Connect with us

Europe

German industry faces uncertainty as Magyar’s landslide victory resets Hungary’s economic path

Published

on

Following the landslide victory of Péter Magyar’s Tisza party in the Hungarian elections, a complex landscape is emerging for Germany: while Berlin may find political relief in the result, significant economic challenges are beginning to surface.

According to an analysis by German Foreign Policy, the ascent of Magyar’s leadership has already produced the first signs of friction between his proposed EU policies and the established interests of German corporations.

Magyar has pledged to firmly anchor the country within the European Union and NATO, while declaring an intent to adopt the euro. His proposed cabinet lineup is notable for its inclusion of executives from major corporations with extensive transatlantic experience. These signals mark a decisive break from the cooperation with Russia maintained by outgoing Prime Minister Viktor Orbán.

Simultaneously, however, Magyar has criticized the extensive subsidies previously granted to large corporations and has set a goal to diversify the Hungarian economy. For German firms that have benefited from the political and financial patronage of the Orbán government for years, these developments suggest a period of significant transition. Approximately 6,000 German companies currently operate in Hungary, a presence that has effectively turned the country into the hub of Germany’s “industrial backyard.”

Magyar also remains opposed to the EU Migration Pact. Meanwhile, pressure from Brussels continues to mount: Hungary must meet 25 reform conditions set by the European Commission by August to trigger the release of funds that were frozen during Orbán’s tenure.

Hungary as Germany’s industrial backyard

German firms remain the largest group of foreign investors in Hungary, with nearly 6,000 companies creating more than 300,000 jobs and investing approximately €18 billion. These enterprises account for 7% of Hungarian employment, contribute more than 11% of the country’s gross value added, and represent nearly one-sixth of all investments in the corporate sector.

Outgoing Prime Minister Viktor Orbán relied on low taxes, deregulated labor laws, and the country’s central European location to construct what was described as an “efficient paradise” for German investors. This strategy solidified Hungary’s role as a central component of Germany’s industrial infrastructure.

German automotive giants as primary beneficiaries

One specific group of companies benefited disproportionately from Orbán’s policies: the German automotive giants.

Mercedes-Benz, for instance, is currently doubling its production capacity at its Kecskemét plant from 200,000 to 400,000 vehicles per year. In Debrecen, BMW has invested more than €2 billion in a new facility, marking its first production site in Eastern Europe. Only months ago, the Volkswagen-owned Cupra brand began production of the Terramar SUV at the Audi Hungaria plant in Győr. Audi, having expanded the facility, now employs 11,000 people there.

The economic incentives are stark. According to Eurostat data, the average labor cost in Germany was €43.30 per hour in 2024, compared to just €14.19 per hour in Hungary. Mercedes reports that production costs in Hungary are 70% lower than those in Germany.

Unlike their counterparts in German politics, German automakers did not oppose Orbán, as his administration provided what they viewed as ideal investment conditions. German suppliers also maintain a robust presence; Bosch operates its largest European development center outside of Germany at its innovation campus in Budapest. Employing 17,000 people, Bosch was projected to generate more than €5 billion in revenue there by 2024. Similarly, the Henkel Group has produced industrial adhesives in Környe for 15 years, supplying approximately 70 countries from that location.

Restrictions on strategic sectors

However, the Hungarian “investor paradise” has its limits. While Orbán aggressively promoted the export sector, he subjected strategic industries—including telecommunications, banking, logistics, construction, and retail—to restrictive industrial policies following the 2008/09 global financial crisis.

Foreign companies in these sectors have long complained of special taxes, regulatory hurdles, price controls, state intervention, and delayed approvals. In recent years, Hungary recorded the highest inflation rate in the EU, with food prices rising by as much as 45% at peak levels.

The Orbán government’s interventions affected not only the Austrian chain Spar and Britain’s Tesco but also German discounters Lidl (the Hungarian market leader), Aldi, and Penny. Price caps currently apply to more than 40 essential food products and will be extended to 30 pharmaceutical products starting in May 2025, a move impacting German retail chains dm and Rossmann.

Interventions in other sectors are even more pronounced. Companies are required to pay additional taxes on construction materials such as sand, gravel, and cement, which has adversely affected German manufacturers.

Scrutiny of “crony” contracts

The ongoing power struggle between the European Commission and Orbán has resulted in the freezing of tens of billions of euros in subsidies since 2022, leading to further economic strain.

A representative of the German steel company Thyssenkrupp Materials in Budapest noted that the cessation of these funds has damaged the industry. According to the official, orders have hit rock bottom and business is performing “truly poorly,” adding: “We hope that relations with the EU will improve again after the elections.”

