“Europe whole and free” owes a great debt to the decision by a courageous Hungarian government to open its frontiers to Austria in the summer of 1989, allowing thousands of East German refugees to escape. Twenty-one years later, and just as it takes over the rotating European presidency, Hungary is a frontrunner once more. The difference is that this time it appears determined to reverse its course. And the risk is that it might take Europe with it.

Normally, the six-month EU presidency is a staid and low-key affair, all the more since the creation of a full-time European President and a foreign-policy czar by the Lisbon Treaty just over a year ago. Few Europeans even noticed that Belgium, Hungary’s predecessor, didn’t have a government for the duration of its tenure. But that is clearly too tame for the pugnacious government of Prime Minister Viktor Orbán. Budapest chose to open the year with a display of political fireworks, featuring two showstopping zingers: a set of new laws restraining the media, and a “crisis tax” on investors.

Uproar ensued. In Hungary, students protested and newspapers appeared with blank front pages. A barrage of criticism came from the rest of Europe:  from EU commissioner Neelie Kroes, German Chancellor Angela Merkel, the OSCE’s top media official, and the French government, to a cross-section of the European Parliament and a dozen European CEOs. When senior representatives of Orbán’s Fidesz party shuffled their feet and made conciliatory noises, the prime minister himself stepped in to clarify: “not…in our wildest dreams” would he allow any changes to the law.

In an attempt at transparency (and damage control), the Hungarian government has now published translations of the media laws in English, as well as lengthy refutations of the criticism against them. It’s an unconvincing effort. The new media rules (totaling more than 200 pages) require all outlets, public and private, to register with a powerful new regulatory authority whose five-person board is to be composed entirely of Fidesz nominees. That authority is empowered to probe whether media reporting is “objective and balanced,” and to impose punishing fines or even closures on offenders; it may also require reporters to disclose their sources in the interest of “national security and public order.” In short, the new rules are unduly intrusive, vague, and over-broad. (As for the “crisis tax,” Budapest argues that it covers all companies, foreign and national. The multinationals counter that, because of the high threshold involved, it will be applied almost exclusively to them.)

Calls by some critics to impose legal sanctions on Hungary—or to exclude it from the EU—are unhelpfully melodramatic. The Lisbon Treaty does provide for such sanctions in its Article 7; this was a lesson from an abortive attempt, in 2000, to isolate the conservative Austrian government for entering into a coalition with the party of right-wing extremist Jörg Haider. But Article 7 is the EU’s equivalent of a nuclear option, reserved for “a serious breach” of EU rules, and requiring at least a qualified majority in the 27-member European Council. Instead, Kroes has sensibly opted for opening a so-called “infringement action,” a standard EU procedure, to bring the Hungarian laws into alignment with the EU’s legal system through constructive criticism. This could be a face-saving escape route for Orbán. If he chooses it, that is.  

Still, there can be no doubt that Hungary poses a very serious challenge for the European Union. Yet, for now, that challenge is political rather than legal. The new laws are only the latest in a series of profoundly illiberal power grabs—from the constitutional court to pension funds, cultural institutions, and the fiscal and monetary authorities—by the Fidesz government, emboldened by a two-thirds majority win in the April 2009 election.

Orbán, for his part, has never made a secret of his contempt for parliamentary democracy: “The republic,” he said in 2006, “is merely a cloak for the nation.” He could not be farther from the truth. Balance of powers, the accountability of government to the governed, and the protection of civil rights and liberties, including the freedom of the press: these are the core principles of the European res publica. To disdain them is to disdain all that Europe stands for.

True, Europe has been watching silently for months while the Orbán government consolidated its gains. And, yes, press freedoms are treated cavalierly (to say the least) in a number of other European countries, such as Italy or Romania. Germany itself is no stranger to state-sanctioned cronyism: the Chancellor, no less, recently appointed a former speaker to head a state broadcasting institution. Most worryingly, the economic crisis has created a fearful, inward-looking public mood all across Europe, which sets growth and stability above freedom and liberal values, making anxious citizens an easy prey for ruthless demagogues and populists.

None of this can be an excuse to condone what is happening in Hungary or elsewhere in Europe. On the contrary, Europe must defend its principles—in the political arena. It is time to say that Europe is not just about the euro.