Centre-right Fidesz, which swept to power with a two-thirds parliamentary majority in 2010, has overhauled the constitution and says this will complete a democratisation process started in 1989, when Hungary's communist regime collapsed.
"It's a big debt of those Hungarians who changed the regime and the political players who took part in shaping political life that this has not happened in the past 20 years," Fidesz parliamentary group leader Janos Lazar told parliament ahead of the vote. "We are trying to settle that debt."
Only the ruling Fidesz-KDNP bloc, with 262 votes, approved the constitution, while 44 deputies voted against and one abstained. The Socialists and green liberal LMP stayed away from the vote. The far-right Jobbik party voted against the law.
Since taking office, Fidesz has not shied away from adopting bold measures, including a hefty bank tax, taking over private pension assets or pursuing a hotly disputed media law which drew the ire of the European Union.
Thousands of people protested on Friday against the new constitution, which human rights and civil groups said would weaken democratic checks and balances when it comes into force on 1 January 2012.
The law curbs the powers of the top court in budget and tax matters and allows the president to dissolve parliament if a budget is not approved by April.
"As for democratic checks and balances this law is a serious step back. For example the powers of the constitutional court - which has been the most important counterweight of the government - are curtailed," said Péter Krekó at think-tank Political Capital.
"In economic matters the picture is ambivalent but we can mention positive elements such as the debt ceiling."
This restriction on the court's powers will be lifted only once the level of public debt sinks below 50% of GDP, from around 80% now - which former President László Sólyom said was unacceptable. Sólyom headed the Constitutional Court before he became president in 2005.
"It is painful cynicism that this unjustifiable limitation has been enshrined in the constitution, with an illusory end to it, which will never happen in the lives of our generation," Sólyom told weekly Heti Válasz in an interview.
The constitution also imposes strict rules to reduce public debt, which investors have welcomed.
However, critics say the governing party should have consulted far more widely when rewriting Hungary's basic law. The Venice Commission, the Council of Europe’s constitutional law advisory body, has questioned the transparency of the process.
Fidesz has said that with its big parliament majority, it can decide what priorities to articulate because voters have authorised it to enact changes.
Analysts say a key problem with the new constitution is that it would allow Fidesz appointees to control key public institutions - such as the budget supervisory Fiscal Council - well beyond its government's term, which ends in 2014.
The next parliament, even if not dominated by Fidesz, will not be allowed to choose a public prosecutor or a public funds investigator till 2022. In spite of Hungary's accession treaty a future non-Fidesz government will not be able to join the monetary union without the approval of Fidesz and changing the constitution, EurActiv Hungary reported.
"I think this [constitution process] will backfire on Fidesz support; the decline we have seen will not stop," said Csaba Tóth, political analyst at think-tank Republikon Intézet.
According to a survey by Median last week, 57% of Hungarians believed the new constitution would need to be confirmed by a referendum, and only 29% said it was sufficient for a two-thirds parliament majority to approve it.
Latest opinion polls show support for Fidesz has declined considerably but still remains well ahead of the opposition Socialists, Jobbik and LMP.
(EurActiv with Reuters.)