[Joint House and Senate Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


116th Congress }                            Printed for the use of the             
1st Session    }      Commission on Security and Cooperation in Europe                       

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			   Developments in Hungary
			   
			   
                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                  
                  
                               April 9, 2019
                               
                               
                              Briefing  of the           
              Commission on Security and Cooperation in Europe
--------------------------------------------------------------------------
                   
                              Washington: 2020


                                           
                      
             Commission on Security and Cooperation in Europe
                       234 Ford House Office Building
                             Washington, DC 20515
                                 202-225-1901
                             [email protected]
                             http://www.csce.gov
                                @HelsinkiComm

                                      
                                      
                                      
                     Legislative Branch Commissioners

              HOUSE				SENATE
ALCEE L. HASTINGS, Florida 		ROGER F. WICKER, Mississippi,
  Chairman				   Co-Chairman
JOE WILSON, South Carolina		BENJAMIN L. CARDIN. Maryland
ROBERT B. ADERHOLT, Alabama		JOHN BOOZMAN, Arkansas
EMANUEL CLEAVER II, Missouri		CORY GARDNER, Colorado
STEVE COHEN, Tennessee			MARCO RUBIO, Florida
BRIAN FITZPATRICK, Pennsylvania		JEANNE SHAHEEN, New Hampshire
RICHARD HUDSON, North Carolina		THOM TILLIS, North Carolina
GWEN MOORE, Wisconsin			TOM UDALL, New Mexico
MARC VEASEY, Texas			SHELDON WHITEHOUSE, Rhode Island
                       
                  Executive Branch Commissioners

              DEPARTMENT OF STATE, to be appointed
             DEPARTMENT OF DEFENSE, to be appointed
             DEPARTMENT OF COMMERCE,to be appointed
             


   ABOUT THE ORGANIZATION FOR SECURITY AND COOPERATION IN EUROPE

    The Helsinki process, formally titled the Conference on Security 
and Cooperation in Europe, traces its origin to the signing of the 
Helsinki Final Act in Finland on August 1, 1975, by the leaders of 33 
European countries, the United States and Canada. As of January 1, 
1995, the Helsinki process was renamed the Organization for Security 
and Cooperation in Europe (OSCE). The membership of the OSCE has 
expanded to 57 participating States, reflecting the breakup of the 
Soviet Union, Czechoslovakia, and Yugoslavia.
    The OSCE Secretariat is in Vienna, Austria, where weekly meetings 
of the participating States' permanent representatives are held. In 
addition, specialized seminars and meetings are convened in various 
locations. Periodic consultations are held among Senior Officials, 
Ministers and Heads of State or Government.
    Although the OSCE continues to engage in standard setting in the 
fields of military security, economic and environmental cooperation, 
and human rights and humanitarian concerns, the Organization is 
primarily focused on initiatives designed to prevent, manage and 
resolve conflict within and among the participating States. The 
Organization deploys numerous missions and field activities located in 
Southeastern and Eastern Europe, the Caucasus, and Central Asia. The 
website of the OSCE is: .

    ABOUT THE COMMISSION ON SECURITY AND COOPERATION IN EUROPE

    The Commission on Security and Cooperation in Europe, also known as 
the Helsinki Commission, is an independent U.S. Government commission 
created in 1976 to monitor and encourage compliance by the 
participating States with their OSCE commitments, with a particular 
emphasis on human rights.
    The Commission consists of nine members from the United States 
Senate, nine members from the House of Representatives, and one member 
each from the Departments of State, Defense and Commerce. The positions 
of Chair and Co-Chair rotate between the Senate and House every two 
years, when a new Congress convenes. A professional staff assists the 
Commissioners in their work.
    In fulfilling its mandate, the Commission gathers and disseminates 
relevant information to the U.S. Congress and the public by convening 
hearings, issuing reports that reflect the views of Members of the 
Commission and/or its staff, and providing details about the activities 
of the Helsinki process and developments in OSCE participating States.
    The Commission also contributes to the formulation and execution of 
U.S. policy regarding the OSCE, including through Member and staff 
participation on U.S. Delegations to OSCE meetings. Members of the 
Commission have regular contact with parliamentarians, government 
officials, representatives of non-governmental organizations, and 
private individuals from participating States. The website of the 
Commission is: .


                        Developments in Hungary                        
                              ----------
                             
                             April 9, 2019


                                                                Page
                              PARTICIPANTS

Erika B. Schlager, Counsel for International Law, Commission 
  on Security and Cooperation in Europe............................1

Paul Massaro, Policy Advisor, Commission on Security and 
  Cooperation in Europe...........................................17

Melissa Hooper, Director of Human Rights and Civil Society, Human 
  Rights First.....................................................3

Dr. Dalibor Rohac, Research Fellow, American 
  Enterprise Institute.............................................8

Susan Corke, Senior Fellow and Director, Transatlantic Democracy 
  Working Group, German Marshall Fund.............................12

                                
                                APPENDIX

Prepared statement of Melissa Hooper..............................23

Prepared statement of Dr. Dalibor Rohac...........................30




 
                       Developments in Hungary
                              ----------                              

                             April 9, 2019


         Commission on Security and Cooperation in Europe
                            Washington, DC

    The briefing was held at 10:00 a.m. in Room 1539, Longworth House 
Office Building, Washington, DC, Erika B. Schlager, Counsel for 
International Law, Commission on Security and Cooperation in Europe, 
presiding.
    Panelists present: Erika B. Schlager, Counsel for International 
Law, Commission on Security and Cooperation in Europe; Paul Massaro, 
Policy Advisor, Commission on Security and Cooperation in Europe; 
Melissa Hooper, Director of Human Rights and Civil Society, Human 
Rights First; Dr. Dalibor Rohac, Research Fellow, American Enterprise 
Institute; and Susan Corke, Senior Fellow and Director, Transatlantic 
Democracy Working Group, German Marshall Fund.

