State debtcraft under illiberalism: rethinking financial repression and (de)financialization in Orban’s Hungary

How do states practicing financial repression balance orthodox and heterodox macro-financial policies while staying solvent? The article focuses on post-2010 Hungary as a critical case of financial repression, where an illiberal government reasserted state control over financial markets and actors, challenging the literature on subordinate financialization and financial nationalism in the semi-periphery. Introducing the concept of “state debtcraft,” the article highlights a politicized approach to sovereign debt management based on forging mutually beneficial, long-term relationships with market actors. Drawing on interviews and policy documents, we argue that the government domesticated foreign banks with bespoke policies favoring primary bond dealers. In turn, the foreign creditors consented to Hungary’s heterodox policies and financial repression, valuing fiscal stability and profits over liberal norms and refraining from penalizing the government in the bond market. This strategy hinged on favorable external conditions like low inflation and EU fund inflows, which eroded post-COVID-19.