On a bustling Saturday evening right before Christmas, one might expect restaurants in the city center to be filled with lively chatter and the clinking of glasses. Yet, there it was: an ideally located establishment, eerily empty. When I shared this oddity with a friend who owns a restaurant himself, his remark was cutting: “If I had received so much from EU grants, I would also be disturbed by customers.”
This simple observation speaks volumes about the state of business in Hungary. EU funds, intended to foster growth and development, have instead created a system that rewards connections over innovation, subsidies over service, and grant applications over customer satisfaction. Hungary’s economy has become distorted to the point where the competition for customers is secondary to the competition for EU money, which is also becoming scarce now.
This distortion goes far beyond a single empty restaurant. It’s emblematic of a system that stifles entrepreneurship, undermines fair competition, and drives Hungary’s most talented innovators out of the country.
A system designed for the politically connected
The distribution of EU grants in Hungary is anything but transparent. Instead of fostering innovation and economic development, the government has used these funds to build a new economic elite—a caste of politically connected businessmen, often called the “NER elite” after Fidesz’s National Cooperation System (Nemzeti Együttműködés Rendszere). In reality, the members of this pro-government, crony elite are the ones benefiting from the EU funds since the Orban government has used the funds to redistribute it to its oligarchs and political clients.
These businesses, often owned or controlled by close allies of the ruling party, receive grants not because of their market potential or innovative ideas but because of their loyalty to the regime. Their success is measured not by how many customers they attract or how much value they create but by their ability to secure subsidies.
The result is a business environment where connections trump competence, and cronyism displaces genuine entrepreneurship. These politically backed businesses operate with little regard for market forces, creating distortions that ripple across the economy.
The death of real competition
The empty restaurant is a perfect metaphor for the broader economic reality in Hungary. When distributed based on political favoritism, EU grants destroy the natural dynamic of competition. Businesses flush with grant money can afford prime locations, lavish marketing campaigns, and inflated salaries without needing to attract customers or deliver quality.
Meanwhile, genuine entrepreneurs—those who build businesses on creativity, hard work, and customer satisfaction—cannot compete. Their rivals have an unfair advantage, with subsidies insulating them from the very market forces that should drive innovation and excellence.
Instead of fostering a vibrant entrepreneurial ecosystem, Hungary’s economy has become a battlefield where businesses don’t compete for customers but for EU grants. Success hinges on having the best grant writers or the strongest political connections, not the best products or services.
Why perfect your menu or train your staff when your financial success is already guaranteed by a grant? This mindset has seeped into every corner of the economy, hollowing out the entrepreneurial spirit that should be the backbone of the country's growth.
The exodus of entrepreneurs
For many Hungarian entrepreneurs, the system is not just unfair—it’s hopeless. Faced with a rigged game, they are voting with their feet, leaving Hungary in search of fairer opportunities abroad. Over 800,000 Hungarians have emigrated in the past decade, among them some of the country’s most talented businesspeople and innovators.
These individuals are not simply seeking higher wages or better living conditions. They are looking for an environment where their success is determined by their ideas, efforts, and market demand—not by their ability to navigate a corrupt and politically controlled system.
The loss of these entrepreneurs is a devastating blow to Hungary’s economy. Innovation dries up, businesses close, and the country increasingly relies on external funding rather than internal dynamism.
A distorted labor market
The distortions caused by EU grants extend to the labor market. Subsidized businesses can afford to pay inflated salaries or hire more workers than they need, drawing talent away from genuine entrepreneurs who cannot match these artificial wages.
This creates a labor market where the most lucrative jobs are not in the most innovative or productive businesses but in politically connected enterprises. Employees are often hired not for their skills or experience but for their loyalty to the system that keeps these businesses afloat. This status quo stifles meritocracy and discourages workers from pursuing careers in genuinely innovative fields.
The way forward
Hungary’s economy is at a crossroads. The current system of crony capitalism, fueled by EU funds, is unsustainable. It stifles innovation, discourages entrepreneurship, and drives away the very people who could build a brighter future.
To reverse this trend, several key changes are necessary. Key elements include transparency and accountability. It means that EU funds must be distributed based on clear, fair criteria that reward innovation and public benefit, not political loyalty. The same goes for access. Small businesses and startups must have access to funding and resources without needing political connections. However, it cannot be done once the government controls all the existing channels. It must be decentralized to reduce the government’s control over grant distribution, which can help eliminate cronyism and favoritism.
For Hungary to thrive, its economy must be built on people's creativity, hard work, and resilience—not on grants and political favors. The fable of the empty restaurant serves as a stark warning: when businesses stop competing for consumers and start competing for subsidies, the entire system collapses.
Hungary’s real potential lies not in its subsidies but in its people. The question is whether the country will seize this potential—or continue down the path of stagnation and decline.
Zoltán Kész is a former member of the Hungarian Parliament who now works for Consumer Choice Center as the Government Affairs Manager.