    Ms. Schlager. Good morning, ladies and gentlemen. I'm going to 
start very promptly this morning because I know one of our panelists 
has a particularly tight schedule. So I will go ahead and open our 
briefing this morning on ``Developments in Hungary.''
    My name is Erika Schlager. And I serve as counsel for international 
law with the U.S. Commission on Security and Cooperation in Europe, 
informally known as the Helsinki Commission. On behalf of the 
commission, I'd like to welcome everyone who is here today. At the 
other end of the table is my colleague Paul Massaro, who is the 
Helsinki Commission's policy advisor on economic issues, including 
corruption. The Helsinki Commission is an independent commission of the 
U.S. Federal Government charged with monitoring and implementing the 
1975 Helsinki Accords, and advancing U.S. policies regarding the 
Organization on Security and Cooperation in Europe.
    In recent years, Hungary has received quite a bit of attention, 
both from the administration and from Congress. I think it is fair to 
say that those Members of Congress who have spoken about or in some 
other way addressed the situation in Hungary are motivated by a deep 
respect for the Hungarian people and a desire to strengthen the United 
States' relationship with Hungary based on the concept of comprehensive 
security. As President George H.W. Bush in 1992 underlined when he 
signed the Helsinki Human Rights Day Proclamation, those countries 
participating in the Helsinki process recognize respect for human 
rights is an essential factor for the attainment of peace, justice, and 
cooperation among nations. This briefing is organized in that spirit.
    We welcome the engagement by Secretary of State Michael Pompeo and 
other administration officials. I'd like to recap briefly Secretary 
Pompeo's points after meeting Minister Szijjarto for the first time 
last May. The secretary underscored the importance of maintaining a 
vibrant civil society. The secretary also emphasized the urgent need to 
help Ukraine in the face of Russian aggression, including the 
importance of facilitating and supporting Ukraine's engagement with 
NATO and the need to counter Russian malign influence in Central 
Europe. Both sides agreed that Europe should diversify its sources of 
energy and discussed increasing U.S. investment in Hungary.
    The secretary and foreign minister committed to concluding a 
defense cooperation agreement in the days ahead and, as many of you 
know, that defense cooperation agreement was signed just a few days 
ago, so it was very welcome. We have made available a package of 
statements by the Department of State, including Ambassador Cornstein's 
recent remarks in Budapest on the 70th anniversary of the establishment 
of NATO. Those materials should be in the packets that you received as 
you came in.
    Now, I'd like to also briefly read one additional point from 
Secretary Pompeo, from his trip to Slovakia, Hungary, and Poland 
earlier this year, February. At one point, Secretary Pompeo was asked 
by a student: What role do small countries play in international 
relations these days? And I really liked his answer and would like to 
share it with you here.
    ``Every nation,'' he said, ``that raises its voice for liberty and 
democracy matters--whether that's a country that is as big as the 
United States and with as large an economy as we have in America, or a 
smaller country. They are each valuable. Each time one falls, each time 
a country no matter how small, each time it moves away from democracy 
and moves toward a different system of governance the capacity in the 
world to continue to deliver freedom for human beings is diminished. 
And so I would urge every country, no matter its size, to stay focused 
and maintain its commitment.''
    Now, before introducing our panelists I do have a couple of small 
administrative notes. First, this event is streaming live on the 
Helsinki Commission's Facebook page, as well as on our website. Second, 
if you are tweeting please use the Helsinki Commission handle, which is 
@HelsinkiComm, C-O-M-M. Third, please silence your cellphones or any 
other electronic device you may have. And finally, for our panelists, 
please be sure to speak closely into the microphone. You'll need to 
have the red button on, as I struggled to do at the outset here. 
[Laughter.] That will facilitate the clarity of our broadcast, 
especially for those watching through the webcast. And I am told there 
are a couple people who are watching from afar right now. We want to 
make sure that everyone can hear every word that you're saying. Of 
course, this event is on the record, and there will be a transcript 
produced at the end.
    With that, I would like to introduce our three panelists. Their 
longer bios are on the table as you came into the room. I encourage 
everyone to read them in their entirety. First up will be Melissa 
Hooper. Ms. Hooper is a lawyer, a rule of law expert, and director of 
human rights and civil society at Human Rights First. After that, 
Dalibor Rohac will speak. Dr. Rohac is a research fellow at the 
American Enterprise Institute. And finally, we will hear from Susan 
Corke, a senior fellow and director of the bipartisan Transatlantic 
Democracy Working Group with the German Marshall Fund of the United 
States based in Washington, DC. And I had the privilege of working with 
Ms. Corke when she was at the State Department--so very glad you could 
be with us here today.
    So with that out of the way, please, Melissa.
    Thank you.
    Ms. Hooper. Okay, great. Yes, we're on. Okay, very good.
    Since coming to power with a supermajority in 2010, the Fidesz 
Party and Prime Minister Viktor Orban have used their power to hollow 
out democratic institutions to such a degree that Hungary has been 
called a ``Franken-State,'' an illiberal mutant composed of ingeniously 
stitched-together imitations of Western liberal democratic elements. 
While the Obama-era policy of limited high-level engagement precluded 
some of the Hungarian Government's controversial actions, it did not 
appear to motivate fundamental change. The Trump-era policy of 
transactional engagement devoid of values has fared no better.
    The U.S. should, therefore, reexamine its policy toward Hungary, 
such that the administration becomes more vocal, critical, and active 
in opposing consequences when fundamental values are undermined, not 
only as an attempt to ameliorate Hungary's flagging democracy, but also 
as a method of reinvigorating democratic values in the region. The U.S. 
Government should also consider taking specific actions to hold the 
Hungarian Government accountable and support local civil society.
    In April 2018 Orban and Fidesz won the third election in a row, 
maintaining a supermajority after winning only 50 percent of the vote. 
The OSCE, which monitored the election, criticized the xenophobic, 
anti-Semitic, and intimidating rhetoric used by the government, the 
undue advantage given the ruling party through the use of state-funded 
resources for its campaigns and messaging, the politicization of media 
ownership and limits on media freedom, and a lack of transparent 
campaign financing.
    Since last year's election Orban and Fidesz have continued to 
undermine, hollow out, and even attack fundamental tenets of democratic 
governance. Free media is nearly nonexistent in Hungary and outside the 
capital, it is, indeed, extinct. Fidesz has consolidated media to such 
an extreme degree through nefarious deals, schemes and pressure--for 
example, the shutdown of independent outlet Nepszabadsag, through 
irregular and illegal procedures that are regularly rubber stamped by 
government agencies such as the media authority and anti-monopoly 
agency.
    The overwhelming majority of outlets now reside in the hands of a 
few close associates of the Fidesz government, such as Lorinc Meszaros 
and Arpad Habony. The ``voluntary'' consolidation of 476 of their media 
holdings into a single major government-run conglomerate did nothing to 
mitigate the problem. On the contrary, the consolidation allows the 
government to spread its propaganda efficiently, even with Russian 
disinformation--especially since nearly 100 percent of regional media 
is now controlled by pro-government outlets. Independent journalists, 
on the other hand, have been placed on published blacklists as so-
called mercenaries, labeled threats to the state and banned from 
parliament.
    Upon coming into power, Fidesz rewrote the constitution to 
consolidate power in the executive and politicize formerly nonpolitical 
offices. They also expanded the definition of ``cardinal laws,'' that 
require a supermajority vote. This was, according to Orban, to bind not 
only the next administration but the next 10. Fidesz engaged in an 
ongoing dismantling of judicial checks and balances soon after taking 
power in 2010, and recently ramped up its latest phase.
    Early moves involved the takeover of the constitutional court, 
forcing out judges likely to disagree with the party. While the 
European Court of Human Rights eventually ruled the forced retirements 
illegal, the fact that the court's decision came a year after the 
retirements meant the remedy was confined to monetary damages. Orban 
also appointed a close associate, Tunde Hando, as the head of the 
National Judicial Council, giving her veto power over judicial 
appointments. When the council alleged she was abusing her power, the 
complaining judges suddenly left their posts in rapid succession within 
a single week.
    Most recently, the government created a parallel justice system 
through development of a new administrative court that is designed to 
hear cases concerning designated topics. While the topics are not 
completely identified yet, these topics are the most politically 
charged or expedient for the ruling party. They include civil liberties 
cases--such as legality of assemblies--election disputes, cases 
involving immigration and refugee issues, police brutality, media-
related cases, transparency of government information, and taxation and 
procurement. Tax and procurement-related irregularities have been cited 
by the EU anticorruption agency--OLAF--as the source of millions in 
suspect deals involving Orban's family and friends, many of which also 
involve Russian state actors.
    On March 15th, the Council of Europe's Venice Commission expressed 
serious concerns about the overwhelming power given to the Minister of 
Justice [MOJ] over the new hermetically sealed court system. Of 
particular concern was the MOJ's complete power over judicial 
selection. In response, on April 1st Fidesz passed a law that it argued 
vitiated these concerns. It did not. The new law modified the process 
for appointing judges only after a nearly year-long transition period, 
