Dark Christmas Signals Tough Times for a Prosperous City in Hungary

GYOR, Hungary — Its fortunes lifted by a huge German-owned auto plant, the largest city in northwestern Hungary has unusually high wages, virtually no unemployment and a deep pool of voters who, grateful for their relative prosperity and well-funded municipal services, support Viktor Orban, the country’s long-serving nationalist prime minister.

So it came as a shock at the start of Advent in late November — only seven months after national elections in which the city, Gyor, gave Mr. Orban’s governing Fidesz party a thumping majority — that the city’s annual Christmas market, usually dazzling with festive lights and laser shows, opened in near darkness.

And that is not all that has changed. In October, Gyor shuttered museums, libraries, art galleries and an aquatic center, saying that high energy prices made them too expensive to operate. Schools and kindergartens have been ordered to keep their thermostats turned down.

The city, despite its relative wealth, is running low on money, as are municipal authorities in many other parts of Hungary.

Since Russia invaded Ukraine in February, countries across Europe and beyond have been jolted by soaring energy costs. But the shock has been particularly acute in Hungary, whose right-wing government has often balked at supporting Ukraine, has cozied up to Moscow in pursuit of what it hoped would be cheap and reliable supplies of natural gas and has told its people that any problems they faced were the fault of the European Union, despite being a member of the bloc.

Now, with inflation soaring at 22 percent, the economy tipping toward recession and even relatively rich areas like Gyor running short of money, economic reality has hit Hungary hard. The governor of the country’s central bank, usually a stalwart Fidesz ally, warned this month that “we have to face the fact that the Hungarian economy is in a near-critical situation,” largely as a result, he said, of the government’s own inflationary policies, not just the war in Ukraine.

The dimming of Hungary’s once bright economic fortunes, symbolized for years by the giant and ever expanding Audi engine plant in Gyor, has left Mr. Orban desperate for cash from the European Union, forcing him to curb his truculent attacks on the bloc, abandon efforts to derail European aid to Ukraine and scrap central parts of his economic policy, like price caps on gasoline.

A market this month in Budapest. With inflation running at 22 percent, the economy tipping toward recession and even relatively rich areas running short of money, economic reality has hit Hungary hard.Credit…Akos Stiller for The New York Times

Last week,European finance ministers meeting in Brussels decided to release a portion of billions of dollars in frozen funding for Hungary after Mr. Orban’s government agreed to stop trying to block European aid to Ukraine.

But it will not help cash-strapped cities like Gyor much in the short term. Most of the funds, about $6 billion in previously stalled pandemic relief grants and possibly billions more to follow, will go to Budapest to help fill a hole in the national budget and save the government from having to borrow.

Hungarian news outlets, most of which are controlled directly or indirectly by Fidesz, hailed the deal as a “big Hungarian victory.” But independent observers viewed it more as a long-overdue truce between Budapest and Brussels, the seat of the European Union’s executive arm and its Parliament, which in September passed a resolution condemning Hungary as a “hybrid regime of electoral autocracy” that should not get any more money.

Reality has also dawned in Gyor.

Tibor Lovincz, a forklift operator at a subsidiary of the German plant and a former Fidesz voter, said he was appalled by the decision to cut the festive lighting. “We all need some light in our lives at Christmas,” he said. Using social media, he rallied hundreds of fellow residents behind a plan to string up their own lights in the center of the city.

Embarrassed, the city government, run by Fidesz, suddenly announced it had found extra money and began decorating — not much, but enough to lift the darkness. “We won a small battle,” Mr. Lovincz said, “but not the war.”

Gyor’s mayor, Csaba Andras Dezsi, declined to be interviewed but, in response to written questions, said that “the armed conflict taking place in our neighborhood and the related energy crisis” had put “a heavy burden on all of us” and forced “more modest decorations.”

Roland Kosa, who runs a film company in Gyor, said the city’s scrimping on festive lighting was a “tipping point.”

“The core of our identity is that we are rich city, and this hit our core,” Mr. Kosa said. “Everyone was asking: Can we really not even afford to have even Christmas lights anymore?”

The Christmas market in Gyor this month. Credit…Akos Stiller for The New York Times

Skeptical that the reason for this was a Europe-wide energy crisis, he blamed Fidesz and the city’s mayor, Mr. Dezsi, an eccentric, parrot-loving cardiologist who took over after the previous mayor, Zsolt Borkai, also from Fidesz, became entangled in a sex scandal and resigned in 2019.

The scandal did little to dent the city’s overwhelming support for Fidesz, partly because it was largely ignored by Hungarian media outlets loyal to Mr. Orban. Bad economic news has been similarly obscured, presented as “fake news” ginned up by political opponents, or blamed on European sanctions on Russia.

To rally the public behind its narrative, not dissimilar from that of the Kremlin, Mr. Orban’s government is now holding what it calls a “national consultation” — a vote on a series of leading questions intended to show that “sanctions are destroying the economies of Europe.”

The European Union has imposed no sanctions on Russian natural gas, and Russia’s energy giant, Gazprom, has itself driven up the price by cutting supplies to many customers. Hungary, which sent its foreign minister to Moscow this summer to beg Russia to keep gas flowing, has not been hit by these cuts, but still has to pay more because the price Gazprom charges is largely set by market rates.

“The power and effect of propaganda is tremendous,” said Bulcsu Hunyadi, a senior analyst at Political Capital, a Budapest research group that is often critical of Mr. Orban. Hungary, he said, has created a system of “informational autocracy” that allows the government to “create an alternative reality.”

A recent Political Capital study found that a majority of Hungarians think sanctions over Ukraine have hurt Europe more than Russia and that half of Fidesz voters believe that Hungary has not endorsed them. In reality, Hungary has voted for each of nine sets of E.U. sanctions since February, including a new round approved by Mr. Orban and other leaders on Thursday in Brussels.

Denying economic problems or blaming them on Brussels became much more difficult this month when Gyorgy Matolcsy, the head of Hungary’s central bank, told legislators that “our financial and macroeconomic indicators are in the first- or second-worst place in the European Union” and predicted that “next year will be worse” without an abrupt change of course.

Gyor has recently shuttered museums, libraries, art galleries and an aquatic center, saying that high energy prices have made them too expensive to operate. Credit…Akos Stiller for The New York Times

Peter Virovacz, an economist with ING Bank in Budapest, said “it was quite a shock” to hear such stark warnings from the central bank. “Markets have been thinking about all these mistakes for some time, but it was a revelation for locals,” he said.

Amid severe shortages of gasoline and diesel because of technical problems at Hungary’s biggest refinery and price caps that made it unprofitable to sell, a surge early this monthin panic-buying at gas stations across the country forced Mr. Orban to abandon his signature policy of setting pump prices by administrative fiat.

In Gyor, the mayor has also struggled to keep a lid on unpleasant news through Gyor Plusz, a local government-friendly media company controlling a television station, a radio station, a website and a print publication.

Balazs Pollreisz, one of a handful of opposition party members on the Fidesz-dominated Gyor City Council, said the furor over Christmas lights had obscured more important issues like steep rent increases for residents of public housing. On Thursday, he organized a small protest in front of City Hall.

“Christmas lights are not our biggest problem,” he said. “But they have become a symbol of how things have gone wrong. There has been a huge debate on social media and in cafes with everyone wondering why a rich city like this is so short of money.”

The mayor, in his written answers to questions, said: “I would like to draw your attention to the fact that although many localities in Hungary have more modest financial opportunities, the claim that Gyor is the richest city in Hungary is not true.”

Barnabas Heinz contributed reporting from Budapest.

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