An analysis by the Financial Times revealed that since Orbán took office in 2010, 14% of all state tenders were awarded to companies owned by just 13 individuals within his inner circle. These firms received an average of three times more contracts annually compared to the five years preceding Orbán’s premiership, spanning the banking, logistics, and construction sectors.

Péter Magyar, as Orbán’s successor, is now promising a new era and has declared a “struggle against 3,000 oligarchs.”

Business heavyweights dominate the new government

Immediately following his decisive victory in the April 12 elections, Magyar launched an offensive against Fidesz and its inner circle, calling for the resignation of President Tamás Sulyok. Magyar has threatened that if Sulyok does not resign voluntarily, he will seek the president’s removal via constitutional amendment.

Magyar is bringing in a new cabinet that includes several executives from major foreign corporations. His choice for Finance Minister, András Kárman—who served as Magyar’s economic advisor since the autumn—was previously responsible for the mortgage business at Austria’s Erste Bank. Prior to that, he served on the Board of Directors of the European Bank for Reconstruction and Development (EBRD) for three years. While Kárman initially worked in Orbán’s first government, he departed shortly thereafter due to disagreements over the prime minister’s confrontational stance toward the IMF.

István Kapitány, 64, slated to lead the Ministry of Energy, spent his entire career at the British oil major Shell.

The designated Foreign Minister, Anita Orbán, is a long-time veteran of the Ministry of Foreign Affairs, having served as Hungary’s roving ambassador for energy security between 2010 and 2015. In 2020, the Orbán government supported her candidacy for NATO Deputy Secretary General. After leaving the ministry in 2015, she worked for several years at US LNG companies Cheniere and Tellurian before joining Vodafone as a lobbying expert in 2021.

A high-level executive and energy expert, Anita Orbán was previously part of Fidesz’s transatlantic wing. She resigned her post as special envoy for energy security in 2017 after Prime Minister Orbán signed a major deal with Russia. She is the author of the 2008 book Power, Energy and the New Russian Imperialism. Before entering active politics, she was a board member of the European Council on Foreign Relations and Globsec, and worked as a journalist writing foreign policy analysis for Heti Válasz.


Europe

German officials urge fighter jet alliance with Sweden and Spain

Published

on

German Defence Ministry officials have advised Berlin to form a new fighter jet partnership with Sweden and Spain rather than join an existing UK-led consortium.

Internal ministry assessment notes obtained by Politico state that a trilateral arrangement among Germany, Sweden, and Spain represents a “more advantageous and promising” approach than joining the Global Combat Air Programme (GCAP) run by the UK, Italy, and Japan.

The proposal outlined in the document does not yet represent a final government decision, nor does it contain any indication that German Defence Minister Boris Pistorius has approved the recommendation.

The advice was drafted after Germany’s flagship project with France to build a next-generation fighter jet collapsed in June following years of industrial infighting.

Initiated in 2017 and later joined by Spain, the Future Combat Air System (FCAS) was conceived as a showcase initiative for European defence cooperation. The partnership aimed to develop an aircraft to replace Germany’s Eurofighter fleet starting in 2040.

However, the initiative foundered on disputes over operational control and workshare between France-based Dassault and Germany-based Airbus Defence and Space. Following unsuccessful rescue attempts at the political level, Berlin withdrew from the joint fighter project this year.

UK Prime Minister Andy Burnham raised the prospect of Germany joining GCAP during an 8 October meeting in Berlin with Friedrich Merz. The two leaders agreed that officials should continue discussions.

For Berlin, the choice carries implications that reach far beyond which model its air force will fly. The decision will determine who controls future military technology, which countries secure production contracts, and whether a new European partnership can avoid the frictions that dismantled FCAS.

Ministry assessment keeps distance from UK-partnered GCAP project

The ministry assessment listed several reservations regarding the GCAP project. The report argued that the existing programme focuses on operations beyond Germany’s capability requirements, whereas Berlin needs an aircraft better suited for missions over continental Europe.

The document also noted that German manufacturers would struggle to secure a significant share of development and production work within an already established partnership.

Invoking past experiences with the Eurofighter programme, which was developed in the 1990s and entered service in the early 2000s, the document took direct aim at British defence contractor BAE Systems.

The German Defence Ministry assessment accused BAE Systems of prioritizing exports over the development interests of Germany and Italy, warning that British dominance would prove incompatible with an equal partnership.

By contrast, the document stated that the military requirements of Germany, Sweden, and Spain align closely and that their starting positions are well balanced.