during which the MOJ will oversee the transfer of a third of the judges 
from the old system and will appoint another one-third of the judges, 
so as long as the MOJ acts relatively soon, the future quasi-
limitations on its power will not have a large effect.
    In addition, the new laws allowed the MOJ to select individuals 
without judicial experience. In fact, the new law gives a leg-up to 
candidates coming from public service who lack any judicial experience, 
making it more likely that Fidesz officials from agencies whose 
decisions are being challenged through this new system will be 
appointed to review and decide those challenges. The rule allowing 
appointment of individuals lacking any judicial experience also applies 
to selection of the chief administrative judge. This is contrary, by 
the way, to the Venice Commission's opinion.
    A 2017 law, given the politically charged title of ``Stop Soros'' 
by the government, requires that NGOs register as ``foreign agents'' if 
they receive more than 24,000 euros of foreign funds. This is similar 
to the infamous Russian foreign agent law passed in 2012. Another 2018 
law taxes foreign funds at 25 percent if the organization ``directly or 
indirectly supports immigration.'' A constitutional amendment in 2018 
made it illegal to, quote, ``support illegal immigration,'' but defined 
the term so broadly as to criminalize providing information regarding 
the legal process of seeking asylum to asylum seekers, or even 
preparing that information for dissemination.
    These same amendments made it illegal to settle foreign populations 
within Hungary. The Venice Commission roundly criticized these laws, 
and the European Commission launched an infringement proceeding based 
on their interference with freedom of association and expression.
    Over 60 NGOs were loudly and publicly subjected to ``criminal 
investigations'' that included home searches, police raids, and 
computer seizures in 2014. They were ordered by the prime minister 
himself. Not a single allegation resulted in an actual charge against 
the organizations. However, the government continues to campaign 
against the ``Soros empire,'' including it as a major theme in the last 
election. Now NGOs that challenge the government's stance on rule of 
law, treatment of civil society and migration believe the next step 
will be to subject them to tax proceedings that could threaten their 
activities.
    The 2017 law referred--to as Lex CEU [CEU]--because it essentially 
applied only to the Budapest-based dual Hungary-and U.S.-accredited 
institution Central European University, required that CEU maintain a 
campus in the United States. After the university complied by opening a 
campus in New York, the Hungarian Government refused to sign an 
agreement with the university by December 1st of last year, which would 
have allowed the university to remain in Hungary. CEU is now in the 
process of moving its campus and its programs to Vienna. While the 
Hungarian Government claims that CEU may continue to operate in 
Budapest without this agreement, this is not true. It's true for only 
20 percent of the university's programs, which are Hungarian 
accredited. The remaining 80 percent of American-accredited programs--
presumably, the more sought-after--cannot operate in Budapest absent 
the agreement.
    During a March meeting in Budapest, Manfred Weber, the leader of 
the European People's Party in the European Parliament--of which Fidesz 
is a member--suggested that the University of Munich and BMW may offer 
support to the university, restructuring it as a European institution 
no longer subject to Lex CEU. This development is still in process.
    Orban and Fidesz have repeatedly relied on state processes and 
funds to implement anti-Semitic and racist campaigns and so-called 
national consultations that involve mailing questionnaires containing 
disinformation to nearly every household in the country. During the 
most recent presidential election in April 2018, Orban campaigned on an 
anti-migration and anti-refugee platform, referring to a mythical 
``Soros plan,'' which alleges that Hungarian-American financier George 
Soros aims to overwhelm Hungary with migrants and ``Muslim invaders.'' 
Orban conveniently then declared himself the protector of Christian 
Europe.
    Campaigns like this easily saturate the geographic space outside 
the capital, where independent media does not exist to counter this 
messaging. Orban openly threatened non-governmental watchdog groups and 
personally targeted Soros, stating that after the election Fidesz will 
``take revenge--moral, political, and legal'' against real and 
perceived enemies of the Hungarian State.
    In April 2018, pro-government magazine Figyelo published a list of 
200 anti-government ``mercenaries,'' whose goal is allegedly to topple 
the government. The list included a number of investigative 
journalists, academics from CEU, entire staffs of watchdog 
organizations such as Transparency International, and members of NGOs 
that challenge the government's limitations of freedom of assembly and 
rule of law. The ``Soros mercenaries'' phrase has been in regular use 
in government rhetoric for the last several years, where it is used to 
discredit NGOs that criticize state policy.
    A second blacklist was published in June highlighting academics 
considered a threat to Hungary. Most were affiliated with the Academy 
of Sciences. This was followed by a defunding of the academy itself in 
2019--a move that was met with significant protests. The magazine 
publishing these lists was purchased by Maria Schmidt, a long-time 
friend of Orban, in 2016. Since then, as with most formerly independent 
media, it has adopted a decidedly pro-government tone. Schmidt, a 
controversial historian labeled by many credible academics as a 
distorter of Holocaust history, has also been awarded stewardship of 
the government-backed ``House of Fates'' museum. The Yad Vaschem, the 
U.S. Holocaust Museum, and the leaders of Hungary's Jewish community 
have each warned that the ``House of Fates'' appears to be a concerted 
effort on the part of Schmidt and the Hungarian Government to rewrite 
the country's World War II-era history.
    Orban is currently campaigning in the European Parliament elections 
on a platform that seeks, in his view, to preserve ``Europe for 
Europeans.'' As in the past, he's employed a billboard campaign 
depicting the image of George Soros to convey the threat posed by 
outsiders and immigrants. This time, the billboard inexplicably links 
Soros to European Commission President Jean-Claude Juncker. On the 
billboard, Juncker's nose has been altered to look larger and, 
presumably, more Jewish.
    In August 2018, the Hungarian Government stopped giving food to 
asylum seekers it has placed in detention while they appeal their 
cases. The government also prohibited others from delivering food to 
asylum seekers and prohibited them from purchasing their own food--
essentially attempting to starve them until they abandon asylum 
proceedings. This decision was the latest in a string of policies that 
violates Hungary's obligations with respect to treatment of refugees 
under international law. An infringement proceeding regarding these 
policies is ongoing.
    In September 2018, the European Commission finally launched a 
proceeding against Hungary under Article 7 of the Lisbon treaty. 
However, the lack of forceful negotiations between the EU and Hungary 
in the past is likely to make this proceeding ineffective. More success 
may be seen in the EU's attempt to restructure its upcoming budget from 
2021 through 2027, such that compliance with rule of law may be linked 
to state budgetary awards. The infringement proceedings in the European 
Court of Justice also present an opportunity, as has been seen in the 
case of Poland.
    Despite these concerning and, in some cases, decidedly 
authoritarian policies, the Trump administration has maintained a 
relationship of non-criticism, often citing the need for solidarity 
against foes, such as Russia and China. The U.S. has expressed 
``concern'' regarding the NGO law. It expressed ``disappointment'' when 
CEU was forced out of the country. However, the government then 
continued to reward Orban and Fidesz with high-level visits that 
legitimized their policy decisions, and with gas and defense deals that 
underscored that legitimacy.
    For his part, Ambassador Cornstein issued a public statement that 
he had not seen or heard any evidence of democratic backsliding and had 
not been told of any. This was after he had met with prominent members 
of Hungarian civil society who described to him exactly that. The 
administration's former assistant secretary for Europe was seen as such 
a champion of the Hungarian Government that last week he was given an 
award by the Hungarian Ministry of Foreign Affairs.
    In October 2017, in light of a dangerously deteriorating situation 
for media in the country, Charge d'Affaires David Kostelancik devoted 
an entire speech to the issue. Following the speech, the State 
Department Bureau of Democracy, Human Rights, and Labor announced a 
notice of funding opportunity for $700,000 to ``support media outlets 
operating outside the capital in Hungary to produce fact-based 
reporting and promote independent media.'' However, this funding 
opportunity was canceled in July 2018 without explanation. While 
Secretary Pompeo mentioned during his February 2019 trip to Budapest 
that the U.S. is providing mentorships and training for journalists in 
the region, and last May told his Hungarian counterparts that a vibrant 
civil society is important, there's no evidence of any U.S.-supported 
programs operating in Hungary that support independent journalism or 
civil society. And my own contacts in civil society reported that they 
know of none.
    The U.S. commitment to its values of a free press, rule of law, and 
protection of democratic institutions in the region has been, at best, 
unclear. Having not expressed alarm regarding the Hungarian 
Government's movement toward authoritarian governance, Orban and his 
associates now believe that limiting free speech and assembly, erasing 
checks and balances, and employing rampant corruption is perfectly 
acceptable to its ally, the United States.
    This, in turn, communicates to other NATO allies that these actions 
are acceptable within NATO, setting a dangerous precedent in light of 
broadening attacks on democratic institutions and governance by Turkey, 
Poland, Romania, and others. In order to retard or even reverse this 
progression, the U.S. must take decisive action to send a message that 
these policies are unacceptable when instituted by a democratic ally--
though, admittedly it must do so while continuing to engage. If the 
