Hungary braces for further conditionality terms for release of €13.3bn in EU funds

Hungary braces for further conditionality terms for release of €13.3bn in EU funds
Hungarian Prime Minister Viktor Orban with EC President Ursula von der Leyen in Brussels on February 3, 2020. / bne IntelliNews
By Tamas Csonka in Budapest November 30, 2022

The European Commission will announce on November 30 that it approves Hungary’s plans to use €5.8bn of post-pandemic recovery fund (RRF) money but it is likely to recommend continuing the suspension of €7.5bn in Cohesion Funds earmarked for Budapest until stringent conditions are met.

EU finance ministers at an Ecofin meeting on December 12 will make the final say on the future of the €13.3bn in EU funds, some 8-9% of the country’s GDP.

The RRF money is desperately needed by Hungary, which is in the throes of an economic and financial crisis. However, the decision will be controversial in the European Parliament, which has taken an increasingly hardline against Budapest's violations of EU values, particularly the rule of law, and the rampant corruption of Prime Minister Viktor Orban's regime.

The "realistic scenario" is that the bloc will conditionally approve Hungary's €5.8bn recovery plan, the minister in charge of EU negotiations Tibor Navracsics told local media.

Last week, sources at the EU executive said the Commission is likely to approve the post-pandemic recovery plan to keep open the possibility of EU disbursements later, but hold back any payouts until Budapest fulfils all agreed conditions. If the post-covid recovery plan does not get the green light before the end of the year, some 70% of the funds would be lost.

Hungary's parliament last month began passing reforms to fight corruption, including setting up an "independent authority" to better control the use of EU funds. Hungary agreed to adopt 17 rule-of-law reforms, but it will also need to comply with Article 2 of the EU Treaty and the Charter of Fundamental Rights.

The full implementation ruling of the European Court of Justice and the European Court of Human Rights could also be a precondition for payments, which was included in last week's EP resolution. In practice, this would mean the amendment or withdrawal of the controversial anti-LGBTQ legislation adopted in July 2021, after which the European Commission launched an infringement procedure against Hungary.

The resolution adopted by the European Parliament last week that called for the funds to remain frozen had turned "the political mood" in Brussels against Hungary, which caused the executive's stance to harden, he said.

"I am still optimistic and hope the Commission will rely on fact and not political opinions," he told media, not ruling out a possible last-minute compromise.

Navracsics said he hoped that next year all the suspended EU funds can be at the country’s disposal.

European Commission President Ursula von der Leyen will not travel to Budapest on Wednesday to announce the approval of the RRF funds, chief spokesman Eric Mamer announced late on Tuesday.

According to Radio Free Europe’s Hungarian online edition, Von der Leyen's entourage was holding off on the trip until the last minute. Hungary is the last country to have its RRF plan approved by the EU executive, and the first not to hold a joint press conference in the host country.