The assessment proposed an industrial partnership between aerospace giant Airbus and Sweden’s Saab, while recommending that the Saab-manufactured Gripen E fighter jet serve as a technological stepping stone until the new aircraft is developed.

The German Defence Ministry declined to comment on the matter. A separate ministry note, however, recorded British efforts to integrate Germany into GCAP as an observer or participant, asking German officials to examine potential industrial roles and military requirements.

An Airbus spokesperson said the company was “generally open to cooperation”, provided that German and Spanish industry secured a “substantial and equal role” across development, production, and operational phases.

“Purely political decisions without an industrial foundation remain insufficient,” the spokesperson said, urging authorities in Berlin and Madrid to clarify the path forward swiftly.

In an interview published in Handelsblatt on Monday, Airbus defence chief Michael Schollhorn pointed to ties with Saab, noting that the two companies have always worked well together.

A Saab spokesperson also indicated that the company is receptive to broad defence cooperation, including in fighter aircraft.

Emphasizing that large-scale collaborative projects are handled at the political level and that participation decisions rest with the respective governments, the spokesperson said: “All questions regarding potential Swedish participation should be directed to the Swedish government. Saab stands ready, as always, to support Sweden’s future fighter aircraft requirements.”

Continue Reading

Europe

EU reopens debate on naming envoy for Ukraine talks with Putin

Published

on

The European Union has returned to the idea of appointing an envoy to hold talks on Ukraine with Russian President Vladimir Putin.

According to sources familiar with the matter who spoke to Politico, this search gained fresh momentum following a visit to Russia by Steve Witkoff, the US special envoy.

During his trip, Witkoff proposed to Putin that Russia, the US, and Ukraine hold trilateral talks.

European countries, meanwhile, fear that Washington could accept terms unfavourable to Kyiv in negotiations that exclude them.

Sources speaking to Politico said the names being discussed for the envoy role include European Commission President Ursula von der Leyen, European Council President António Costa, and EU High Representative for Foreign Affairs and Security Policy Kaja Kallas.

Some European diplomats believe Finnish President Alexander Stubb may be the most suitable candidate for the post.

Stubb’s good relations with Trump and Finland’s experience in dealing with Russia are cited among the factors setting him apart.

An unnamed EU diplomat described Stubb as the only European politician so far to have demonstrated senior-level leadership.

Another group of diplomats argues that Costa should lead the talks. European leaders asked Costa during last week’s EU summit in Brussels whether the time had come to speak with Putin.

Politico’s source recounted that exchange: “Costa said no, saying he would not speak to Putin right now. But if we want to play a role in the negotiations, Costa still needs to initiate dialogue with Putin.”

According to an assessment by another source, the European Council president could serve as a more neutral mediator than von der Leyen or Kallas, who are seen as overly focused on supporting Ukraine.

“Three or four people cannot go there with each of us speaking on behalf of the European Union,” one of the sources told the publication. “Ultimately, the choice of who represents the EU must be based on maximum efficiency, not on a personal power struggle or someone’s narcissistic ambitions.”

Politico previously reported in January that the EU was considering appointing a special representative for Ukraine negotiations. At the time, the initiative drew support from several European leaders, including French President Emmanuel Macron and Italian Prime Minister Giorgia Meloni.

Putin said he was ready to negotiate with European countries, but asserted that Europe had “no peace agenda” and stood “on the side of war”.

The Russian leader also named former German chancellor Gerhard Schröder as Moscow’s preferred negotiator from Europe.

Kallas ruled out such an appointment, noting that Schröder was “a lobbyist for Russian state companies” and would sit “on both sides of the negotiating table”.

Stubb details obstacles to talks and Oslo diplomatic drive

Finnish President Alexander Stubb said the principal obstacle to ending the war between Russia and Ukraine was the territorial issue.

Stubb took part in talks in Oslo with US envoy Steve Witkoff, who subsequently travelled to Saint Petersburg to meet Vladimir Putin.

As reported by the newspaper Helsingin Sanomat, Stubb stated that advancing the peace process required either bilateral talks between Russia and Ukraine or trilateral negotiations involving the US.

The Finnish president listed the other major items to be addressed within a settlement as US security guarantees for Ukraine and the construction of a new European security architecture after the war ends.

Without stating it outright, Stubb implied that the core issue within this framework was Ukraine’s NATO membership. The Finnish leader pointed to monitoring the ceasefire, establishing the line of contact, ensuring energy and food security, and exchanging prisoners as practical tasks.

Stubb also detailed the talks held in Oslo on 20 October, which included Witkoff, Ukrainian President Volodymyr Zelenskyy, and Norwegian Prime Minister Jonas Gahr Støre.

