EU Not to Release Hungary's Funds Until Conditions Met

The EU Commission will propose holding back some of the EU funds earmarked for Hungary citing the Hungarian government failure to implement rule of law and anti-corruption measures. At stake are more than EUR 7 billion, cash that Hungary badly needs at a time when inflation is above 20% and the economy is forecast to slide into recession.

Brussels is not satisfied with the measures adopted by the government of Prime Minister Viktor Orbán and is planning to withhold funds from Budapest until previously agreed measures are implemented, several media outlets reported this week, citing people familiar with the discussions. Under the EU recovery scheme, Hungary could get EUR 5.8 billion in grants to spend on making the economy greener and more digital.
The European Commission recommended in September suspending EUR 7.5 billion in funds, which equals 65% of the cohesion funds destined for Hungary from the 2021-27 EU budget. The move was part of the so-called conditionality mechanism, a new EU rule, which allows the EU to suspend funds to a member country if those funds are at risk.
While the European Commission is likely to approve Hungary's post-pandemic recovery plan next week to keep open the possibility of EU disbursements later, it will hold back any payouts until Budapest fulfills all agreed conditions, sources at the EU executive told Reuters news agency. The commission is expected to make the formal decision on November 30, with the likely conclusion being that Hungary did not make enough progress on the 17 measures it had agreed with the commission in September, EU Observer reported. EU governments need to decide by 19 December if they want to adopt, reject or amend the commission's proposal by a qualified majority.

Super milestones
Budapest has been in talks with the EU for months over EU concerns about high level corruption, the independence of courts, non-governmental institutions and media, as well as rights of minorities. The Hungarian government pledged to implement 17 measures to fight corruption, which critics say, is the key instrument in how Orbán centralizes control in Hungary. Brussels, in turn, expects Hungary to deliver 27 "super milestones" in exchange for disbursing the funds. The requested reform measures are centered around increasing the independence of the judiciary in Hungary.
A formal approval of the recovery plan is key before the end of the year so that Hungary does not lose 70 percent of the money allocated for it. Member states will also need to give the green light on approving the country's recovery fund.
Earlier this week, the European Parliament called on the Commission to retain a firm stand and request that Hungary meets the rule of law requirements. French Green MEP Gwendoline Delbos-Corfield, who is in charge of the file on Hungary, said the "proposed reforms will not solve the dire situation" in the country and "much more will be needed to restore democracy and the rule of law." German MEP Daniel Freund said in a statement that the EU should freeze funds to Hungary “until the government rebuilds the structures of a functioning democratic state,". "Money is the only language Orbán understands. We call on the Commission and Council to hold the line in the defense of the rule of law."
Among other things, the commission reckons that the Integrity Authority, a new body proposed by Hungary that would oversee the spending of EU funds, needs to be further reinforced and investigations should follow up the findings of the authority. In addition, it would like to see further efforts on cementing the independence of the judiciary. The commission seeks to make sure all of the measures are implemented fully, as they depend on each other to be effective.
Hungarian officials put on a brave face to reports that Budapest may see some of its funds retained by the Commission. Tibor Navracsics, minister in charge of EU funds, said at a press briefing that the Hungarian government was committed to meet all requirements, including the ones on judiciary reforms. Orbán's chief of staff Gergely Gulyás told a briefing he expected Budapest to get EUR 7 billion from the EU in 2023, of which more than half would be from funds from the last EU budget for 2014-2020 that are not being suspended.