EC budget control committee finds string of shortcomings in Hungary

EC budget control committee finds string of shortcomings in Hungary
Members of the EP Budgetary Control committee (CONT) at their press conference in Budapest on May 17. / bne IntelliNews
By Tamas Csonka in Budapest May 18, 2023

A fact-finding mission of the European Parliament's Budgetary Control Committee  (CONT) has called on the Hungarian government to act more responsibly in distributing EU funds, include regional authorities in decision-making instead of a "top-down" approach, and meet the criteria required for releasing the funds withheld from Hungary.

The delegation concluded its three-day visit to Budapest on May 17 by highlighting a string of shortcomings, including the failure to involve local governments and civil organisations in the distribution of EU funds, or to implement public procurements in line with free market rules.

The committee noted that the State Audit Office (ASZ) could not provide information on the use of €1.48bn in 29 cases over which concerns had been raised before.

A short statement by ASZ said audits related to EU-funded projects, including subsidies within the framework of the Rural Development Programme, were on the agenda at the meeting.

Effective implementation of the 27 "super milestones" defined earlier and the related 17 remedial measures under the conditionality regulation is required for unblocking €28bn in EU Cohesion Funds and from the EU’S Recovery and Resilience Facility (RRF), Monika Hohlmeier, the head of the delegation, said at a press conference on May 17

EU funds "represent a very big opportunity for the development of Hungary", she said, noting however the committee's "core concern is how the money can reach Hungarian citizens, businesses and regions".

She raised concern over government measures distorting competition such as the introduction of "unfair special taxes", and "arbitrary change of laws" without preliminary consultation, as well as intimidation.

The CSU politician referred to complaints by multinational companies, including German ones who fear being squeezed out of the market by discriminatory laws and pressure from businesses with close ties to the government.

She also raised further concerns over ad hoc decision-making, referring to the regular practice of amendment of the budget law overnight. Alone this year, the government modified the budget 95 times in a decree.

Hohlmeier said the committee noticed several positive developments such as the setting up of the Integrity Authority, reforms at the tax office, and the strengthening of the national judicial council.

Minister of Regional Development Tibor Navracsics, the chief Hungarian negotiator of talks on EU funds, downplayed such criticism and told journalists that the talks achieved a foothold in mutual understanding, and he was confident members of the committee had been convinced on several issues by the Hungarian side’s objective arguments. Navracsics highlighted the steps taken to reduce the proportion of single-bid procedures to 15%, the EU average. The Hungarian side refuted accusations of political bias in the distribution of EU funds and when dealing with municipalities.

The latest criticism by the EU comes at a time when Budapest's local government announced it would hold back tax payments to the state, saying that extra levies slapped on it during the pandemic and tax cuts imposed by the government (free parking and halving the local business tax) will push the city to bankruptcy by the summer. Unlike cities with Fidesz-led local governments, Budapest was denied compensation for soaring energy bills.

German MEP Daniel Freund (Greens/European Free Alliance), a staunch critic of the Orban government, said the EU aims to protect the EU budget and does not want to enrich the friends and family of the prime minister.

"This was my eighth trip to Hungary and every time I learn about new things that do not happen in other EU countries", he was quoted as saying by Hungarian independent media.

The German MEP said that until Hungary meets the necessary conditions, funds will be frozen.

Also in response to a question, Finnish MEP Petri Sarvamaa of the EPP, said that they had not come to Hungary to campaign for or against any political party. He stressed that they were demanding that the rule of law be restored in Hungary in all aspects.

Dutch MEP Lara Wolters recalled that Justice Minister Judit Varga declined to meet with the delegation. She also spoke of the hostile reception by pro-government media. 

The justice ministry’s statement said the delegation had “put forward political expectations beyond the EU’s conditionality procedure and super milestones”,  adding that the ministry rejected those expectations. "Political pressure jeopardises the credibility of procedures", the ministry said.

An MEP of the governing party also struck the same chord, saying the delegation's visit was "part of Brussels's exerting political pressure" on the Hungarian government.

Two Hungarian opposition MEPs were also observers in the delegation but were not present at the press conference.