The discussions, which spanned approximately eight hours across various formats, had three objectives: to lower tensions in public discourse, to convey European and Ukrainian proposals to the US envoy before his visit to Russia, and to determine the next steps toward a peaceful settlement. Stubb announced that these goals had been achieved.

Moscow ready to resume trilateral talks in November

Witkoff met Putin in Saint Petersburg on Wednesday.

Following the meeting, Russian presidential aide Yuriy Ushakov announced that Moscow was prepared to resume trilateral negotiations with the US and Ukraine during the first half of November.

Ushakov also said that the EU and NATO had begun to “take a more serious approach” to Kremlin proposals on Ukraine, adding that “matters” were moving toward an end to the conflict.

Witkoff described the meeting as “constructive”.

Sources told Bloomberg in September that Putin continued to insist the Donetsk region must come fully under Russian control, expressing confidence that the territory would be captured within the next six months.

Putin previously set conditions for ending the war, demanding that Ukraine abandon plans to join NATO, maintain a neutral and non-nuclear status, and that anti-Russian sanctions be lifted.

Continue Reading

Europe

Trump midterms calculus halts Israeli strike plan against Iran

Published

on

A comprehensive military operation planned by the Israeli military for 10 October did not take place because US President Donald Trump chose to avoid a broad conflict before the 3 November congressional midterm elections.

Preparations had been made on the orders of Prime Minister Benjamin Netanyahu for an aerial bombardment meant to last several days, according to a report by the Financial Times citing sources familiar with the matter.

The list of targets included nuclear facilities and locations associated with the Iranian leadership, along with power stations and other civilian infrastructure sites.

The planned strikes were projected to exceed the joint operation launched by the US and Israel in February in terms of intensity.

White House Deputy Press Secretary Anna Kelly told the newspaper: “The United States is not going to strike Iran at any point before the midterms.”

Kelly argued that the administration in Tehran was in distress both economically and militarily, adding that the blockade imposed on Iranian ports and US efforts to secure oil shipments through the Strait of Hormuz were producing results.

Speaking to the newspaper, one source addressed the possibility of strikes resuming in the coming weeks, saying: “There’s either going to be a deal or a strike.”

The same source reported that Washington aims for a comprehensive settlement that resolves the conflict over both the Strait of Hormuz and the nuclear programme, although it remained unclear whether the US would have participated directly in the cancelled operation.

Another source said the preparations for the operation might have served as leverage to pressure Tehran in negotiations, adding that the final decision on any new military step rests with the US president.

Hegseth reviews updated target list in Israel

An Israeli official said US Secretary of War Pete Hegseth visited Israel on 19 October to meet with Netanyahu and senior representatives.

Another source stated that the Israeli side presented an updated target list to its American counterparts, compiled with fresh intelligence and incorporating civilian infrastructure sites that had not been struck earlier this year.

The Pentagon did not respond to questions regarding the meetings, while Netanyahu’s office and the Israeli military declined to comment.

Despite the postponement of the operation, Trump and Netanyahu continued to issue military warnings to Iran in public.

In a video released on 19 October, Netanyahu addressed Trump, saying: “Donald, you said we need to finish this, and we will finish it together.” Speaking on speakerphone, Trump responded: “You’re a great warrior, and we’re going to prove it very soon.”

These engagements between the leaders coincide with critical election cycles in both countries.

Parliamentary elections in Israel are scheduled for 27 October, one week before the vote in the US.

Most public opinion polls in the country show the opposition bloc holding a narrow lead over Netanyahu’s coalition, though neither side commands a clear majority.

Axios, a US-based news outlet, previously reported that the Pentagon instructed military planners to finalize strike plans against Iran, though the directive specified no date and Trump had not reached a final decision.

On 15 October, CNN reported on plans to use the GBU-43/B munition, known as the “mother of all bombs”, against Iranian nuclear facilities, with US officials who spoke to the broadcaster expressing scepticism about the weapon’s ability to destroy deep bunkers.

While Tehran announced that it remains open to a diplomatic solution, it declared that any potential operation would draw a fierce response.

Iranian Foreign Minister Abbas Araghchi stressed that if its adversaries chose military conflict, the response would be “much harsher than before”.

Following the joint operation launched by the US and Israel on 28 February, Iran retaliated by striking targets across the region and restricting maritime passage through the Strait of Hormuz.

Although the parties reached an agreement in June covering a ceasefire and negotiations to lift the blockade in the strait, reciprocal strikes between the US and Iran have not ceased.

Continue Reading

MOST READ

Turkey