Hungary swings back to Europe – and what this means for its partners

Orbán’s time in office was charac­terized by the systematic disman­tling of democ­ratic insti­tu­tions and checks and balances, the entrenchment of polit­i­cally organized and strategic corruption, and a reori­en­tation of Hungary’s geopo­litical alignment away from its European partners toward Europe’s strategic challengers, including the author­i­tarian great powers Russia and China, and – since January 2025 – increas­ingly the Trump administration.

Together with the erosion of output legit­imacy and the regime’s persis­tently weakening economic perfor­mance, these three factors played a decisive role on the demand side of politics in driving the robust mobilization of Hungarian society in support of govern­mental and regime change. On the supply side, the notable political achieve­ments of the “Respect and Freedom” (Tisza) party – estab­lished in early 2024 – and its leader, Péter Magyar, increas­ingly convinced Hungarian voters of the plausi­bility of opposition victory and political trans­for­mation. This encom­passed not only the successful devel­opment of party struc­tures and a resilient political movement in rural areas beyond the tradi­tional urban strong­holds of the opposition, but also the artic­u­lation of compelling narra­tives that effec­tively linked the regime’s corrupt practices to the everyday “bread-and-butter” concerns of ordinary citizens.

This political config­u­ration resulted, on 12 April, in a historic record turnout of 79.56 percent and a consti­tu­tional super­ma­jority of 141 mandates (out of 199) for Tisza. While approx­i­mately 70 percent of parlia­mentary seats was secured with only 53.18 percent of the party-list vote, it is important to emphasize that Tisza achieved this landslide victory within the same electoral system designed by Fidesz – one that had previ­ously enabled Fidesz to obtain consti­tu­tional super­ma­jorities with similar or smaller shares of the popular vote. Moreover, the opposition’s victory was delivered in a “free but not fair” election, conducted on an uneven playing field that conferred struc­tural advan­tages on the incumbent Fidesz party.

Restoring democracy, combating corruption, and re-estab­lishing Hungary as a constructive partner within the European Union constitute the most important tasks facing the new government. However, while the regime of Prime Minister Orbán repre­sented a well-known quantity in Europe, the incoming prime minister, Péter Magyar, and his government are under­standably less familiar, creating space for a wide range of projec­tions among investors and inter­na­tional partners. Against this backdrop, it is worth examining the key reform challenges in both the domestic and European political arenas, as well as the expec­ta­tions surrounding Hungary’s newly elected democ­ratic government.

The Way out of State Capture

Over its 16 years in power, the Orbán regime estab­lished political control over all key consti­tu­tional insti­tu­tions as well as Hungary’s media system. This control – partic­u­larly over the Prosecutor’s Office and the judiciary – enabled regime actors to become deeply entangled in political corruption without facing prose­cution or conse­quences under criminal law. As a result, the restoration of the rule of law and the fight against corruption are likely to be closely inter­twined in the months and years ahead in Hungary.

Even though the new parlia­mentary majority holds a consti­tu­tional super­ma­jority, the process of restoring the indepen­dence of state insti­tu­tions will most likely take years and may closely resemble the post-2010 period of consti­tu­tional engineering carried out by Fidesz – albeit directed toward the re-estab­lishment of democ­ratic checks and balances.

In his victory speech on the evening of 12 April, Péter Magyar called for the resig­nation of Hungary’s president, as well as the heads of several key insti­tu­tions, including the Consti­tu­tional Court, the Supreme Court (Kúria), the Prose­cutor General’s Office, and the State Audit Office, among others. This reflected not only the recog­nition that these political appointees have come to symbolize state capture in Hungary, but also the under­standing that the independent functioning of these insti­tu­tions is scarcely conceivable with their current leadership in place. Since then, Magyar has used several public appear­ances to sustain pressure on these officials, tacitly acknowl­edging that their removal from office is difficult – if not impos­sible – under the existing consti­tu­tional framework.

Tisza holds the political capacity to compre­hen­sively overhaul the Hungarian state system – including its office­holders – through the adoption of a new consti­tution. However, such a course of action could be perceived as contro­versial, both domes­ti­cally and at the level of the European Union. Péter Magyar has stated that he will not pursue a new consti­tution without the consent of other political parties. Should he adhere to this commitment, his government will be limited to consti­tu­tional amend­ments and a gradual disman­tling of state capture – an approach that will require the careful identi­fi­cation of entry points, a methodical strategy, and time.