U.S. is concerned about the decline in perceived support for democracy 
in Hungary and the region and it seeks to ``compete for positive 
influence,'' a goal cited both by former Assistant Secretary Wess 
Mitchell and Secretary Pompeo himself, the U.S. response to the 
concerning situation in Hungary must be clear and more resolute.
    First, and most importantly, the U.S. should reinvest in democracy 
promotion. In Hungary and in the region, lofty speeches about democracy 
won't turn things around. Meaning, the U.S. cannot send Americans to 
reinvigorate democracy in places like Budapest, Debrecen, or Pecs. It 
must support Hungarians who are already engaged in pro-democracy work--
such as investigative reporting on corruption, assisting victims of 
xenophobic violence and hate crimes to combat radicalization, and 
challenging threats to rule of law.
    Second, in doing so, the U.S. should announce publicly that it is 
reintroducing support for civil society in the region, and specifically 
in Hungary, due to a decline in the government's ability to or interest 
in protecting democratic institutions. A reintroduction of democracy 
funding would offer support to the institutions and pro-democracy 
innovators that are currently resource-starved, while an announcement 
explaining why would send a message to the Hungarian Government that 
the U.S. is more than ``concerned'' about developments in the country; 
it is ready to act. The recent notice of funding for independent media 
was canceled, at least in part, apparently because the Hungarian 
Government expressed displeasure with the idea. Announcing the 
reintroduction of democracy funding will cause some bruising in 
Budapest, yes, but it will not rupture the relationship, and I believe 
it can strike the right tone between getting the government's attention 
while not driving it away from engagement.
    Third, Congress should be more vocal and pointed in expressing its 
concern and even alarm at Hungary's antidemocratic movement and 
expressing support for individuals such as journalists or members of 
watchdog organizations that are targeted by government campaigns or 
blacklists. This could come in the form of a bipartisan resolution or a 
letter to the government. Statements on the floor of Congress would 
also be welcomed by those that fear government targeting. Congress 
could also take a more active role in expressing concern to the 
Ambassador that his statements are out of line--or, when his statements 
are out of line with objective reporting regarding factual developments 
in the country.
    Finally, the U.S. should not shy away from applying targeted 
sanctions, such as via the Global Magnitsky law, when clear lines are 
crossed. When visa bans were used against some officials in 2014, they 
hit home in Hungary. The message reverberated both inside the 
government and throughout Hungarian society. Application to individuals 
that are taking the lead in wiping out independent media, erasing rule 
of law, and employing state processes for their own corrupt deals 
should be held up as examples of those who have crossed the line.
    Thank you very much.
    Ms. Schlager. Thank you, Melissa.
    Dr. Rohac. Thank you, Erika. Thank you all for coming, ladies and 
gentlemen. It is a real honor to be with you this morning. There's been 
a lot of talk of Hungary in recent years, including on the political 
right, where I'm spending most of my intellectual time. I work at the--
I don't work for the Open Society Foundation or any of the other 
organizations that could be sort of dismissed by the authoritarian 
government as being bedfellows of the political left. And on the 
political right, much of the talk of Orban's Hungary has been quite 
positive. People appreciate the Euro-skepticism of the government. 
People appreciate its attitudes toward traditional values and defending 
national unity, and curbing illegal immigration, et cetera, et cetera.
    And I have some degree of appreciation for why many of my friends 
on the political right are essentially seeing Viktor Orban and Fidesz 
and today's Hungary as not necessarily an example to avoid, but rather 
as an example to emulate across Europe. But I think that attitude is 
the deeply misguided because it misses what is a part of current 
developments in Hungary, namely its turn toward authoritarianism. There 
is no avoiding that conclusion.
    One can only--you know, if you want you can go back to the 2014 
speech that Viktor Orban gave in Baile Tusnad in Romania at the Fidesz 
summer school, where he singled out Turkey and Singapore and China as 
stars of international analysts, and he touted the idea of illiberal 
democracy as an example for Hungary to follow. He urged Hungary to part 
ways with Western dogmas of individual freedom, the idea, I quote, 
``that people have the right to do anything that does not infringe on 
the freedom of the other party.'' So that's the direction that's been 
announced. And that's the direction the country has been moving in.
    We've heard about the court packing. We've heard about the 
tightening of restrictions on civil society, concentration of media 
ownership in few hands of oligarchs connected to the ruling party. And 
also, the mobilization through government propaganda of public opinion 
against real or imagined external enemies. So what I would like to do 
in my remarks is talk about three dimensions of this problem. One is 
the measurable decline of various indictors of governance and rule of 
law that we can look at. I'd like to look at the patterns of 
politically organized corruption. And then finally, I would like to 
touch on what these developments in Hungary mean for the United States 
and its interests in the region.
    Last year, Freedom House, I believe, famously downgraded Hungary 
from free to partly free territory and that prompted ire from the 
Hungarian Government. Government spokesperson Zoltan Kovacs--who, by 
the way, tweeted about our panel this morning calling it ``brazenly 
one-sided''--I hope he's watching this morning. [Laughter.] Essentially 
he accused Freedom House of double standards. He called its methodology 
politically motivated. And he blamed the results on George Soros' 
machinations in the background. You know, fair enough. We can have a 
debate about Freedom House and its methodology. But the reality is that 
the steady erosion of freedom and rule of law and quality of governance 
can be observed on any indicator you pick.
    So, you know, the World Bank has been publishing for many years the 
Worldwide Governance Indicators, which are seen as the gold standard 
for students and scholars of governance and institutional economics, 
and rule of law. I think you have a few of those graphs in your 
handouts, in the package you could have picked up at the entrance. But 
there, where you look at the rule of law metric, country of corruption 
metric, voice and accountability metric that the World Bank puts 
together--you know, a technocratic institution that does not have a dog 
in this fight--you see a very clear, very steady decline.
    If you look at indices produced by organizations such as the 
Heritage Foundation or the Cato Institute, certainly not in bed with 
George Soros and the Open Society Foundation--well, in its index of 
economic freedom, the Heritage Foundation places the protection of 
property rights in Hungary in the mostly unfree territory. That has to 
do with the seizing of pension fund assets at the beginning of the 
Orban administration, at the beginning of this decade, but also with a 
number of other cases of sort of concentrated ownership that typically 
ends up in the hands of Fidesz-connected oligarchs. The same index 
notes a marked decline in government integrity measure, again, placing 
Hungary into the oppressed territory on those sub-indices, with a 
dramatically worse score than in 2009.
    Remember, that much of what Fidesz has been doing in terms of 
policy changes has been motivated by this idea that they are trying to 
rectify all the corruption and all the debt that accumulated over the 
previous governments. The Cato Institute has been producing a very 
thoughtful metric called Human Freedom Index, which includes measures 
of economic freedom and other sort of attributes of rule of law and 
political freedom, personal freedom. Where on that--on that index, 
Hungary took a plunge from 28th to 44th place in the first 5 years of 
Viktor Orban's rule. We'll have to sort of wait for another sort of 
years of data to see the new version of the index, but the dynamic is 
clear.
    It's also a fairly known fact that Central Europe, including 
Hungary, relies quite heavily on the inflow of new funds. A lot of 
public investment in Hungary, and in other Central European countries, 
is funded through European taxpayers' money. In Hungary, it's I think 
almost 80 percent of all public investment that's being funded by the 
EU. It accounted for close to 4.6 percent of GDP over the 2006-2015 
period. And throughout the region, these EU funds have been, it has to 
be said, a mixed blessing. When you shower money on countries that are 
not perfectly governed, where the rules of the game are not always 
clear, you sometimes end up with corruption, with problematic 
procurement practices.
    But even there, Hungary has been an outlier in many ways. First of 
all, it concentrates much of the decisionmaking authority over EU funds 
in the prime minister's office, unlike other countries. It relies 
heavily, in comparison to other countries of the region, on 
unannounced, unadvertised negotiated procedures through which the 
government can just strike a deal with a company without having to go 
through the usual hassle of open competition and bidding. And even on 
open tenders, the highest rates of procedures involve just one bidder. 
In OLAF, the EU's anticorruption office, when it reviewed all of its 
projects in Hungary between the years 2011 and 2015, they found 
irregularities in all of them. And over that period, large amounts of 
money had to be repaid by the Hungarian Government.
    You know, for the new metro line in Budapest, the government had to 
return 283 million euros. Last year, the OLAF announced that it would 
seek to recover 40 million it gave for municipal lighting projects, 
which happened to be awarded to a company owned by Viktor Orban's son-
in-law, Istvan Tiborcz. And some of these example have become really 
well known even beyond Hungary's borders. Lorinc Meszaros, which is the 
mayor of Felcsut, which is Viktor Orban's home village, he's a gas 
engineer by training, and he is also the eighth-richest man in Hungary, 
who owns 121 different companies with his wife. His wealth tripled in 
just one year, between 2016 and 2017, to 392 million, according to the 
