Yesterday's news of the collapse of cross-party talks over campaign finance reform again put the spotlight on the murky nexus between money and elections in Hungary. The negotiations, which were taking place in advance of next year's general elections, were the culmination of many months of work by Freedom House and Transparency International, global advocacy and research groups with operations here in Hungary. Among those leading the ongoing effort is Freedom House Europe Deputy Director Bálint Molnár. Politics.hu spoke yesterday with Molnár via "instant message" about the negotiations, as well as larger issues relating to money and campaigns in Hungary and beyond.

Why do you think Fidesz torpedoed the talks?

I can only guess regarding their motivations. They might feel that this is not the right time to come together with the Socialists on an issue of such symbolic - and of course practical – importance. Perhaps they think that passing the same bill after April would generate more political capital for them. And to be fair, there are also some specific issues that they would like to see tackled differently than in the draft bill prepared by Freedom House and Transparency International.

What did Freedom House and Transparency International initially expect to come out of this initiative?

We had multiple aims. We first started working on this issue in May of 2008. One of the goals was to raise public awareness about the serious problems surrounding party- and campaign financing in Hungary - without public awareness and public pressure it seemed unlikely that the parties would address this issue seriously. Party- and campaign financing have been highlighted in the publications of both TI and FH as a central area in the fight against corruption, and key to the strengthening of the country's democratic framework. We also wanted to continue the research work started by the Eötvös Karoly Institute in 2006 and generate very specific policy proposals on a range of areas connected to this subject. (The resulting policy papers are available in English here.)

As our advocacy work progressed, we realized, especially during discussions with the parties, that there might be a window of opportunity to draft a bill on campaign finance reform. It also seemed possible that such a draft, which would come from neutral parties (i.e. FH and TI) and would take into account the parties various "red lines," may actually have a chance of success. That is, all the parties could sponsor and endorse it in parliament. Deciding to take our work into this very specific direction was a result of closed-door discussions with the parties in the spring of this year.

What is the most pressing issue relating to campaign finance reform, and why?

It is important to understand that party- and campaign finance are related areas, but campaign finance is a narrower area, where it is easier to come up with a solution that tackles the specific problems that generate and allow corruption. Party finance is a much larger, more complex area, which is directly connected to such issues as public procurements, protection of public funds, and the oversight and operation of state- and municipality-owned companies.

Since 1997, the parties can legally spend only Ft1 million per candidate on their campaigns. This means that in total they cannot spend more than Ft 386 million in a parliamentary campaign. This was an unrealistically low amount even back in 1997 (in 1994, Fidesz and MSZP spent Ft 560 and Ft 750 million respectively on their campaigns. These are the last real numbers reported by the parties before the spending cap was introduced).

In the 2006 elections, reliable estimates showed that the big parties may each have spent as much as Ft 4 billion-Ft 6 billion on their campaigns. So basically they have overspent the legal limit by a factor of 10 or more. But the State Audit Office accepted their financial reports, which said they spent exactly the allowed 386 million. So in the current system there is an unrealistic spending cap, and there are no mechanisms to enforce it. This is a recipe for disaster. The result is a bare-faced lie, perpetrated by all parties, who blatantly flaunt the law and get away with it.

Here are some other relevant facts relating to the current system of financing campaigns:

1) Placing a single, 1.5-minute ad on television costs around Ft 1.5 million in Hungary.
2) Commercial media can freely provide discounts to political parties without revealing the extent of these discounts, potentially harming the principle of equal playing field during the elections.
3) According to experts, nine out of every 10 forints spent are channeled to party campaigns through potentially illegal channels and from potentially illegal sources.
4) The money spent by parties on campaigns doubles every four years, meaning that next year, parties could spend as much as Ft 15 billion on their campaigns
5) Currently, nothing prevents the participation of ministries, and other publicly-funded institutions in the campaigns under the guise of “public communications”. Most recent examples for this could be seen during the European Parliament elections when the Ministry of National Development rolled out a campaign touting the government’s efforts to counter the effects of the economic crisis.
6) Only 16% of Hungarians today believe that the parties respect the laws governing their operations.

Who actually contributes most of the money given to parties, and why do they do it?

This is the problem. We don't know who gives 90% of the money, we don't know how it is spent and we can only guess their motivations for giving. This is where many make the link between, for example, overpriced highway building contracts and rigged public procurement tenders and party and campaign financing.

Isn't it ultimately futile or even counter-productive to put caps on campaign expenditures by parties and candidates who - let's face it - have made it rather plain they don't feel bound by the law? Why not just aim a bit lower, and try to get them to report their finances accurately?

Good question. I actually think it is not a bad idea to have a realistic spending cap. But what are also needed are tools and procedures that make cheating impossible or very, very difficult. This is what’s missing from the current law. A spending cap is actually a good way to keep costs from spiraling and campaigns from becoming a spending "arms race" of sorts.

But how can a US government-funded institution plausibly push the capping of campaign spending when President Obama's campaign last year eschewed all such limits?

We, Freedom House Europe, are actually a Hungarian-registered NGO, with funding from a very wide variety of sources, which does include the US government, as it includes the Hungarian, German, and Irish governments as well as a host of foundations and other private donors. These two issues have nothing to do with one another. Freedom House is a non-partisan, non-governmental organization. We do accept grants from governments to carry out work that is in line with our mission, which is to work on supporting human rights and democracy. We often criticize the very governments that otherwise fund our work in various places around the work.

In your opinion, what country provides the best model for campaign financing?

There are good examples in many countries and there are bad ones, too. Actually, in most democracies party and campaign financing are areas of constant evolution and are often characterized by scandals that spur further reforms, examples abound from the UK, to France, to Germany and, indeed, the US. It is clear that now it is high time to fix our system and I think we have a pretty clear idea how to do it. A campaign account from which all spending must be conducted is used in a number of countries in Europe, so that is something we did not invent, but which should become a centerpiece of any reform. Similarly, a more transparent system regulating the purchase of advertising space in commercial media is very important; as is a somewhat shorter campaign period (we recommend 60 days), and a clear ban on using state funds to bankroll party campaigns. The problem is not the lack of useful and creative ideas. The problem is the lack of political will and the prevalence of "zero-sum" thinking in Hungarian politics. This is what prevents us from tackling this issue and I would venture that this is what eventually led to the failure of the current talks as well. Everyone knows what the problem is, and everyone knows what the solution should be. Still, we are here.

Overall, do you think the political system in Hungary has gotten cleaner or dirtier over the last several years, and do you expect it to get cleaner or dirtier when, as expected, Fidesz takes over next year?

Nations in Transit, one of FH's flagship publications, which we publish here in Budapest, has shown that the in the area of corruption the situation has actually worsened in recent years. There is a downward trend, which has continued this year as well. I think political corruption, sadly, has tainted all the current parliamentary parties; one only needs to look at reports in the paper over the last few years. I will not venture a guess as to how Fidesz, should they form the next government, will fare in combating corruption. I think they will need to address the key issues in that area if they want to strengthen citizens’ trust in the democratic institutions and stop the dangerous rise of political populism, which receives a great deal of support from disillusioned people who believe that the system is rigged and all the parties are irredeemably corrupt. The current parliamentary parties bear massive responsibility for getting the country to this point and the next government will have to show commitment and real political will to address this area. The record of governments of various stripes is, sadly, discouraging.