22/09/2021

Geopolitics

Hungarian-German relations in the ’Merkel era’

The sixteen years of the chancellorship of Angela Merkel, which remarkably impacted not just Germany, but all of Europe, was also a decisive era of the bilateral relations between Hungary and Germany. In the ‘Merkel era’, the economic and trade relations of the two countries have developed dynamically, as Hungary became a main target country of German investors, while Germany secured the primary place among Hungary’s export and import partners. But becoming a part of the supply chain of the German (primarily automotive) industry would not have been possible without Merkel’s ‘realpolitik’ approach, which allowed detente between the countries in times of political disagreement and pragmatic focus on economic relations.

On 26 September 2021, federal elections will occur in Germany. Their results will defy interpretation from merely a domestic political context. Considering the country’s leading political and economic role in the European Union, the outcome of the elections will certainly have an impact on the next several years of the bloc too. But 26 September will also mark the end of an era for Germany and Europe: Angela Merkel, after sixteen years in the role of chancellor, will retire from active politics. This paper will analyze the evolution of the German-Hungarian political and economic relations during the ‘Merkel era’ and future perspectives of the relationship of the two countries in light of the Chancellor’s legacy, as well as the possible results of the upcoming elections.

Economic and trade relations

Before Merkel

To understand the overall picture of bilateral economic and business connections, one should look back to the Cold War era, where the starting point of the still-developing economic relations between Germany and Hungary lies. Before the regime changes and the dissolution of the Soviet Union, both East and – more surprisingly - West Germany were major trading partners of Hungary and ranked second and third place, respectively, after the USSR.[i] With the fall of the Iron Curtain and the opening of state borders, these developing relations could enter a new phase. One of its milestones was the signing of a partnership agreement between the newly freed Hungary and reunited Germany in 1992. The agreement had social, political and economic aspects and facilitated the deepening of these bonds and regular meetings at a high political level. Accordingly, in the 1990’s, Germany became Hungary's most important trading partner. German companies such as Bosch[ii], Bayernwerk (then E.ON)[iii] Opel and Audi had already set up subsidiaries in the country after the change of regime.[iv]

The First Merkel Cabinet (2005-2009)

As the first Merkel cabinet was formed on 22 November 2005, Angela Merkel already made history as the first female Chancellor of Germany. Chairman of the Christian Democratic Union (CDU), Merkel entered into alliance with the Christian Social Union of Bavaria (CSU) and the Social Democratic Party (SPD) to form a so-called grand coalition. In Hungary, the government of PM Ferenc Gyurcsány was also supported by a socialist and center-right party (MSZP-MDP) coalition. But at that time, it was not just the inter-governmental relations that defined the relations between the two countries. By 2005, Hungary had already gained full membership in NATO (1999) and the EU (2004) as well, which meant that Germany and Hungary became part of the same security, political and economic structure, giving the countries enormous leverage to reshape their relationship.

 

[i] PEISCH, Sándor: „Soha nem felejtjük el nektek…” A magyar– német kapcsolatok az elmúlt két évtizedben In: KKI, 2009 p.46
https://kki.hu/assets/upload/Kulugyi_Szemle_2009_03_Soha_nem_felejtjek_el_ne.pdf (2021.08.31.)

[ii] Company history, In: Bosch
https://www.bosch.hu/hirek-es-tortenetek/1990-2016-valaszok-a-globalizacio-kihivasaira/ (2021.08.31.)

[iii] E.ON Hungária csoport In: E.ON Hungary
https://www.eon.hu/hu/rolunk/vallalatcsoport/eon-hungaria.html (2021.08.31.)

[iv] A vállalat, In: Audi Hungary
https://www.audi.hu/hu/a-vallalat/ (2021.08.31.)

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