Forbes magazine. When he was asked once to what he owed his success he 
said, ``God, luck, and Viktor Orban.'' Eighty-three percent of his 
company's earnings are believed to come from EU funds.
    Now, corruption is a problem across Central Europe, across post-
communist countries. But what really makes Hungary's case stand out is 
the extent to which this has been embedded into the political system--
the extent to which corruption has been centralized, has been connected 
to the party, and has also served as a mechanism of political patronage 
and political mobilization.
    Such corruption has affected U.S. companies as well. There's a 
famous case dating earlier this decade of a New York City-based company 
called Bunge, which makes cooking oil, which noticed the widespread 
fraud related to value-added tax in Hungary, where companies are 
pretending to export foodstuffs and then getting their VAT paid back by 
the government. So it started lobbying the government to reduce the 
rates to eliminate the source of such fraud. They were told by a 
businessman close to Fidesz, Peter Heim, that such a policy change 
would be only possible if Bunge made substantial contributions to 
Fidesz's political foundation, Szazadveg. As a result, in 2014 the 
Obama administration famously put Heim on a visa ban list together with 
a number of other officials, including the head of Hungary's Central 
Tax Authority.
    Melissa touched a little bit on this really blase attitude that the 
Trump administration has toward authoritarian practices in Hungary. I 
have to say that this is partly a problem in Europe as well, where 
Fidesz is still a part of the EPP political family, in spite of its 
temporary suspension. There is a certain degree of complacency in both 
Europe's and--Europe's political class, and also on this side of the 
Atlantic as well. But the reality is that this embrace of crony 
authoritarianism by Hungary is a direct threat to U.S. interests in the 
region and to the West's interests more broadly.
    The idea that competing for positive influence in the region means 
that we should not hold our allies to high standards I think is one 
that's enormously detrimental because it's precisely the 
authoritarianism, the graft, the cronyism that opens ways for foreign 
revisionist powers to enter Hungary and influence the country and pull 
it away from the West. In many cases, it could be in that regard, 
suffice it to mention the nuclear power plant Paks that was awarded--
its reconstruction was awarded or its expansion was awarded to the 
Russian nuclear monopolists Rosatom without an open tender, financed 
through loans from Russia. China has been visible in the country as 
well. And so that's a space that needs to be watched very closely.
    Now, one directly related example is Hungary's deteriorating 
relationship with Ukraine. So if you consider Hungary to be a U.S. ally 
and we're working closely on matters of mutual interest, you have to 
wonder how come it was Hungary that sought to exclude Ukraine from 2018 
NATO Summit. After Russia cut off natural gas supplies to Ukraine in 
2014, Hungary followed suit, notwithstanding the EU's concerted efforts 
to provide Ukraine with energy through reverse gas flows.
    Last year Hungary's government refused to extradite two suspected 
arms dealers, Vladimir Lyubishin Sr. and Vladimir Lyubishin, Jr., to 
the United States. So these two are suspected of organizing arms 
shipments to Mexican drug cartels, including fairly advanced missile 
systems, and also are suspected of trafficking cocaine to the United 
States. So, if extradited, they could face a jail time of 25 years in 
U.S. prisons. They are Russian nationals. When they were arrested by 
Hungarian authorities, they awaited the decision on the extradition to 
the United States. In the meantime Russians submitted their own 
extradition request, which the Hungarian Government decided to honor, 
turning down the U.S. extradition request. And on August 10th, 2018, 
these two were dispatched to Moscow.
    In February, the Hungarian Government concluded an agreement with 
the International Investment Bank. If you're wondering what the 
International Investment Bank is, it is a relic of the cold war. It's a 
quasi-multilateral institution that includes Russia, a handful of 
Central European countries, and then countries such as Vietnam, Cuba, 
and Mongolia. It's currently based in Moscow and is going to move, 
under the terms of this agreement, its headquarters to Budapest. Russia 
is the one that sets the tone for the organization, which is totally 
insignificant when it comes to infrastructure financing in terms of the 
volumes of the finances it provides. Clearly, it is an instrument 
primarily of Russian power projection and sort of way of driving 
Eastern Europe away from the West, and from the EU in particular.
    And what that means is that under the terms of the agreement 
concluded, the IIB will have all the immunities and privileges that are 
given to international organizations--the World Bank, the IMF--in the 
city. So it will be able to bring in any advisors it will want to bring 
in, including potentially--I mean, that's sort of murky territory; 
we'll see when we get there--what happens when it will seek to bring in 
people who are on various sanction lists to the Schengen space. We'll 
see what happens when it tries to do business and provide loans to 
projects that involve Russian entities that are also sanctioned. But 
it's very easy to imagine how this could further strain the relations 
between Budapest, Brussels, and Washington.
    Overall, this really is a challenge to America's interests in the 
region. The U.S. stood by Central European nations as they liberated 
themselves from communism in the 1990s, in the nineties when they 
joined the ranks of self-governing free nations of the West. And the 
idea that the U.S. should now be either silent or a cheerleader for 
policies that are now driving Hungary away from the West strikes me as 
a particularly misguided one.
    At the very minimum, what we need is a bipartisan work on a 
resolution that will make it clear where the two parties in this city 
stand on this, that creeping authoritarian practices are not acceptable 
to Democrats and Republicans. And we need more clarity in terms of U.S. 
companies operating in Central Europe to know that they have the 
backing of the U.S. Government when they encounter corrupt practices. 
The administration should not shy away from imposing sanctions on local 
officials that have been demonstrably involved in corrupt dealings.
    And, yes, I'm all in favor for getting back into the business of 
democracy promotion, adapted to the reality of the 21st century. We 
just celebrated NATO's 70th anniversary, and it was in many ways a 
happy occasion. But it also should be, I think, a time for a serious 
debate about how this organization can be changed from a one-way 
ratchet to a two-way street. Countries that have diverged from the 
organization's shared values have to face a credible mechanism of 
escalating sanctions, culminating in their expulsion, potentially, if 
they adopt a radically different political model. It's not just a 
question of institutional changes or institutional design but more 
importantly, I would argue, of political leadership in Washington. And 
my hope is that this conversation today can help catalyze that in a 
helpful way.
    Thank you.
    Ms. Schlager. Thank you, Dalibor.
    Susan.
    Ms. Corke. Thank you. It's hard to follow Melissa and Dalibor, but 
I'm really happy to be here today. The Helsinki Commission has been a 
moral center for the Euro-Atlantic vision of a comprehensive security, 
where protecting human rights is an essential and co-equal pillar--
along with hard security, the economy, and the environment. I've worked 
with Erika for many years, and I know that we're lucky to have experts 
like her, who create continuity in a changing U.S. political landscape. 
The fact that the commission is bipartisan and bicameral enables us to 
have sensitive discussions like the one today about challenges to our 
alliance.
    As we assess the past decade, when we talk about threats to liberal 
democracy in Europe the conversation always starts and ends with 
Hungary. Hungary is actually the prequel reason for our group, which 
I'll talk about, the Transatlantic Democracy Group, and why it came 
together. I'm going to go back in the time machine briefly. After the 
fall of the Berlin Wall and Soviet control, Hungary was a promising 
example of democratic development. But its roots were weak, and we in 
the Western community underestimated the kind of sustained attention 
that would be necessary to solidify the gains and match backsliding on 
democracy with appropriate support.
    Hungary had a history over centuries of authoritarian influence. 
The 2008 global financial crisis was a pivotal period. It exposed that 
the roots of democracy were not very deep or strong in many places. And 
in the wake of that economic crisis, cracks in the foundation of 
Hungary's weak democracy started to widen. With people feeling the 
harsh effects of the crisis, people started to question what democracy 
was bringing concretely to their life that was better. And those are 
valid questions, ones that we need to do a better job thinking about.
    We, as a democratic community, need to constantly be assessing what 
we can and should be doing better. But as people felt left behind 
economically, nationalism and xenophobia were rising, and into this 
arena came Viktor Orban in 2010--not as a new actor. He was previously 
prime minister. And he was also previously a supporter of NATO, the 
European Union, and had been a fellow with George Soros' organization, 
and my own. So he was somebody who initially, you know, was seen as 
having democratic--promising.
    I was in the State Department covering Europe and democracy 
issues--and I see my old boss, Tom Meliacoal, out here--at the time 
that Orban came to power. And I can attest that it was hard to get 
senior level attention to the early signs of Hungary's decline. When I 
left the State Department 2011 for the human rights NGO world, I joined 
a small chorus of those who saw in the rise of the openly anti-Semitic 
Jobbik party in Hungary, and the growing authoritarianism of Orban and 
his party Fidesz a dark shadow coming over the trajectory for democracy 
in Hungary that did not bode well for the neighborhood.
    Human Rights First, with a few other organizations, started a 
Hungary working group, which I was a part of while at Freedom House, 
and then when I moved over to Human Rights First. A part of this was 
the resurgence of anti-Semitism in Hungary, which was seen as a canary 
in the coal mine, a sign that there was a sickness at the core. Soon, 
