Constitutional Court Curtailed: Good news for fiscal balance, bad for democracy

Background

Hungary’s governing Fidesz party initiated an unprecedented effort October 26 to strip the Constitutional Court – Hungary’s final authority on legislative questions – of a number of powers. Fidesz parliamentary caucus leader János Lázár submitted the Constitutional Court Amendment after the court struck down several laws as unconstitutional, including a 98% tax on public-sector severance-pay packages worth more than HUF 2 million (€7,275). While the tax itself was insignificant for Hungary’s budget, the ruling suggested that the court might also find constitutional issues with new surtaxes on businesses and plans to divert private pension-fund contributions into state coffers. Without these revenue streams, Hungary will be unable to reach its budget-deficit targets of 3.8% of GDP for 2010 and 2.8% of GDP for 2011. This is why Fidesz swung into action with a constitutional amendment to curtail the court’s scope of authority.

The Constitutional Court Amendment

Fidesz’s proposed constitutional amendment would take away the Constitutional Court’s right to rule on any issues that are also off-limits to popular referendums. These include:

• The budget, tax laws and import duties
• Obligations related to international treaties
• The government’s political program
• Dissolving Parliament
• Declarations of war and national emergencies
• The activities of the Hungarian armed forces
• Parliamentary personnel decisions

Consequences of the decision:

• Fiscal: The loss of Fidesz’s 98% tax on public-sector severance payments over HUF 2 million is just a pretext: By the government’s own estimates, this tax would generate only HUF 1 billion in revenue for 2010. Fidesz’s true concern was that the Constitutional Court would abolish its surtaxes on the financial sector, chain stores, the energy sector and the telecommunications companies, plus its decision to seize employee contributions to private pension funds: These measures are worth a combined HUF 400 billion (€1.5 billion) for 2010 and HUF 700 billion for 2011. The loss of these revenue streams would spell disaster for the budget. From Fidesz’s perspective, narrowing the role of the Constitutional Court was the only hope for maintaining fiscal balance.
• (Romania’s Constitutional Court sparked financial panic June 25 when it struck down the government’s pension overhaul, shaking investor confidence in the entire Central and Eastern European region. The court’s ruling prompted the International Monetary Fund to postpone its June 28 review of Romania’s €20 billion standby loan.)
• Political: The Constitutional Court panic has generated the biggest outcry since Fidesz won power last April; even the right-wing media and intellectuals have criticized the governing party’s actions. Perhaps most significantly, it is unclear whether members of the Christian Democratic People’s Party (KDNP), a subgroup of Fidesz that has its own caucus in Parliament, will support Lázár’s bill. This is the first time there has been the slightest hint of a split in the legendarily homogeneous Fidesz-KDNP. Given the acrimony, Fidesz may have a tough time reaching the two-thirds majority it needs to pass a constitutional amendment, so a strategic retreat cannot be ruled out. (This is not very likely, since Prime Minister Viktor Orbán has come out in support of the bill). The opposition remains far too weak to threaten Fidesz‘s power – but Fidesz can still weaken itself with the political arrogance reflected in the amendment.
• Democratic and Constitutional: The proposed amendment reveals that the Fidesz-led government does not tolerate any barriers to its rule – at least on the domestic level. Fidesz argues that there is no need for a strong Constitutional Court since democratic institutions have been stabilized. “In April, Hungary entered a new era,” Orbán spokesman Péter Szijjártó said on state television October 27. “This new era demands a new, finalized Constitution that is capable of regulating the new state of affairs. It is quite apparent that the old era’s Constitution is incompatible with the new era in several respects.” Such arguments reveal that the Constitution simply doesn’t have any political relevance for the government since Fidesz can use its two-thirds majority to change it at any moment.
• Fidesz is currently drafting its own Constitution, scheduled for completion next year. Should the need arise, lawmakers can also modify this new document at will. This poses a threat for the rule of law and can only weaken Hungary’s democratic and constitutional fundamentals.

  See our earlier analysis Independent Constitutional Courts: One man’s joy is another man’s pain