On Wednesday, the European Commission (EC) recommended freezing $7.8 billion in funds to Hungary under its cohesion policy for failing to “adequately implement central aspects” of the 17 reforms it agreed to fulfil by the 19 November deadline.
European Commissioner for Budget and Administration Johannes Hahn stressed that these issues, mainly related to rule-of-law and combating corruption, would have a “horizontal effect,” because, if they do not work, it would weaken the entire budgetary protection.
The rule of law is the foundation of our Union. Today, we are taking important decisions on EU funds for Hungary.
— European Commission 🇪🇺 (@EU_Commission) November 30, 2022
Press conference by Executive Vice President @VDombrovskis and Commissioners @JHahnEU @dreynders. https://t.co/peUsINMhwL
The Commission thus noted that “further essential steps will be needed to eliminate remaining risks for the European Union (EU) budget in Hungary.” These steps include the effectiveness of the newly-established Integrity Authority, the possibility to review cases which have been dropped by a prosecutor, and the rules on asset declarations or conflict of interest.
The EC also maintained that Hungary must not enter into any legal commitments with any public interest trust. Furthermore, Budapest needs to enforce reforms related to the anti-corruption framework and to more effectively prevent, detect and correct fraud, corruption, and other illegal practices. It must also allow the European Anti-fraud Office (OLAF) to conduct independent investigations into fraud in the country.
We find that Hungary has not progressed enough in its reforms and must meet essential milestones for its Recovery and Resilience funds.
— European Commission 🇪🇺 (@EU_Commission) November 30, 2022
This means that no payment under the RRF is possible until Hungary has fully and correctly implemented 27 super milestones.
Nevertheless, Hahn affirmed that Budapest “has moved into the right direction, by addressing the numerical majority of the measures in this short time frame” as several of the reforms are already underway.
The Commission also proposed adopting the $6 billion post-pandemic Recovery and Resilience Plan (RRP), subject to the “full and effective” implementation of the 27 “super milestones,” including the 17 previous ones that Budapest had agreed to related to judicial independence.
After much work, @EU_Commission endorsed Hungary’s #RRF recovery plan. Payments depend on 🇭🇺 carrying out major rule of law reforms.
— Valdis Dombrovskis (@VDombrovskis) November 30, 2022
If these happen, plan will boost:
📌green/digital transitions
📌economic, social, institutional resilience
My remarks 👉https://t.co/Kl1ZIdGOlF pic.twitter.com/0jv60HGpwu
“The ‘essential milestones’ must all be met in full before Hungary can submit its payment request. […] In short: no funds will flow until the ‘essential milestones' are properly implemented,” Executive Vice-President Valdis Dombrovskis stressed.
Likewise, European Commissioner for Justice Didier Reynders affirmed that the Commission will be “very vigilant” in scrutinising the implementation of the measures, which are “binding and time-bound.” “There is no partial payment for partial fulfillment here,” he underlined.
If the Council adopts the budgetary protection measures, we continue to monitor w/a view to solve the outstanding issues as soon as possible.
— Johannes Hahn (@JHahnEU) November 30, 2022
Important to stress that we are guided in our assessment by the regulation + the intention to achieve improvements f. the 🇭🇺 citizens.3/3 pic.twitter.com/DdGf6D0XLp
However, the bloc and Hungary may be able to resolve these issues and come to an agreement, as the Commission noted that Hungary has successfully implemented quite a few of its measures. As part of its RRP, Budapest aims to allocate 48.1% of the RRP funds to climate objectives, including reforms in renewable energy and sustainable transport, energy, and water management, which exceeds the stipulated 37%. It has also assigned 30% to digitising its education, healthcare, transport, and energy sectors, which again is more than the 20% target.
In addition, it aims to strengthen the role and powers of its National Judicial Council and the judicial independence of the Supreme Court, apart from fighting corruption and promoting competitive public procurement.
13.3 billion Euros of EU funding will be frozen to Hungary because Viktor Orban wants to keep his system of corruption and autocracy.
— Daniel Freund (@daniel_freund) December 1, 2022
That's 1370 Euros per Hungarian citizen.
562,184 Hungarian Forints.
In the midst of an economic crisis. And Orban still refuses to reform.
Hungarian Minister for Regional Development Tibor Navracsics expressed hope that the bloc would approve the RRP on 12 December at its finance ministers’ meeting. “In the timeline we set for ourselves there are still deadlines... We are not yet at the finishing line,” he remarked, adding that Budapest remains “open for compromise.”
He also highlighted that Hungary “will put in place the additional measures required and in 2023 we have no doubt that we will succeed in convincing the Commission (...) that it is not necessary to suspend the funds.”
Along the same lines, Hungarian Prime Minister (PM) Viktor Orbán’s chief of staff, Gergely Gulyas, also said that he expects the bloc to release the $6.36 billion package in the second half of 2023.
The European Commission has just confirmed that it will propose to freeze funds for Hungary under the rule of law conditionality.
— Terry Reintke (@TerryReintke) November 30, 2022
This is a welcome and needed step to protect rule of law and democracy in the EU - and tax payers money.
Member states should follow suit.
Calling it a “historic moment for the protection of the rule of law in Europe,” Petri Sarvamaa, a Finnish member of the European Parliament’s committee on budgetary control, asserted, “If EU citizens’ money cannot be protected against irregularities, then it cannot be disbursed.”
Even many Hungarian Non-Governmental Organisations (NGOs), including Hungarian Helsinki Committee, K-Monitor and Transparency International (TI) Hungary, have hailed the European Commission’s proposal by calling it “fair and serves the interests of Hungary.”
In retaliation, #Orban has threatened to veto further 🇪🇺aid to #Ukraine, including an €18 billion aid package 🇺🇦desperately needs right now. Hungary also blocking a proposal for a minimum tax on multinational companies.
— Dave Keating (@DaveKeating) November 30, 2022
Will this prompt reform of Council's unanimity traditions?
Many European Parliament members have accused Hungary of blackmailing the bloc by blocking the $18 billion fund for Ukraine and also the minimum tax rate. Furthermore, the Hungarian parliament has postponed its vote on the accession protocols of Sweden and Finland to join the North Atlantic Treaty Organization.
The European Council will vote on the Commission’s proposal on 19 December, which requires a “qualified majority,” meaning 55% of member states in favour, which represents 65% of the bloc’s population.