, that the Hungarian government really wanted the Norwegians to keep the agreement secret.

The Norwegians celebrated complete and utter victory

The Norwegians communicated the agreement as an absolute victory and have openly said that the issue surrounding the NGOs played a role, but they have also refrained from making public specific details of the agreement.  Vidar Helgesen, Norway’s minister for EU affairs, told the Norwegian parliament that the suspension was lifted because the Hungarian government provided guarantees that it would leave the NGOs alone.

“There is a message in this for the EU in that it shows that it is possible to handle such cases in a principled way,” Helgesen told Reuters.

“It pays off to stand up for fundamental values,” he told Politico. “We are under so much pressure externally that it is even more important to ensure internally that we hold each other to account in Europe. The EU should learn from that.”

18 months of madness

Norway is not a member of the EU, but it is a member of the European Economic Area. This means that Norway must also contribute to the development of the EU’s poorest countries. A large portion of Norway’s grants to Hungary are spent together with the help of the Hungarian government. A much smaller portion of Norway’s money is allocated to NGOs. A consortium led by Hungary’s Ökotárs Foundation was awarded the responsibility of distributing the NGO funds following an open tendering process.

The Hungarian government changed its fund distribution system in early 2014 without ever seeking the input of the funds’ donor, Norway. The situation became tense when the Hungarian government started attacking the Ökotárs Foundation after the 2014 election. That was when János Lázár started attacking Ökotárs for having ties to Hungarian opposition party Politics Can Be Different (LMP) and accused the Norwegians of funding opposition parties in Hungary.

The Norwegians rejected these claims. A few weeks later, the Norwegians suspended a large portion of their funding to Hungary. The Norwegians did not suspend the much smaller NGO funding distributed through Ökotárs.

(This is not correct.  The attack on civil society took place immediately AFTER Norway formally notified the Hungarian government that it was suspending payment of development funds to the government owing to its failure to provide satisfactory answers after it wound up the National Development Agency at the end of 2014.  The attack on beneficiary NGOs by Minister Overseeing the Prime Minister’s Office and János Lázár and undersecretary for communications, Nándor Csepreghy, was Viktor Orbán’s way of pressuring Norway into resuming fiscal transfers to the government of Hungary.  The message was clear:  “Either give us the money or we’ll destroy the very NGOs you have been supporting”.-ed.)

The Hungarian government responded by ordering the Government Control Office (KEHI) to audit Ökotárs. KEHI finished its audit by autumn 2014 and claimed to have found improprieties in Ökotárs’ books. KEHI then reported Ökotárs to Hungary’s tax authority. Hungary’s tax authority then raided the offices of the organizations, seizing documents and computers. The authority also suspended the organizations’ tax ID number and, after a year of investigations, dropped the case. By October 2015, Hungarian authorities determined that no crimes were ever committed by the organizations.

The debate surrounding Norway’s suspension of the funds was formally closed when the Norwegians announced they would accept the government’s new fund distribution system. Another part of the agreement was that the Hungarian government would have to stop harassing the NGOs and their employees.

Billions of forint in losses

The Norwegian government suspended EUR 150 million worth of funding between May 2014 and December 2015. Of these funds, about EUR 100 million can still be salvaged by the Hungarians but the clock on the remaining EUR 50 million has run out. That’s about an HUF 15 billion loss.

The Hungarian government tried to explain this loss in a strange way. On December 10th, János Lázár announced that the agreement between the two countries means that Hungary could still use HUF 37-40 billion from the fund. But the suspension affected EUR 150.3 billion. The amount named by Lázár only comes out to about EUR 120 million. He only acknowledged half of the loss publicly.

Much ado about nothing

So what did the Hungarian government gain from all of this? Nothing at first glance. It did, however, incur losses. The attacks against civil society were criticized by numerous Western governments, including the United States. Hungary’s bilateral relations with Norway were all but destroyed and Hungary’s perception in the West was also tarnished further.

The war of words continues in Hungary

“The government maintains its position that certain civil society organizations received funding from the NGO fund unlawfully. The agreement is a sign that legal mechanisms continue to operate appropriately in Hungary and the government respects the rule of law,” PMO undersecretary Nándor Csepreghy said on December 9th.

That is, the Hungarian government will cease its investigations and has promised not to launch further investigations into the organizations, but the government will continue to maintain (at least domestically) that the NGOs broke rules. How any of this means that rule of law exists in Hungary is difficult to understand.

An agreement between Hungary and Norway concerning the funding for the 2014-2020 cycle has yet to be reached. The Hungarian government still wants to have the right to decide who distributes the NGO fund in Hungary. It remains to be seen whether the Hungarian government will concede that point, too, at a secret meeting in two weeks.