Goran BULDIOSKI and Peter NIZAK
Co-Director and Hungary Project Director
Open Society Initiative for Europe (OSIFE)
Brexit will undoubtedly have negative effects on Hungary but will not cause a “Huxit,” as some media have already speculated. Nevertheless, we can easily identify tangible harmful short-, mid-, and long-term consequences on Hungary.
The first and immediate negative impact is the uncertain status of hundreds of thousands of Hungarians who work in the UK, the exact number of which is unknown. Hungarian official data point at 112,000, whereas official data by the Office of National Statistics of the United Kingdom refer to 150,000 in 2014. Same year, György Matolcsy, the governor of the Hungarian National Bank made a much bolder statement by alluding to 300,000 Hungarians working in the UK at the time. Irrespective of the exact number, 100,000 represents a loss of 2 percent of the Hungarian labor force. The trend of Hungarians going to work in the UK has also accelerated, with a tenfold rise in the number since 2001 and a three-fold increase over the past five years. Further, as the Hungarians in the UK are an important source of remittances, many families felt directly the effect of the weakened pound after Brexit. A bigger worry is the status of these people and uncertainly about their ability to remain in the UK after it leaves the Union. Their status is also a politically sensitive issue, as the Hungarian economy and government service would face enormous difficulties to absorb the return of so many people to Hungary. The fear was palpable, as the Hungarian government paid for advertisements in British newspapers that argued against Brexit before the referendum in June.
The mid-term negative impact of Brexit will arrive in the form of diminished EU funds. Losing the United Kingdom, the EU’s second-largest net contributor, will result in a decrease of EU funds to countries such as Hungary, which are net beneficiaries. In addition to this loss, from 2020 the UK’s absence will cause a reduction in EU structural funds. As most structural developments in Hungary are financed from these funds, this reduction will cause serious damage to the national economy (the latest calculations are 3 percent to 4 percent of GDP). On the positive side, as the UK was a modest source of foreign direct investment in the country, its departure from the EU will not affect the investment climate in Hungary.
A long-term negative impact of the UK departure is a protracted but inevitable decline of the rule of law across Europe and weakened enforcement of EU regulations. In the UK, the EU was a stalwart of the market economy and liberal democracy, regularly backing up the role of the Commission to watchdog adherence to the EU rule of law. Once UK is gone, EU will lose a very strong supporter of a rule-based union. Brexit has already triggered a serious shake-up in Europe, and Hungarian leadership along other likeminded politicians in Europe may seize the opportunity to “reshape” the EU and weaken some of its regulations. The Hungarian government is already in the habit of opposing the EU, as the upcoming referendum on the European Union quota system for resettling asylum seekers demonstrates. Brexit may embolden the government to intensify its demands and solicit more concessions from the EU.
Will Hungary be next?
Hungary will not follow the example of the UK and leave the EU. Because the Hungarian population harbors ambivalent but pro-EU sentiments, it will be politically difficult for the government or any other force to sway those opinions. Further, FIDESZ, the ruling party, has a strong economic interest in EU membership as it brings private investments and so much needed EU structural funds, without which it could not “feed” the friendly businesses close to the party. In conclusion, Brexit has and will have negative effects on Hungary but will not trigger its exit from the Union.
As the Hungarian government initiated a referendum on obligatory quotas, this question was raised several times in the media. See more: http://journal-neo.org/2016/08/17/will-hungary-be-next-to-exit-the-eu/ or https://alethonews.wordpress.com/2016/08/17/will-hungary-be-next-to-exit-the-eu/
According to the Central Statistical Office, 111,000 Hungarians officially worked abroad in 2015. The main target countries were Austria, Germany, and the UK. See more: https://www.ksh.hu/docs/hun/xftp/idoszaki/mo/mo2015.pdf.
However, TARKI points out that these statistics are not reliable because of definition problems (who are the “emigrants”?) and a lack of data from the target countries. See more: http://www.tarki.hu/adatbank-h/kutjel/pdf/b337.pdf. Using the data of the UK statistics office, Index (a reputable local news portal) put the number at 150,000 already in 2014; see: http://index.hu/gazdasag/igazamiigaz/2014/06/09/egymillio_magyar_dolgozik_angliaban/.
According to a recent poll by Zavecz Research, Hungarians have a pro-EU sentiment but they are critical: they are not satisfied with the performance and results of EU. They do not value the political benefits but prefer the material, practical ones (such as opportunities to work in other EU countries, Schengen, and economic benefits). They see migration and decreased sovereignty as the two major problems. See more: http://index.hu/belfold/2016/08/16/ok_akarnak_itthon_kilepni_az_eu-bol/.