Hungary's transition to a Western-style parliamentary democracy was the first and the smoothest among the former Soviet bloc. By 1987, activists within the party and bureaucracy and Budapest-based intellectuals were increasingly pressing for change. Young liberals formed the Federation of Young Democrats (Fidesz); a core from the so-called Democratic Opposition formed the Association of Free Democrats (SZDSZ), and the neo-populist national opposition established the Hungarian Democratic Forum (MDF). Civic activism intensified to a level not seen since the 1956 revolution.
With more than $60 billion in FDI since 1989, Hungary has been a leading destination for FDI in central and eastern Europe, although this level is beginning to decline. The largest U.S. investors include GE, Alcoa, General Motors, Coca-Cola, Ford, IBM, and PepsiCo, with the overall level of direct U.S. investment estimated at $9 billion. As a result of extensive and continuing liberalization, the private sector produces about 80% of Hungary’s output.
Hungary maintains a common external tariff with other members of the European Union, and the trade regime is fairly competitive. The investment regime is relatively efficient, but deterrents such as bureaucracy and deficient transparency still impede the dynamic growth of investment. The government has largely withdrawn from banking, and over two-thirds of the sector is foreign-owned. Foreign investors participate freely in capital markets.
The judiciary is constitutionally independent, and the threat of expropriation is low. Property rights are relatively well respected, and the legal framework continues to evolve, although overall progress has been sluggish. Protection of intellectual property rights has improved somewhat. Despite efforts to eradicate corruption more effectively, concerns remain, particularly in the area of government procurement.
The Magyars constitute more than 90% of the population. There are small minorities of Gypsies, Germans, Serbs, and other groups. Hungarian is spoken by most people. Over half of the people are Roman Catholic, but there is a large Calvinist minority. Hungary still has the largest Jewish population in Central and Eastern Europe (100,000–120,000).
Situated on a plain near the geographic center of Europe, Hungary has been the meeting place and battleground of many peoples, and its heterogeneous population was often the cause of social upheaval before 1919. However, as a result of the separation of non-Hungarian territories after World War I, the great slaughter of the Jews in World War II, and the exchange after the war of Slavic and Romanian minorities for their Magyar counterparts, Hungary is today essentially homogeneous.
Hungary was one of Eastern Europe’s star economic performers before it was hard hit by the global economic slowdown set off by the financial crisis of 2008. Since then, it has become a center of concern in Europe over what many perceive as a turn toward autocratic government.
Hungary is a landlocked state with many neighbours – Slovakia, Ukraine, Romania, Serbia, Croatia, Slovenia and Austria. It is mostly flat, with low mountains in the north. Lake Balaton, a popular tourist centre, is the largest lake in central Europe.
After centuries as a powerful medieval kingdom, Hungary was part of the Ottoman and then Habsburg empires from the 16th century onwards, emerging as an independent country again after World War I.
Map of Hungary
Hungary traces its history back to the Magyars, an alliance of semi-nomadic tribes from southern Russia and the Black Sea coast that arrived in the region in the ninth century.