though, the brand of ethno-populism and authoritarianism that Orban was 
such a trailblazer on started to effect a broader trend of far-right 
populism based in fearmongering of ``the other.''
    The scope expanded. We were no longer just looking at Hungary or 
Central Europe. We started looking at France, and Italy, Germany. And 
then, here in the United States in January 2017, we saw the same 
divisions that we'd been monitoring in Europe and the same hateful 
rhetoric being used as political weapons were fueling a divisive 
climate in the United States. The D.C. policy community was hampered in 
its ability to respond effectively due to paralyzing domestic partisan 
divisions. Our little Hungary working group decided we needed to 
broaden our scope.
    We came together out of alarm that if we didn't put aside our 
partisan bickering and stand together for democratic principles and 
institutions, and address threats--not only external ones, but 
antidemocratic forces and trends within our Euro-Atlantic ranks--our 
transatlantic security was at risk. We decided that whatever our 
political differences, we must put those aside. We are in a moment in 
history where we needed to fight for the vision that brought Europe and 
America together 70 years ago. Our power and security in the world is 
enabled and strengthened because of our democratic principles and 
alliances.
    Quick sidebar--last week for the 70th anniversary of NATO, our 
group put out a public statement. And it was sounding the alarm, that 
we feel that NATO is at risk, and that it is time to reaffirm our 
commitment to democracy. I joined with 70 signers for NATO's 70th, all 
former leading voices on Europe.
    Our group launched publicly in 2018 as a bipartisan response to 
address this democratic erosion and concern about lack of U.S. 
leadership to address it. We assembled a dedicated group of experts and 
former officials from all of the leading policy, human rights and 
academic institutions across the political spectrum to stand together 
as a coalition to support core values, institutions, and alliances. We 
agreed to join together and not just talk about the issues, but to try 
to do something together. Our first course of action was last year 
around the NATO Summit. We really wanted to revive the conversation 
about the importance of democracy as inextricably linked to our 
security.
    It was not really a coincidence that our launch coincided with the 
Hungarian election. In April 2018, Orban's party Fidesz won the 
Hungarian elections with 49 percent of the vote. This translated into a 
commanding two-thirds majority in Hungary's Parliament, which--you 
know, on some levels it was an election, but--you know--that was 
relatively fair on election day itself but Orban had stacked the 
playing field well beforehand.
    And we knew that with this new mandate, that Orban planned to 
implement at an increasing pace repressive plans for his illiberal 
democracy. The executive director of Transparency International Hungary 
said that long before they secured this powerful majority, Fidesz had 
reengineered the public arena, and that Hungary is a captured state.
    At times, those who wish to minimize the importance of these issues 
will ask me: Why is your group so concerned about Hungary? It's a small 
country. Don't you have bigger things to be worried about? They ask me: 
Why did we fight for the renowned Central European University in 
Hungary? And the answer to the Central European University and broader 
questions, we view Viktor Orban's campaign against the Central European 
University, which as Dalibor talked about was a joint American-
Hungarian institution, as a highly symbolic move against a vital 
institution that was founded to promote the transatlantic values of 
democracy, openness, and equality of opportunity, and posed a direct 
challenge to the United States.
    Another major geopolitical reason to worry about what is happening 
in Hungary is that Moscow is using Hungary and other NATO members as 
back doors of influence in Europe--Dalibor provided a lot of really 
good examples of that--which is fueling distrust, allowing corruption 
to spread, exploiting and enabling the rise of nationalist populism 
throughout the continent. So this is all very central to the mission of 
our Transatlantic Democracy Working Group.
    And Hungary's strong corruption is not an internal problem for 
Hungary. It is part of a macro problem that is destabilizing on the 
world stage. As both Melissa and Dalibor talked about, in Hungary you 
have a centralized top-down state, both politically and economically, 
which has enabled an increasingly centralized system of corruption. 
Again, quoting Transparency International, they said Hungary seems to 
be a kind of laboratory of transparent corruption, because the 
government has actually made legal many of the conditions to enrich 
themselves. So it shows that transparency is a necessary, but alone 
insufficient, condition to fight corruption.
    Our group had Tom Firestone, who's one of the preeminent experts on 
corruption in the region, come speak to us last week. And he said, 
Kleptocracy is the new cold war, and it is a very difficult foe to 
fight. Dalibor also talked a little bit about the funds, how they go 
directly into the pockets of Orban's cronies. You know, Orban--Hungary 
receives on average 4 to 7 percent of its annual GDP from the European 
Union. So they're essentially co-opting European Union funds, while at 
the same time being Euro-skeptical, and it's going directly into the 
pockets of Viktor Orban, while he's criticizing the EU. I mean, there's 
a real problem with that.
    Dalibor also talked about the Russian International Investment Bank 
opening its headquarters in Budapest, and why we should be concerned 
about that. There's an additional concern that I don't think he 
mentioned, but the bank's chairman has longstanding ties to Russian 
intelligence agencies. There are concerns that Moscow could use that as 
a base for a European intelligence operation. So essentially, putting 
Moscow within a NATO member country, could have a new base.
    The contemporary threat, though, is not a new one. But I do think 
that 2019 could be a pivotal year for the liberal world order, for the 
European project, for our transatlantic alliance.
    We have a new Congress, though, that is increasingly playing its 
oversight role, which is a hopeful sign. You know, I think a lot will 
ride on the European Parliament elections. [Laughs.] Don't even get me 
started about Brexit. But we also have the symbolic anniversaries for 
NATO and fall of the Berlin Wall. This could either help fuel the 
right-wing populist wave, or it could provide opportunities for 
opponents to build momentum for democratic renewal.
    Clever authoritarians implement antidemocratic threats stealthily 
and slowly. Each move may not seem threatening. It is when you connect 
the dots you realize how democracy has been dismantled. Orban is trying 
to co-opt the European project and use its funds to celebrate his 
vision of an illiberal democracy. And he's providing Russia a 
playground for destabilizing Europe, NATO, and therefore American 
security. We must not let that happen.
    I'll quickly end on a few things that I think could be done. But 
the challenge is large, and it requires action from all of us. The 
first one, NATO must use this year--NATO and NATO allies must use this 
year, the 70th, to make commitment to democracy among members a 
priority, and find a way to exert pressure for those who go against it. 
No. 2, the EU must--the EU should, not must, and they are considering 
this--adopt rule of law conditionality for structural funds for member 
states.
    No. 3--and, you know, usually I would also be calling for the U.S. 
administration, and I still am, but their record has been uneven, at 
best, on these issues--thus, we're really looking to the U.S. Congress, 
as the Helsinki Commission is doing now, to really exert its oversight 
role, with hearings, resolutions, introduction of legislation. Melissa 
talked a lot about the need for funding for civil society. And I 
heartily endorse that recommendation. I also think that there should be 
consideration of really developing a new model with a theory of change. 
The old model is outdated. It was based on a graduation model, with a 
linear progression of democracy. And now the trends that we're seeing 
are very much cross border and require new thinking.
    The State Department has implied that they do have money and a 
strategy in place. Melissa said that there's no evidence on the ground 
yet of that. So we should hold their feet to the fire. I encourage 
Congress and those in the NGO community to be asking them to, you know, 
provide evidence that they really are putting a new strategy into 
place.
    And then on corruption, Melissa talked about the need for more 
Global Magnitsky sanctions. U.S. businesses should also be held 
accountable. And we should be carefully monitoring what Russia and 
China are doing, and holding them accountable, to the extent that there 
is any leverage.
    And then finally, to go back to our Transatlantic Democracy Working 
Group, that is, you know, one modest effort for a group of those who 
really care about the transatlantic alliance and the advancement of 
democracy to come together and fight for it. So I encourage other 
similar initiatives.
    Thank you.
    Ms. Schlager. Thank you to all of our panelists. This has been a 
really great session, and you have given us an enormous amount to chew 
on. At the same time, I feel like we have barely touched on the 
surface. There is so much that we could be going through. I would say, 
as someone that follows Hungary fairly closely, I was struck, Dalibor, 
by your comments on the weakening protection of property rights. I 
think that is something that is really an interesting thing to delve 
into a little bit more and pay attention to, and the observation that 
corruption has been embedded into the political system as part of local 
patronage. And that may be something also to look at a little bit more 
closely.
    I'm going to invite my colleague, Paul Massaro, who is our expert 
on corruption, to ask the first question. And then I'll open it up to 
others who might want to make a brief comment or very concise 
questions.
    Mr. Massaro. Yes, terrific. Well, thanks, Erika. And thanks so much 
to all of you. I'm obviously very excited that corruption has come up 
so much. I'm also sorry that it has come up so much. You know, I 
absolutely echo Tom Firestone's comments. In sort of the circles I run 
in we say, Corruption is the new communism. And I think we're seeing 
that more and more, that it is just as destructive--and in many ways 
more destructive--to societies. And on that note, I kind of wanted to 
