The key points of the analysis are as follows:

  • The Hungarian government desperately tries to present Angela Merkel’s visit as a great success. From a diplomatic aspect, the joint press conference by the German chancellor and the Hungarian prime minister revealed some disagreements over the concept of illiberal democracy, the treatment of NGO-s and the media. Speaking about the Ukrainian crisis the chancellor emphasized twice how important it was that Hungary re-started the gas transport to Ukraine.
  • Following the political fiasco, the government’s propaganda machine resorted a controversial PR stunt to shift the focus from the political criticism to the successful business agreements made during the negotiations. However, the leaked information about a new BMW manufacturing plant and the expansion of the existing Mercedes Benz plant was soon denied by both companies. Sources present at the meeting of the German chancellor and top executives of German companies in Hungary contradicted the government’s assessment: company leaders expressed their deep concerns about the business environment in Hungary.
  • According to Political Capital, the tone of the chancellor’s remarks was more scathing than anticipated. Though the visit was a political failure for the Hungarian government, the German side can claim some clear credits. First, it is very likely that the Hungarian state will buy a bigger stake in a power plant owned by RWE, and the German company can expect a generous offer, similar to the buy-out of MKB bank from Bayerische Landesbank. In the near future, the government plans to amend the controversial truck-tracking system (EKÁER) introduced earlier this year to prevent cross-border VAT evasion.
  • It is still not clear whether Siemens would participate in the highly controversial Paks2 nuclear plant project – the company has yet to commented such speculation.  Furthermore, if BMW does not choose Hungary as the location of its new plant and the government’s leaked information turns out to be a hoax, it will further damage the credibility of the government domestically.
  • As far as foreign policy is concerned, it is still opaque whether Orbán is ready to confront Russia and support further sanctions against Russia to regain some of his lost credibility in the West — while a gas deal between Hungary and Russia should be completed this year and it provides the Russian side a comfortable bargaining position for the upcoming Orbán-Putin meeting. 

Read the Flash Report here.