In 1989-90 Hungary experienced a peaceful political and social transition as part of the global transformation marked by the collapse of the Soviet empire and the fall of the communism. As a result of the agreement reached between the democratic opposition, formed by intellectual groups and movements, and the weakened communist power, the Constitution of 1949 was modified (Act XX of 1949 on the Constitution of the Republic of Hungary), and the Hungarian Republic was proclaimed on 23 October 1989. Since the promulgation of the Amendment of the Constitution on 23 October 1989 Hungary has been a parliamentary democracy. Hungary is a republic and an independent and democratic constitutional state.
Democratic conditions are characterised by parliamentary alternation. As a result of the first free elections in 1990, a coalition government was formed by centre right and conservative political parties.The government launched an overall privatisation process in the industrial, agricultural and service sector, and also started to make political and economic restitution. In 1994 the government submitted its membership application to the European Union.
After the 1994 spring elections, the coalition of left-wing and liberal parties formed government.. The government continued the privatisation process and implemented a comprehensive economic stabilization programme. After the 1998 elections Fidesz – Hungarian Civic Alliance (FIDESZ-MPP) formed a coalition with the Independent Smallholders, Agrarian Workers and Civic Party (FKGP) and the new government was set up with the participation of the two parties. The general elections held in 2002 and in 2006 were won by the Hungarian Socialist Party and entered into a coalition with the Alliance of Free Democrats.
In the 2010 2014 and 2018 parliamentary elections, the alliance of FIDESZ and Christian Democratic People's Party (KDNP) won a two-third majority in parliament.
Political stability that characterised the period after the political changeover, along with the overall reforms implemented in ownership conditions, the banking system, public administration and the education system as well as the legal and financial reforms in the regulation of the industrial, agricultural and service sector, made Hungary a reliable partner for both investors and international diplomatic partners. While the significant influx of foreign operating capital played a decisive role in economic growth and integration into international economy, local SMEs had an increasing share in employment.
As a result of efforts for Euro-Atlantic integration, Hungary became a member of the Council of Europe in 1990, of the OECD in 1996, of NATO in 1999 and the European Union in 2004. Through accession a new political and economic era started, which provided a beneficial environment for economic and social development and integration into Europe. On several occasions, Hungary played an active role in the establishment and consolidation of new international relations of the era following the break-up of the Soviet Union as well as in international crisis management and peace-keeping (in Kosovo, Iraq, Afghanistan etc.). In 1994 Hungary hosted the Conference on Security and Cooperation in Europe, and chaired the Organisation for Security and Cooperation in Europe. In the first half of 2011, Hungary held the rotating Presidency of the Council of the European Union. The adoption of a European Roma policy, the EU2020 Strategy and the Danube Region Strategy as well as the removal of obstacles to closing the accession negotiations with Croatia and the preparation of accession negotiations with Iceland were the core tasks of the Hungarian presidency.
On 18 April 2011, the Parliament adopted the Fundamental Law of Hungary, replacing the earlier Constitution. It was later amended several times. It determines the major segments of the social, political and economic arrangements of the country.
After the Millennium, the national social, political and economic processes of the past years – along with the growth of the GDP that has always exceeded the EU average – could be characterised, on the one hand, before 2009 by a gradual decline in the macroeconomic balance, the relative weakening of the country’s international market position, an income outflow exceeding the economic performance, on the other hand in connection with these processes, by an increasing demand for a comprehensive reform of public administration and the social redistribution systems. In 2010, the restitution of the balance of public finances called for urgent and radical austerity measures. The Hungarian Convergence programmes aimed at cutting back state expenditure, increasing revenues and comprehensively reforming state administration and the large social redistribution systems (health care, education, social services). Expectations about fulfilling the Maastricht criteria, preparing for the introduction of the Euro and ensuring sustainable growth have been reflected in the social and economic programme of the 2007-2013, 2014-2020 and 2021-2027 as well.
Joining the Euro zone is not on the agenda at the moment.