The world’s most comprehensive corruption survey, the Corruption Perceptions Index (CPI), was compiled for the 28th time this year by the Berlin-based Secretariat of Transparency International (TI). In 2022, Hungary became the most corrupt member state of the European Union. This result can be attributed to the decade-long erosion of the rule of law, state capture and the development of systemic corruption, according to TI Hungary’s Report, which was presented together with the CPI results on January 31 in Budapest.  

Hungary at the tail end of the EU 

According to the latest results of the Corruption Perceptions Index (CPI), the corruption situation in Hungary has further deteriorated: in 2022, Hungary scored 42 points on a scale from 0 (most corrupt) to 100 (least corrupt), ranking 77th out of 180 countries, down 1 point and 4 places compared to the previous year. This can be considered a medium performance globally, but within the European Union, Hungary has slipped to last place. 

Graph: over a decade, Hungary became the most corrupt member state of the EU

Hungary’s results are significantly worse than those of the countries that are considered its direct regional competitors. Czechia and Slovenia, together with other European countries, reached 41st place with 56 points. Poland ranked 45th with 55 points, Slovakia 49th with 53 points, and Croatia 57th with 50 points in TI’s corruption ranking. 

Graph: Hungary also became the most corrupt country in the V4-group (grey: Poland, green: Czechia, blue: Slovakia, red: Hungary)

Hungary’s rear position in the European Union is the culmination of a process that has been going on for more than a decade, involving the erosion of the rule of law, state capture and the development of systemic corruption. While in 2012 Hungary was ranked 19th in the then EU-27, its performance deteriorated in a trend-like fashion, by 2019 and then 2021, only Bulgaria ranked lower. (In 2020, there was a three-way tie for last place between Hungary, Romania and Bulgaria). By 2022, Hungary has lost the minimal lead it had a year earlier against the poorest country of the EU: Bulgaria improved somewhat, while Hungary’s position worsened. Overall, Hungary’s ranking in the world corruption index has decreased the most in the last ten years. Due to the long lead time of the survey, the impact of the government measures to free up EU funds is not yet reflected in the latest CPI results just published. 

Graph: Hungary lost the most points not only in the EU, but also in the Eastern-European region

Fighting corruption in the shadow of the war in Ukraine 

The Berlin-based Secretariat of Transparency International points to a clear link between the extent of corruption and threats to national security, based on the latest global CPI data. 

“Corruption is making the world we live in a more dangerous place. Weak government action against corruption has also increased the risk of violence, putting citizens at risk. The only way out of the current situation is for governments to take up the fight against corruption, standing up to guarantee the well-being of society as a whole, not just a narrow elite,” said Delia Ferreira Rubio, Chair of TI. 

The rule of law will not be restored overnight 

In parallel with the presentation of the Corruption Perception Index, Transparency International Hungary (TI Hungary) also published its Annual Report on corruption, which comprehensively analyzes the state of the rule of law, public procurement and the use of EU funds, as well as the impact of corruption on economic performance. 

Among the most significant developments in 2022 is the fact that for the first time in the history of the EU, the European Commission has launched a rule of law procedure against Hungary after the parliamentary elections in April, tying the availability of EU funds to conditions – states the section on the rule of law in TI Hungary’s Report. This indicates that, after a decade, a change of attitude has taken place in the European Union, and neither the EU institutions nor the key Member States are standing idly by as infringements and systemic corruption occur in some Member States – primarily in Hungary and Poland.

As of January 2023, under the rule of law mechanism, Hungary will not have access to 55 percent of the funds from the three operational programs for the 2021-2027 budget cycle, i.e. EUR 6.3 billion (about HUF 2,500 billion, almost 30 percent of the total cohesion funding), until it meets the 17 conditions (“milestones”) set by the European Commission. The EU also tied the de-blocking of EUR 5.8 billion (approximately HUF 2,300 billion) of direct grant from the Recovery Fund (RRF) to a total of 27 so-called “super-conditions”. 

The Report states that the steps taken under EU pressure and designed to curb the misuse of EU funds can be considered the only serious anti-corruption measures of the NER (System of National Cooperation) period, even though the government’s real aim is to obtain funds, not to restore the rule of law. According to TI Hungary, the package is not even suitable for the latter, since corruption permeates the state structure and abuses have become part of the system. State capture was already complete by the middle of the previous decade. 

“If the Commission rigorously monitors the implementation of the new rules, misuse of EU funds can be expected to decrease in the future, but the institutional destruction of the last decade will not be undone and the rule of law will not be restored “in one fell swoop”, said József Péter Martin, Executive Director of TI Hungary, presenting the CPI results and TI Hungary’s Report. 

Public procurement and the distribution of EU funds are hotbeds of corruption 

Although Hungary has been one of the largest beneficiaries of the EU budget, the inflow of money has not contributed to increased efficiency or economic activity measured by the number of businesses, inequalities have not decreased either, but corruption has increased. As the section on public procurement and the allocation of EU funds in TI Hungary’s Report shows, the economic weight of public procurement in Hungary remains significant, while the system’s exposure to corruption is high.

The European Commission has repeatedly drawn attention to the high rate of single-bid tenders in public procurement, which significantly reduces the intensity of competition. The 35 percent rate of single-bid tenders in procurements above the EU threshold remains well above the EU target of 15 percent. The competitive conditions for obtaining public contracts are further worsened by the fact that the most important procurements are regularly exempted by the government from traditional public procurement procedures, for example on the pretext of the coronavirus epidemic, or for reasons of national security. Last year was no exception: concessions launched in previous years that went against EU legislation were closed, usually with winners close to the government (for example, two concessions for waste management and for the operation of freeways, both for 35 years). 

Hungary’s economic performance is low by EU standards 

Hungary became the most corrupt country in the EU despite strong economic growth in the seven years leading up to the coronavirus epidemic, according to the chapter on economic trends in TI Hungary’s Report. As in previous years, there remains a strong correlation between national income and corruption in the EU. Hungary is stuck in the EU’s lower league of corruption-ridden Member States with low national income by EU standards, despite the fact that its gross domestic product (GDP) per capita increased by as much as 39 percent between 2013 and 2022. The main reasons why Hungary failed to improve its position among the EU countries are the destruction of the rule of law and systemic corruption. 

According to the findings of the Report, several interrelated factors led to intensive investment activity in the Hungarian economy since 2016, not only in public but also in private investments, despite the destruction of the rule of law and systemic corruption (the investment paradox). The latter is a result of public funds allocated to crony businesses and oligarchs turning into private assets over time; the domestic economy has been characterized by years of resource abundance due to below-inflation borrowing rates; and the systemic overpricing of public procurement and EU resource distribution improved investment and growth statistics. Furthermore, it cannot be neglected that a significant number of economic actors have accommodated the disruption of the rule of law and systemic corruption since the second half of the last decade, accepting it as a kind of “new normal”. 

*** 

About the Corruption Perception Index 

The Corruption Perceptions Index (CPI) is prepared by the Secretariat of Transparency International (TI) in Berlin based on 13 surveys and analyses performed by 12 organizations. They measure corruption in the public sector by surveying the opinion of experts and businessmen on the corruption exposure of the public institutional system, the economy and society. Corresponding data was available on 180 countries in 2022, and Hungary was assessed based on 10 different subfactors. TI defines the scores of the sub-factors on a scale from 0 to 100, where 0 marks highly corrupt countries and 100 those least affected. The secretariat of TI in Berlin calculates the index by weighting the average of the scores.