“The new state that we are building in Hungary today is not a liberal state. It doesn’t deny liberalism’s basic values such as freedom but doesn’t make it a core element. It uses a particular, nationalist approach.” Last Saturday’s (26 July) grandiose speech was intended by the Hungarian Prime Minister Viktor Orban to mark a clear turning point from the liberal democratic model to a more nationalistic authoritarian one which he intends to be highly corporatist in nature, writes Tim McNamara, our chief political correspondent.

Interestingly, Orban, in a nod to pan-nationalism, chose to make his speech to a gathering of ethnic Hungarian leaders in the Romanian town of Baile Tusnad, (Tusnádfürdő in Hungarian). Most of the attendees, if not all, would have been Romanian residents in possession of Hungarian passports. Like Putin with expatriate Russians, Orban sees the value of drawing closer ethnic Hungarians in the ‘near-abroad’.

The creation of a siege mentality in Hungarian political life, based on populist nationalism, is a deliberate strategy employed by Orban and his cohorts. Citing the ‘exceptionalism’ of the Hungarian people, he paints Brussels and Washington as conspiracists against his nation. He uses the threat of the ‘other’ both externally and internally, brooking no opposition from his political opponents. Even with 66% of the votes in Parliament (based on a mere 44% of the popular vote), he still wants to grind his political opponents into the dust.

Like Putin, he has systematically changed the media landscape to squeeze out unfriendly media outlets. Through a process of intimidation, buy-outs and selective taxation changes the Hungarian media is now a pliant and overwhelmingly sympathetic to Orban’s party Fidesz. In a remarkably similar move to what has happened in Russia, a recent OSCE report revealed that there was a “significant bias” towards the ruling party and that an increasing number of media outlets are owned by people associated with Fidesz.

Taking a leaf out of Putin’s United Russia playbook for targeting the independent media,  Fidesz have manipulated the tax system to focus upon the largest independent media outlet in Hungary, RTL. By creating escalating tax bands for individual media companies they have ensured that RTL will soon operate at a significant loss and will eventually have to close down most of its activities.

Orban has also tried to shut down civil society organisations that allegedly receive funding from abroad. He has said “We are not dealing with civil society members but paid political activists who are trying to help foreign business interests”. This even applies to non-controversial work by Norwegian-funded NGOs.

Yet Orban differs from Putin in one highly significant area. Whilst Putin has territorial aspirations as part of restoring Russia’s reputation as a great power, Orban accepts the post-1945 borders of Europe. This despite over three million ethnic Hungarians living close  to Hungary’s borders. Whilst there are residual concerns in Slovakia, Romania, Serbia and Ukraine (trans-Carpathia) about the intentions of their Hungarian populations, there is no popular support for a ‘Greater Hungary’ policy.

Orban appears to be setting a course that will bring him into direct contradiction with the core values of the EU as enshrined in the ‘Copenhagen criteria’. Yet, besides a recent  intervention from the European commissioner, Nellie Kroes, and some comments in the USA media, Orban’s intervention has largely gone unnoticed.

One worrying trend is that Orban seems to be increasingly the sole arbiter of power in Hungary.  His recent decision to kow-tow to Moscow over nuclear energy in return for cheap loans is highly indicative of his maverick nature. The  Euro 10.5 billion contact (10% of Hungary’s GDP) appears to have been made unilaterally, ignoring legal tendering rules and without consulting parliament.

Attila Mesterhazy, former president of the biggest opposition party and the premier’s challenger in elections this year said the decision to “single-handedly” decide on the nuclear deal without consultation was tantamount to a “coup d’etat“. Whilst the merits of the deal have to be closely investigated, it is the manner in which Orban arranged the agreement with Putin that clearly demonstrates the dictatorial nature of his leadership.

Yet, the deal is notable for one particular reason. Putin is clearly the dominant force in the relationship. Orban may be currently the master of all he surveys within his own borders but externally, he looks increasing like the leader of a client state that is gently but perceptively gravitating towards Moscow’s sphere of influence. Which in itself is a remarkable state of affairs considering the residual concerns over the 1956 invasion by the Soviet Union.

It is remarkable that, up until now, Orban’s anti-EU rhetoric, his increasing authoritarianism, his antagonistic attitude to domestic criticism, his cosying up to Moscow and his bellicose nationalism has, it appears, almost been indulged by other EU leaders. Orban has been given the latitude and political space to carry out his policies that would be publicly condemned if a similar situation would occur in a candidate country applying for accession to the EU.

Orban’s technique in avoiding criticism is to avoid head-on collisions with the EU’s institutions (especially adjudications by the Commission and rulings by the Court of Justice). In a process of minimal concessions, Orban’s government makes tiny adjustments to the Hungarian legal code only if forced to do so. These tiny concessions then require a completely new legal procedure to start again. Its a similar defensive process adopted by the manufacturers of ‘Legal Highs’, who each time they are banned tweak chemical formulae by a single molecule thereby continually staying within legal definitions.

It is questionable that the Hungary of today fulfills all of the Copenhagen criteria. In the field of political and economic criteria there are very deep and growing concerns. With regard to stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities, the government in Budapest would today be hard pressed to claim that they act in accordance with the criteria. To be a prominent opponent of Orban in today’s Hungary, is to be a persona non grata with very few employment prospects and deemed to be a political pariah.

Orban’s nationalisation of private assets, his attacks on companies from other EU member states, especially multinationals, calls into question Hungary’s claim to be a functioning market economy. It seems that there is a decreasing capacity in the country to cope with competitive pressure and market forces within the Union.

It is a disgrace that the senior institution in the EU, the European Council, continues to indulge Orban. His government is increasingly violating fundamental democratic principles. The failure to name and shame Hungary as a country traveling down an anti-democratic path is creating a problematic example that other member states and candidate countries may follow.

His example is already being closely studied by populists in Greece, Romania and Bulgaria amongst others. Viktor Orban may not be a Putinesque figure in some respects but he does want to exert his influence on governments beyond his borders. His aim is clear, “the countries of Central and Eastern Europe should make their own policies without looking to the EU”.

Orban’s grandiose vision is a direct challenge to the democratic norms and principles that supposedly underpin the European Union. He is quite clear in the direction he wants to follow. “Breaking away from the accepted dogmas and ideologies, we will seek out and hammer out a new form of a Hungarian state that could make our community a success for decades to come in the global race”.

At some point, the other 27 member states are going to have to decide when enough is enough. Until then Orban and his followers will continue to dishonour core EU values and treat EU case law as a minor irritant.

Vicktor Orban may not be a political clone of Vladimir Putin, in that he lacks the diplomatic and military clout, but he has some remarkable similarities. It is time that the EU seriously considered sanctions against Hungary, starting with a complete suspension of regional aid in the form of structural funds.

Tim McNamara is head of the Peercourt consultancy firm. He was previously political editor at the European Commission.