Democracy and Deficits Hungary and Cyprus Hijack EU Summit

Stalled economic growth and high unemployment were supposed to be the focus of this week's European Union summit in Brussels. But concerns about democracy in Hungary and debt in Cyprus have taken center stage. Both issues have generated considerable strife.
Prime Minister Orbán rejected criticism of recent amendments to Hungary's constitution.

Prime Minister Orbán rejected criticism of recent amendments to Hungary's constitution.

Foto: AP/ DPA

The focus of the European Union summit on Thursday and Friday in Brussels this week was supposed to be clear, with measures to promote growth and reduce unemployment across the Continent topping the agenda.

But instead, this has been overshadowed by a number of other issues that have thrust themselves into the limelight.

First and foremost among them is the extreme concern with which European leaders are viewing recent constitutional amendments pushed through  by the Hungarian government of Prime Minister Viktor Orbán. Just as heads of state and government were set to begin their regularly scheduled meeting in Brussels on Thursday, the issue emerged at the forefront, with a decisive shove being provided by European Parliament President Martin Schulz.

"The European Union is a community of values," Schulz said. "We cannot remain silent if a member state rides roughshod over them." Schulz demanded that European leaders take a close look at the constitutional amendments passed by Hungarian parliament on Monday to see if they counteract European values and to punish the country if they do. "In response, Orbán sharply attacked me," Schulz said, adding that the atmosphere between the Hungarian prime minister and other European leaders was "very frosty."

The point was underlined during Orbán's combative press conference on Thursday afternoon. "Who is able to present even one single point of evidence -- facts, may I say -- which could be the basis for any argument that what we are doing is against democracy?" he said. "Saying 'we don't like something' is not concrete enough to react …. I am more than happy to answer their questions."

'Political Opinions'

Schulz was not alone on Thursday in questioning the recent changes made to Hungary's constitution, though. German Chancellor Angela Merkel emphasized that a parliamentary majority should not be "abused," adding that it should be "treated very carefully." And Viviane Reding, EU commissioner of justice, said that the European Commission would take a close look at the amendments and examine possible sanctions. "You don't play around with the constitution," Reding said. "You can't go and change the constitution every six months."

The amendments in question are to a constitution that Orbán's government only installed last year. They were passed by an overwhelming majority on Monday evening, with 265 lawmakers voting in favor, and just 11 against, with 33 abstentions. Orbán's conservative Fidesz party holds more than the two-thirds parliamentary majority necessary to pass constitutional amendments in Hungary .

Legal experts say the changes will severely limit the powers of the country's constitutional court and likewise erode freedom of expression. Several laws the constitutional court had previously rejected, such as a ban on the homeless from loitering in public places, were also anchored into the constitution.

Orbán showed no signs of backing down on Thursday, saying defiantly: "As far as I can see, we are talking about political opinions here. They cannot replace facts."

Yet despite Orbán's apparent pleasure in the massive turnout for his Thursday afternoon press conference, his country was not the only issue to highjack the summit agenda. Though Merkel said repeatedly on Thursday that a potential Cyprus  bailout was not on the schedule, it was a major topic in smaller, informal groups on the summit sidelines.

Berlin Puts on the Brakes

Luxembourg Prime Minister Jean-Claude Juncker, who was also, until recently, head of the Euro Group, demanded that a solution to the issue be found by Friday evening. Specifically, Juncker was referring to the parallel meeting of euro-zone finance ministers in Brussels on Friday, saying the gathering "must not only make progress towards a solution to the Cyprus question, but present it in finalized form" by Friday evening.

The head of the Cypriot central bank, Panicos Demetriades, likewise piled pressure on the euro-zone on Thursday saying that his country presents a "systemic danger" to the common currency. "The greatest risks are coming from the periphery and at present that is Cyprus," he said, adding that the bailout must be ready by the end of the month.

Merkel, however, sought to lower expectations of a finalized package being ready on Friday. Further negotiations, she said, are "desirable," adding that it takes time to come up with a "prudent, quality solution."

New Euro Group head Jeroen Dijsselbloem suggested on Thursday that finding such a solution might actually be easier than thought. Thus far, it had widely been assumed that the country needed a bailout of €17.5 billion. Though small relative to previous euro-zone bailouts, the sum is close to the equivalent of the small country's annual gross domestic product and raised concerns about Cyprus' long-term ability to shoulder that debt.

Lower Cypriot Financing Needs

Dijsselbloem, however, said on Thursday that the country's actual needs are closer to €10 billion ($13 billion). He declined to offer details, but hinted that Russia might play a greater role than previously assumed. One of the primary hurdles facing the package has been the significant presence of Russian money in Cypriot banks  and EU concerns that bailouts would first and foremost help Russian oligarchs. The country's alleged ineffectiveness in combating money laundering has also led many in Berlin and other euro-zone capitals to view a bailout with skepticism.

As for the actual agenda prepared for the summit -- those issues will apparently be addressed, too. French President François Hollande made sure of that on Thursday by demanding more flexibility on EU budget rules to create growth. Saying that he remained committed to budgetary consolidation, Hollande added: "It is precisely because of this commitment that there must be flexibility, because the only priority right now, aside from the budgetary commitments, is growth …. Too much rigidity would mean too much unemployment."

Berlin is unlikely to consider watering down EU budget rules, though. It was only on Wednesday that German Finance Minister Wolfgang Schäuble announced that his country's budget would be balanced by 2015, a year earlier than necessary under the "debt brake" amendment to the constitution. Deputy Chancellor Philipp Rösler, who joined Schäuble in announcing the news, crowed that Germany was "an example to Europe" and that "the whole world envies" its finances. Hardly the words of a leadership willing to grant France much wiggle room.

With reporting by Christian Teevs in Brussels and information from wire reports
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