The Role of EU Taxpayers’ Money in Hungary during the Orbán Era

Abstract

Purpose | The paper aims to estimate the extent to which EU taxpayers unwittingly supported the creation of Viktor Orbán’s regime with kleptocratic characteristics between 2011 and 2023 through EU funds allocated to Hungary. Research method | The paper is based on a descriptive and comparative analysis of data from more than 340,000 Hungarian public procurement contracts between 1999 and 2023, supplemented by interviews with municipal economic and budgetary experts as part of a natural experiment. Results | The results show that, within contracts financed by EU funds, the net value of contracts awarded to the thirteen key actors and those awarded without compe tition was €19.3 billion between 2011 and 2023. Based on a kleptocratic rent ratio of 20–40 percent, we estimate that EU taxpayers may have supported Orbán’s kleptocracy with €3.2–5.5 billion. This amount represents 3.8–6.4 percent of the net value of all contracts financed by EU funds. It should be noted that overpricing resulting from the kleptocratic system and the kleptocratic rent is not only financed by EU subsidies but also by nationally funded contracts. In the latter case, the kleptocratic rent is slightly higher, at 7.6–13.0 percent of the total value of public procurement. These figures also indicate that EU and Hungarian taxpayers may have financed the establishment and consolidation of Orbán’s kleptocracy at a ratio of 1 : 3 and 2 : 3, respectively, between 2011 and 2023. The presence of electoral cycles in the annual volume of kleptocratic rents derived from EU funds, and the logit estimates of corruption risk constitute direct empirical evidence that Orbán’s kleptocracy has used EU financial support to reinforce its political stability. Originality / value / implications / recommendations | In this study, based on data from public procurement contracts, we first estimate the extent to which EU taxpayers have supported a corrupt ruling elite in an EU Member State.