hone in a little bit on where the Hungarian people are in the 
anticorruption fight. And specifically with regard to the European 
Public Prosecutor's Office.
    So you've spoken a lot, Susan, about sort of the EU models. And in 
Brussels, you know, they're thinking a lot about what you do with the 
fact that you have this fraud in EU funds. And their sort of result has 
been to set up a European Public Prosecutor's Office that would be able 
to bring cases against individuals that have, you know, done fraud with 
EU funds. Hungary, of course, said no. [Laughs.] You know, we're not 
going to join that model. But then there was sort of an upswell of 
support in the form of a referendum that has garnered, you know, 
100,000-plus signatures for Hungary to join this. And just wanted to 
see if you, Dalibor, Susan, and maybe Melissa, would like to make any 
comments on what this sort of says about where the Hungarian population 
is on some of these policies, especially with regard to corruption.
    Ms. Hooper. I'm sure Dalibor will go have some--[background 
noise]--technology!--I'm sure Dalibor will have some thoughts on this. 
But I think that the OLAF proceedings from a year-plus ago really 
brought this to the forefront. When OLAF was able to identify this 40 
million, you know, related to the lighting projects that they said 
showed irregularities. And then OLAF went to the Hungarian Government, 
as it is supposed to do, and it said: Please take a look at this. 
Please investigate. And Hungary said, Looks all good to us and, you 
know, backed away from it.
    And I think that that publicly happening, that--we were watching 
that here in the United States. So it gained enough attention so that I 
think that ignited some concern within Hungarian society, which in my 
experience as, you know, I've been going to Hungary recently, is fully 
aware of the corruption, as Susan mentioned, it's happening in--you 
know, in daylight.
    But it's just kind of the belief that is just going to happen. 
Like, we are--we're not sure what we can do. But having this, I think, 
publicized some greatly has maybe ignited something. And so I think 
that you are seeing some movement as a result.
    Dr. Rohac. I agree that this is the key issue around which 
opposition could mobilize itself. Politically, the problem is that it 
is facing an uphill struggle doing that. And it lacks sort of 
organization and leadership resources, faces a media environment that's 
not exactly favorable.
    But I want to reiterate the sort of deeper underlying point, which 
is that this corruption is endemic across post-communist countries. But 
there is something special about the nexus of sort of legal patronage 
and graft and authoritarianism. The two cannot be separated. And that's 
not just an example recently, but an example of authoritarian hybrid 
regimes all around the world. The way these operate is by providing 
benefits to sort of politically connected, politically aligned groups. 
And that's exactly what Viktor Orban is doing.
    You know, can the EU push back more effectively? Of course it can, 
and it should. OLAF, for example, honestly, has been always very 
forthcoming when it comes to information related to these various 
corruption scandals and tenders. So there are--you know, we learned 
that this amount of money has to be returned. Obviously, that procedure 
has not been perfectly compliant. But we rarely learn what exactly the 
details were. And that places the burden on civil society, on local 
activists to sort of dig deeper and do the local investigative work, 
which might be difficult in a place like Hungary.
    The other structural flaw of all this is that the EU is not--is not 
a federal government. It's not a supranational entity. It rests, 
ultimately, on the consent of the EU's member States. I mean, that's--
you know, that's a good thing in many ways, but it also restrains the 
ability of European institutions to push back effectively. So right now 
we have three countries that are sliding toward some form of--you know, 
hybrid forms of governance in Europe. We have Romania, Poland, and 
Hungary. And so those three can effectively team up and push back 
against attempts to scrutinize their decisions, and I think that's 
partly the problem with this debate about conditionality for EU funds. 
I mean, there is a heated debate underway right now in the EU about the 
next multiyear financial framework which will revolve around that. And 
there is--there is an opposition to that from some member states. So 
it's far from clear to me which way it will go in the next sort of 7-
year financing period.
    Ms. Corke. Well, Melissa and Dalibor gave pretty comprehensive 
answers, so I'll answer it in a little bit different way. But, I mean, 
the fact that, as I mentioned in my remarks, that there is a structural 
and increasingly legalized method for corruption, you know, does give 
the population the sense that's very hard to fight, that there's a 
sense of despair. So having a public airing with the European Union and 
an external accountability, I think that gives the population something 
that they feel that they can hang onto.
    You know, I also want to note that, looking at other countries 
where systemic corruption has been a problem--like in Russia with 
Navalny, that to the extent that there has been successful activism 
breaking through, it's been on issues of corruption. The recent 
Slovakia election was very much about the public's rejection of the 
corruption amongst the elite and wanting an outsider who was a crusader 
against corruption, and the environment, and other issues. And in 
Ukraine, to some extent, too the election was about that. So I do think 
if the population feels that there is a way to have these issues out in 
public and have external accountability, it gives hope.
    Mr. Massaro. Thank you.
    Ms. Schlager. Thank you.
    I'd like to open it up now for some questions from the audience, if 
there are any, and in particular--Zsolt, then did you have a question 
or a comment?
    Questioner. Yes. A couple of them. Definitely.
    Ms. Schlager. Okay, please. I would first, then, actually give the 
floor to my colleague from the Embassy of Hungary, the deputy chief of 
mission, Zsolt Hetesy.
    Thank you for being here and listening to us. And please, brief 
comment.
    Questioner. Thank you very much. Thank you very much for your kind 
words. And thank you for the panel.
    One of you had mentioned that Kovacs Zoltan might be watching you--
could be. [Laughter.] He indeed made a reference of the panel being 
one-sided and I do believe that it is a fair statement, that the three 
of you are one of the most staunchest critics of Hungary. Now, I 
thought that it would be nice for all of us in the room to have 
somebody on the panel who would speak for the administration; for 
example, why the administration has chosen a new path. And that didn't 
happen, so that much about one-sidedness.
    But actually I have a couple of questions. One is, you have 
mentioned the issue about weakening protection for property rights. 
Now, the example that you have used came in 2010, okay? I remember 
because I was also affected, okay? It is not definitely right but, yes, 
that was a case that was criticized by many.
    However, if you take a look at the current numbers--and numbers 
matter--Hungarian FDI, bringing money into Hungary, surpasses all the 
average--surpasses the average of the European Union and many of the--
most of the countries, including the United States, where you have, I 
think, 1,700 companies investing and reinvesting in Hungary.
    Hungary does--U.S. is second-biggest investor in Hungary. I know 
that nowadays it's not the best argument with the administration, but 
still it is true that a lot of invest money is ticking in and--ticking 
in, in Hungary. So it seems to me that although you are talking about 
economic freedom problems, the companies are feeling otherwise. 
Otherwise it would not be the case.
    Second, on Russia, many, many--most of you, I think all of you, 
have mentioned that Hungary is providing some kind of a back door for 
Russian interests. Now, how do you reconcile that with the fact that we 
had, for example, open criminal cases against Russian interference 
already in 2014-2015, months before the 2016 elections here in the 
United States? Both of them had to do something with the far right in 
Hungary, and one of them actually had to do with a European Union 
member, a Parliament member of Jobbik.
    Second, if you think that Russia is economically a back door of 
Hungary, how do you reconcile that with the fact that Russia--Hungary 
is providing an economic back door for--sorry. Hungary is providing an 
economic back door for Russia. How do you reconcile that fact with--or 
that allegation with the fact that it is not Hungary that comes to the 
Hill and comes to the administration to lobby for Nord Stream, for 
example, or the Rusal case. It is not Hungary that has the biggest 
intertwined economic interest with Russia, but many of the Western 
European countries? Why is Hungary that you are harping on, and why it 
is not the other countries? Why IIB is important for you, if you see 
that Western European banks are laundering Russian money in the 
billions? IIB is a bank with five NATO members that has a capital of 
$350 million U.S.
    Anti-Semitism. Have you seen the EU watchdog agency, its report, 
FRA [Fundamental Rights Agency], about anti-Semitism? It is a 2018 
report. I'll speed up. I have two more issues to mention; actually, one 
more only. If you take a look at that report, in Hungary--this is--this 
is a survey of Jewish people in European Union countries. And in that 
report, it is very clear that Hungary is the safest country for the 
Jewish community. They feel extremely safe. They can wear and they wear 
the kippahs and all of their religious symbols openly in Hungary. There 
are no cases of physical abuse against Jews in Hungary. How can it 
happen if you think that there is--or, if you allege that there is an 
anti-Semitic government that is winning elections on anti-Semitic 
campaign? How can you reconcile that?
    Last point, Ukraine. I don't want to get into this, but you are the 
Helsinki Commission. It should be about human rights and minority 
rights. None of you have mentioned--none of you have mentioned that 
those rights are under attack constantly in this new Ukrainian regime 
or government. None of you have mentioned that there are 70 
institutions--Hungarian-language educational institutions--that can be 
closed because of the Ukrainian law.
    Ms. Schlager. Thank you for----
    Questioner. Thank you very much.
    Ms. Schlager. I appreciate that you were here today to hear the 
panel.
    Questioner. Very good. Thank you. Last sentence.
