'Hungary is test case for state capture'

He is now professor at the Central European University (CEU), the campus Hungarian prime minister Viktor Orban tried to force out of the country last year - leading the European Commission to open an infringement procedure over Budapest's controversial legislation on foreign NGOs and new rules on higher education.

"[The action against] CEU is part of government's attack against free-thinking, which also targets the press," Balazs told EUobserver in a recent interview in the margins of the Prague European Summit, an EU affairs conference.

The CEU was founded by Hungarian-born US billionaire and Orban's nemesis, George Soros. It was the main target of the law voted on last year, which required foreign universities to have campuses abroad - something CEU did not have.

"The government had found an impossible condition [for us to meet]," Balazs noted.

Since then, however, CEU established a partnership with Bard College in the US, and bought buildings in Vienna, in neighbouring Austria.

Recently, the CEU's board of trustees confirmed the university would begin recruitment for the 2019-2020 academic year in Budapest.

"CEU has delivered, but the government is not answering, playing with time," the professor said. If no official green light is given to continue its operations, CEU could be forced to move in Vienna.

"It would be very big political intellectual loss for Hungary," said Balazs.

Orban's drive against the CEU is part of a policy, aimed at both foreign NGOs, liberal thinking and Soros himself, to stifle activities his government considers opposed to Hungary's interests.

They are also part of a wider project to reshape the country's political and economic landscape since he returned to power in 2010 - after an earlier stint in the 1990s.

Balazs, an independent who served under a socialist prime minister, insisted that besides constitutional changes, Orban's friends have "grasped power and occupied all state institutions."

"There is hardly any other country where the prime minister, the president and the speaker of the parliament were in the same room at university," he said, referring to Orban, Janos Ader and Laszlo Kover. "And we could go on, with the chief prosecutor and other people..." he added.

"It's a very narrow circle of friends and they proved to be excellent technicians of power," he argued. "They used all the possibilities of liberal democracies to come to power, and then to transform the system in order [that] nobody can pursue them."

"Hungary is a test case for state capture," he said, pointing out that there was "a very high degree of 'not properly used' EU money" in his home country - more than in others.

New ruling class

Balazs, who was EU commissioner for regional policies from May 2004, when Hungary joined, to the end of the Romano Prodi commission six months later, alleged that in many cases, EU funds for public projects became private revenue.

He noted that in many cases, tenders were given to companies that overpriced their work or delivered low-quality products.

In one case, reported earlier this year by Olaf, the EU anti-fraud office, a firm co-owned by Orban's son-in-law had committed "serious irregularities" and a "conflict of interest" in 35 projects for public lighting.

The firm which won the tenders was linked to the firm that was in charge of the tenders. The Hungarians have closed the case in 2016, but an inquiry was opened after Olaf's report.

Olaf also asked the European Commission to recover some €43.7m.

"Olaf do their job," Balazs said. But "they cannot put an officer at the entry of government procurement offices."

He also claimed that EU agriculture subsidies went to Orban's clique who had been attributed state-owned land, or that friends were given control of a new national system of tobacco shops that enjoys a monopoly.

"Orban has openly said now we are shaping a new ruling class - this is part of the systemic change," he said. "He is killing all competition, eliminating foreign companies and subsidising his supporters."

Easy conditions, great temptations

The former commissioner pointed out, however, that Hungary was not alone among the newest EU member states who "have learned how to use and how to misuse EU money."

"In most countries, it was just cheap money with a high temptation for corruption," he explained.

Even if each country is different, he said, "there are some similarities - the sudden increase of external sources with relatively easy conditions, great temptations."

On the other side, he noted, the EU commission and Olaf have also developed a "learning process on how to find those money-diverting actions and tricks, and how to punish them."

"This is partly reflected by the MFF," he said, referring to the multi-annual financial framework, the seven-year EU budget.

In its proposal for the 2021-2027 budget, unveiled in May, the commission proposed reducing funds for agriculture and cohesion policies and to put more conditions on cohesion funds, while helping more research, education and migration policies.

Hungary, as well as Poland, would be the most affected by these changes.

"Here I could feel the innovative spirit of the commission," Balazs said, adding that the next budget was "an exceptional opportunity to change things, to bring new elements."

But he admitted that "fundamental change will be very difficult [because of] strong resistance on behalf of beneficiaries."

Cohesion funds not efficient

Looking at cohesion policies, his former portfolio at the commission, Balazs argued that EU funds should be linked to "much deeper national development strategies."

"My political experience tells me that if a donor like the EU is offering money for seven years, it should require at least programmes for seven-year projects, not ad hoc projects," he said.

As for Hungary, where Orban relies on a friendly media and faces no organised opposition, the former minister and academic said he hoped that "external forces will sooner or later eliminate this governance which is mostly bad, not in the interest of Hungary."

"My hope is that bad governance is not forever," he said.