In certain areas, however, results may be delivered rapidly. Tisza is likely to defund and restructure Hungary’s Fidesz-controlled public broad­casters, accede to the European Public Prosecutor’s Office, and, lever­aging its consti­tu­tional majority, swiftly establish an Anti-Corruption Prosecutor’s Office similar to those operating in Romania and Ukraine. By contrast, the imple­men­tation of other reforms may proceed more slowly; greater clarity in this regard is expected to emerge from the new government’s program.

EU and Foreign Policy Impact

While Hungary’s domestic autoc­ra­ti­zation has posed a signif­icant challenge to the democ­ratic integrity of the European Union – as has its record of strategic corruption affecting the EU’s financial interests – since Russia’s full-scale invasion of Ukraine in February 2022, Budapest has been primarily perceived as a spoiler due to its obstruction of key EU decisions. Since 2022, the Orbán regime has blocked all major financial assis­tance packages and instru­ments designed to support Ukraine at the EU level, and has diluted or delayed most of the EU’s 20 sanctions packages against Russia.

In this regard, the new government may deliver an almost immediate break­through. On Monday, 13 April, Péter Magyar announced that his government considers the current €90 billion financial package for Ukraine a settled matter; given Hungary’s opt-out from the joint borrowing component, he sees no reason why its imple­men­tation should not proceed. In a similar vein, he at first indicated that Hungary will not raise objec­tions to the launch of EU-Ukraine accession negoti­a­tions under the “Funda­mentals” cluster.

In early May, Magyar’s position shifted: he linked lifting Hungary’s blockade on the launch of accession negoti­a­tions to a far-reaching expansion of the rights of the Hungarian minority in Ukraine. At the same time, he offered President Zelensky a bilateral meeting and signaled his willingness to reset relations between Kyiv and Budapest. Whether this renewed blocking stance on Magyar’s part is a negoti­ating strategy aimed at securing maximum conces­sions on minority rights, or a revival of Fidesz-style coercive diplomacy, remains to be seen. However, the rapid shift in tone and course regarding the start of accession negoti­a­tions can be seen as an initial warning sign.

Another key EU-related issue for the new government will be the release of frozen EU funding. While successful anti-corruption reforms may unlock access to a signif­icant share of the approx­i­mately €9 billion in suspended cohesion funds, the more critical question concerns the fate of the €4.9 billion allocated under the European Recovery and Resilience Facility (RRF), which is set to be entirely lost by August 2026 due to the expiry of the program. While some of these resources could be utilized through techno­cratic workarounds – such as channeling funds into financial instru­ments or investment vehicles – the prospects of preserving even part of this allocation to support Hungary’s post-illiberal recon­struction appear very limited in the absence of a political solution, notably in the form of a deadline extension.

Securing access to frozen EU funding will be critical both for the new government’s output legit­imacy and for ensuring fiscal stability and sustainable economic growth in the years ahead.

The Investor Perspective

Hungary’s polit­i­cally influ­enced and corruption-prone public procurement practices, discrim­i­natory tax legis­lation, and the aggressive conduct of author­ities toward polit­i­cally disfa­vored companies have generated signif­icant distor­tions in the domestic market.

A return to market-based principles, the rollback of prefer­ential treatment, the intro­duction of robust anti-corruption measures, and the restoration of the rule of law could reposition Hungary as a more attractive investment desti­nation within the European Union – not only for top-tier multi­na­tionals with estab­lished political connec­tions, but also for mid-sized, inter­na­tionally active companies. This shift may be further supported by increased domestic consumption and investment, driven by a renewed inflow of EU funds, as well as by the new government’s long-term commitment to adopting the euro.

While key elements of the new government’s tax, economic, and fiscal policies will only become clear with the publi­cation of its program, investors can reasonably antic­ipate a more neutral, market-oriented, and business-friendly environment in Hungary – one in which the rule of law, rather than political connec­tions and corruption, shapes economic outcomes.