Governance in a low-trust environment: The difficulties of fiscal adjustment in Hungary

The favourable assessments of international organisations regarding the character of democracy in the Central European countries seem to suggest that, in spite of early fears, democracy can be established even in a low-trust environment. Through analysing the difficulties of fiscal adjustments in Hungary this article examines how lack of trust affects the quality of these democracies in terms of effective governance. Hungary used to be a front-runner in the transition process but given its ballooning budget deficit, it is now considered a laggard in terms of meeting the requirements for introducing the euro. This article claims that while strong continuities from the socialist period gave the country a head start at the beginning of the transition process, the same continuities have slowed down development more recently because of their effects on the general level of trust. The prevalence of distrust both towards and within the elite provides a fertile environment for economic populism and under such circumstances fiscal adjustment becomes more difficult. The main conclusion is that while the low level of trust did not prove decisive in terms of establishing the institutions of democracy, the existence of trust is critical for effective governance.