After several weeks of scrutiny, the European Commission has found Budapest’s corruption reforms unconvincing and has called for the suspension of funds to Hungary.
On Wednesday, November 30th, the European Commission announced that it was recommending the freezing of the funds Hungary is expecting to receive: €7.5 billion in cohesion funds from the 2021-2027 EU budget, plus €5.8 billion under the recovery plan. The decision hits Hungary hard as it faces high inflation. The content of the post-COVID recovery plan has been formally approved by the Commission, but the funds are still blocked.
Since April, Hungary has been subject to a conditionality mechanism from the European authorities: they demand that Hungary must implement reforms to comply with European requirements on corruption and the rule of law. The reforms have been initiated, but Brussels considers them insufficient for the time being. 27 shock measures are expected. A first deadline was set for November 19th to examine the first 17 reforms carried out, but the result did not meet expectations. “While a number of reforms have been undertaken or are underway, Hungary failed to adequately implement central aspects of the necessary 17 remedial measures … as it had committed to,” the Commission said.
The requested efforts concern the creation of independent anti-corruption bodies, legislation against conflicts of interest, and guarantees of transparency in public life. “No funds will be disbursed until these essential conditions are properly met,” Commission Executive Vice-President Valdis Dombrovskis told the press. Until all 27 points have been addressed, no payments will be considered.
The Commission was initially not necessarily in favour of confrontation, but the European Parliament is clearly pushing for a showdown. Finnish MEP Petri Sarvamaa (EPP) welcomed the decision: “I am glad that the Commission came to the same conclusion as we in the European Parliament did.” He reflects the feeling of a majority of his colleagues: MEPs last week overwhelmingly backed a resolution calling for EU funds for Hungary to be frozen with 416 votes in favour and 124 against the resolution.
The Hungarian government did not want to overreact to the Commission’s recommendation and, through the voice of Regional Development Minister Tibor Navracsics, is confident that an agreement can be reached to pay the funds in 2023. The European Commission is proposing to set February 2023 as the deadline for the completion of the reform package.
Viktor Orbán has leverage with the Brussels authorities. Hungary has announced that it will veto an €18 billion EU loan to Ukraine for 2023—a plan that requires the agreement of all member states to be validated. Orbán has pledged €186 million in aid to Ukraine. EU Budget Commissioner Johannes Hahn called the Hungarian move “pure political blackmail.” The Hungarian prime minister insists that the two issues are not linked in any way and it is true that the Commission is also engaging in a form of blackmail against Hungary.
Despite its negative opinion of the payment of aid to Hungary, the European Commission does not have the power to decide alone on such a sanction. The €13 billion freeze it has recommended still needs to be confirmed by member states by a qualified majority by December 19th, which requires the approval of 15 out of 27 states. A vote could take place as early as December 6th, when economic ministers meet in Brussels.