    Ms. Schlager. And I'd like to see if there are any other----
    Questioner. Thank you very much. Last sentence. I think that there 
is a systemic problem in these kind of briefings. You have 1 hour and 
15 minutes to criticize Hungary, and you give me five. This is not a 
dialog. This is not a normal briefing.
    Thank you.
    Ms. Schlager. Thank you.
    I'll turn it back to any other questions, if there are any, before 
we have to close. And I know Dr. Rohac has to leave very shortly. I do 
want to note that there have been quite a number of events in 
Washington, including one on the Hill just a week ago, organized by the 
Hungarian Government. I think there are many opportunities for the 
government to get its message heard. And we really appreciate that you 
were here today to hear this panel. Certainly within Hungary, where the 
prime minister's office is the largest purchaser of advertising space, 
I think the government has a highly robust communications team to get 
his message out. And certainly that is well known, I think, to everyone 
here in this room.
    Are there--yes. So I will turn for a question from----
    Ms. Hope. Thank you so much. We have a question via social media 
from Clay Fuller.
    What, if anything, can be done to address issues of transparency in 
Hungary, the EU and abroad, defined as, quote, ``credible information 
about the economy and politics''?
    Ms. Schlager. Okay, thank you.
    Do we have any other questions that I should take before--okay, I 
think there's one way in the back of the room. So let me take that and 
then do----
    Questioner. Good morning. My name is Conner Clark. I'm a grad 
student at the University of Maryland.
    I just wanted to ask, because I've--based on some anecdotal 
evidence I've heard from a friend in Hungary, how does the--is there a 
similar urban-rural divide, as Americans might think of, in Hungary 
that manifests itself in politics? You know, the economy, changes in 
technology?
    I'm wondering if it's anything at all similar to what we might--
what we might be familiar with in the States or something very 
different--say, reflected into their broader assessment of the European 
Union, you know, which can be seen as very technocratic, very 
cosmopolitan, very urbanized?
    Ms. Schlager. Thank you.
    So, panel, I will turn back to you for a lightning round to respond 
to anything that we've heard just now, and also to wrap up.
    Thank you.
    Ms. Hooper. I think, in terms of Clay Fuller's question of 
increasing transparency, that is an easy one for me. It is about 
increasing support to civil society, investigative journalists that are 
trying to do that. And that are having a very difficult time. And I 
think that that also ties into the urban versus rural divide question, 
in that there may be some resources, even very small, in Budapest, but 
there are very few resources for civil society outside of Budapest. And 
so, to the point made by both Dalibor and Susan that we need to be 
rethinking democracy promotion by the U.S., we should be thinking about 
how we can support those that are outside the capital in particular and 
looking at transparent--issues of transparency and corruption and 
prioritizing those.
    Ms. Schlager. Thank you.
    Dr. Rohac. So full disclosure: Clay Fuller is a wonderful colleague 
of mine at AEI who works precisely on this nexus of money and 
authoritarian politics. And I would urge everybody to follow his work. 
I think it's a subject for a longer conversation.
    Part of the story is what Melissa touched on. I think another part 
of the story is also holding Western countries to high standards. There 
is a difficult tradeoff between financial privacy and transparency. But 
we do know that a lot of stolen laundered money ends up in the West in, 
you know, Florida real estate, and in Mayfair, London, and other 
places. And so I think there is a sort of debate that ought to take 
place in Western capitals as well.
    Yes, politics in Hungary in some ways bears resemblance to the 
politics everywhere else right now, the sort of cleavages--the same 
cleavages are there that you would recognize in other countries. That's 
why I think Viktor Orban has been successful in speaking to Western 
Anglo-Saxon, if you will, conservatives. So I would very much sort of 
stress that, in those dimensions, Hungary is not a sort of different 
planet or a world of its own.
    And finally, to the remarks by the gentleman from the embassy--you 
know, I wouldn't say that this panel was one-sided in the sense that it 
would be keen to paint a pessimistic or sort of one-sided, black 
picture of the country. And, you know, we all understand that the 
reality is nuanced. We are all keen to praise Hungary's government when 
we can, when it is deserved. We are all likewise keen to criticize and 
call out others when they don't live up to the same standards and 
expectations. And so the sort of rhetoric that was actually presented 
to us was known, I think from the cold war era, as ``whataboutism.'' 
`Well, you know, there are these other things that we haven't discussed 
we could have discussed, but we didn't.' And it's--I think, to me, it's 
quite poignant that you haven't touched on the issues that we did 
discuss.
    And I'll stop there.
    Ms. Corke. Thank you for very good questions. And Melissa and 
Dalibor answered them very well. So I would mainly underscore a couple 
of things.
    On the increasing transparency, it is very important to increase 
funding for independent media. But alongside the funding for 
independent media is also rebuilding trust, understanding that there 
has been--particularly with the rise of online media sources and that, 
you know, it's a much more polarized environment. We need to be 
investing in the digital environment as well and understanding how 
there's been an exploitation of and undermining of trust in the media 
and that there's a need to build that back.
    So there's also, I would argue, need for support in terms of civic 
education in schools, and teaching people--teaching young people how to 
be critical consumers of information, and to really value the role that 
a free press plays in society.
    There's a need for increased multilateralism, for transparency. You 
know, within, like, the Organization for Security and Cooperation in 
Europe, it is an organization where each member State--each 
participating State has taken on commitments to hold each other 
accountable. So, you know, today we're talking about Hungary. On 
another day we could be talking about Italy. And it--one of the 
requirements of being a member of the OSCE is that countries should 
welcome criticism as an opportunity to learn. Does it--you know, and 
debate and talk about solutions together.
    There's--[laughs]--I think if you look at my record, I have 
criticized a lot of countries over the years. And the framework for the 
Transatlantic Democracy Working Group is not explicitly focused on 
Hungary. We are looking at where we see democratic institutions going 
in the wrong direction, where we see concerns about rule of law, we can 
see concerns about the ability to exercise fundamental freedoms, and in 
particular where those declines are within countries of the NATO 
alliance and that's starting to pose security risks. And we come 
together as a bipartisan group to discuss and debate which issues are 
the ones that we think are really going to matter and which ones would 
make a difference if we stood up on together.
    I would also--on the question of, you know, just focusing on 
Hungary, the issue of corruption itself is multi-country, multi-
stakeholder. It's private sector. It's government. It's wealthy 
individuals. It's a very complicated problem. You know, we're looking 
today at Hungary and where there's systemic corruption, but there are 
many actors. And we need to focus on the demand side as well. And, you 
know, American banks have also been implicated in this laundromat 
scandal. So this is not an attempt to focus on another country and not 
be calling for transparency on what the U.S. is doing wrong, because 
this is--a lot has been exposed about American wrongdoing as well.
    Finally, on anti-Semitism, I--you know, that was--before my current 
position that's what I was focusing on. And there--you know, Hungary 
has a very small Jewish population. The things that you----
    Questioner. Second-largest in Europe.
    Ms. Corke. Hmm?
    Questioner. Second-largest in Europe. That's all.
    Ms. Schlager. Please continue.
    Ms. Corke. Yes. And, you know, the campaign against George Soros 
using explicitly anti-Semitic imagery, funded through government funds, 
you know, is very troubling. There's been historical revisionism. So--
and I wouldn't say--we are concerned when we see anti-Semitism being 
stoked as a way to create fear of the other. I am also concerned about 
it in the United States. I think when there is coded anti-Semitism used 
in the public space, it creates the sense of fear amongst the affected 
communities.
    And I'll end with that.
    Ms. Schlager. Unfortunately, I think we are out of time for the 
session we have right now, so we are going to wrap it up.
    I do want to thank all of our panelists for your presence here 
today, the contributions you have brought forward, and particularly 
your thoughtful recommendations about what we can do going forward. 
Again, I thank my colleague from the Hungarian embassy also for being 
here and hearing us out.
    The goal of this briefing today was to enhance the information that 
may be useful to Congress in considering how we go forward, how we can 
strengthen the relationship with Hungary. And I hope that we have 
contributed to that goal. I know that there were a number of things 
that we didn't get to today, including issues relating to identity 
document security or other extradition matters. Maybe we can get to 
those at another event. Also some other voices that we didn't have here 
today just because of the constraints of time. I do want to mention 
briefly the Brookings report on democracy disorder, which is a great 
resource for folks looking at this. Okay, very convenient. Thank you, 
Melissa.
    Ms. Hooper. I happened to have that.
    Ms. Schlager. The work of PEN America, the American Bar 
Association, others who are really looking to illuminate this work more 
fully. One of the resources that was in the packet when you came in was 
the United States Holocaust Memorial Museum fact sheet on the Holocaust 
in Hungary. That is an evergreen resource. And so I hope it will be 
useful to folks going forward.
    So, again, thanks to everyone for being here today.
    Thank you. [Applause.]
    [Whereupon, at 11:31 a.m., the briefing ended.]


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