(Bloomberg) -- Hungary’s most popular politician Peter Magyar has a plan to end his country’s economic crisis: defeat Prime Minister Viktor Orban in the next election, bring home frozen European Union funds and steer the country toward euro adoption.
A former ruling-party insider, Magyar has catapulted his nascent Tisza party into a double-digit poll lead against Orban’s long-dominant Fidesz ahead of the 2026 elections. A spate of political scandals, a plunging currency and a cost of living crisis have chipped way at the support of the five-term prime minister.
In an interview with Bloomberg, Magyar said the government had lost investor trust. Years of freewheeling spending have strained the budget while allegations of widespread corruption prompted the suspension of about €20 billion ($21 billion) in crucial EU funds. Moody’s Ratings on Friday cut the outlook on Hungary’s debt to negative from stable, citing the risk that Orban won’t succeed in unlocking the money.
Magyar, 43, said he would follow the example of Donald Tusk, the Polish prime minister who promptly regained access to EU funds after ousting his country’s nationalist leadership last year. As a first step, Magyar said he would allow the EU prosecutor’s office to probe corruption in Hungary, which has been seen a stumbling block in efforts to access the bloc’s financing and something that Orban has rejected.
“EU funds would be the first item on our agenda,” Magyar said after a rally in Szekesfehervar, west of Budapest. “It’s a key task to emulate Tusk in preparing and negotiating that. We need that money.”
Magyar’s Tisza Party still faces formidable obstacles on the road to power, including the media apparatus backing Orban and election rules that are once again under revision by the Fidesz-dominated parliament. International monitors have characterized the previous votes that brought Orban four consecutive victories as “free but not fair.”
Tisza, which Magyar set up just weeks before the June elections for European Parliament, has had a meteoric rise in Hungary, unlike any other challenge to Orban’s 14-year rule. It came in second with 30% in the EU vote and is now polling at 47% among decided voters, 11 points ahead of Fidesz in the latest poll by Median.
The government has responded to the surveys saying it aims to “win elections, not opinion polls.”
With the economy in recession, Magyar said there was a need for a fresh start after successive years of missed budget and economic growth targets. That had pushed the government to rely on windfall taxes, some of them targeted at foreign investors, to plug budget holes.
Market Trust
“A new government with more predictable economic policies would win back the trust of markets if it doesn’t change laws daily or doesn’t seek to penalize foreign investors,” Magyar said. “After that, the country’s risk premium will plunge and sovereign debt can be refinanced at a much cheaper level.”
That would be key to finance Magyar’s plan to inject more cash into long-neglected areas, such as health and education, pledges that have resonated with voters.
One crucial area where Magyar would diverge from Orban is euro adoption. The common currency would provide additional stability for the economy and markets, Magyar said, though a specific entry date and forint conversion rate would still need to be worked out.
“We want a predictable forint exchange rate and we’d like to have a date for joining the euro area,” Magyar said.
Hungary’s currency has lost more than 7% against the euro this year as unfavorable global sentiment made investors focus on the country’s financial vulnerabilities. That’s forced the central bank to halt monetary easing and to keep its key interest rate at 6.5%, tied with Romania for the highest borrowing cost in the EU.
The forint extended its losing streak on Monday to near a two-year low against the euro after the outlook cut by Moody’s, which also cited the risk of election spending for its decision.
“I know the euro has advantages and disadvantages,” Magyar said. “But it gives stability and predictability for the markets, for Hungarian entrepreneurs and Hungarians.”
©2024 Bloomberg L.P.