Hungary ‘very optimistic’ EU funds won’t be withheld over rule of law concerns

The Hungarian government is “very optimistic” the European Commission will abandon its threat of withholding billions of euros of EU funds from Budapest after the government implemented a swathe of reforms to curb rule of law concerns.

Brussels threatened in September to not disburse €7.5 billion of regular EU cohesion funds to Hungary through the new rule of law mechanism, with an additional €5.8 billion in pandemic recovery funds also provisionally withheld.

Combined, this amounts to nearly 10% of Hungary’s estimated 2022 GDP.

But Budapest could still get the funds if it went ahead with 17 remedial measures it negotiated with the Commission.

The measures include efforts to strengthen the process of awarding public contracts, eradicate conflict of interest among government officials and address weaknesses in the investigation and prosecution of cases regarding EU funds.

Hungary says there was ‘constructive dialogue’

“I am very optimistic,” Hungarian Justice Minister Judot Varga told reporters on Friday from Brussels, “because finally we could sit down at the table and there were constructive and very professional provisions and proposals on how to remedy the concerns raised by the Commission.”

Home Affairs ministers are to discuss Hungary’s democratic track record during their General Affairs Council in the Belgian capital but will make no decision on Friday.

Budapest has until November 19 to address the European Commission’s concerns with the EU’s executive not expected to announce its decision on whether member states need to vote on withholding the funds until the end of the month.

For the punitive measure to go through, it would need to be approved by a qualified majority.

Varga said that she’ll be “sending my official letter by the deadline, the 19th of November, to the European Commission about the fulfilment of our commitments, and we also commit ourselves to regular monitoring and follow up of the exercise.”

She also called on her fellow member states “to show us the political responsibility and political commitment, because this case, the conditionality can be a test case.”

“It can be a beautiful example of constructive dialogue. It can be a symbol of unity, and it can be a confirmation of genuine solidarity.”

‘Blackmail’

A senior EU official, speaking on condition of anonymity as they had not been authorised to speak publicly about the matter, told the Reuters news agency that Hungary “will get the money, but not without some serious conditions.”

The promised reforms mark a change from years when, according to rights watchdog groups, Orban had channelled EU funds to his close associates, enriching them and ensuring their loyalty.

Hungary had irregularities in nearly 4% of EU funds spending in 2015-19, according to the bloc’s anti-fraud agency OLAF, by far the worst result among the 27 EU countries. Orban says Hungary is no more corrupt than others in the bloc.

For Varga, the matter is “not a rule of law issue. This is a very stringent fiscal and transparency issue where we could be partners throughout the procedure.”

“Hungary is committed to the values of the European Union as all member states who share all these common values, and that is also committed to the financial interests, to protect the financial interests of the European Union,” she said.

But some have accused Hungary of blackmail by using its veto power over other important EU issues, including sanctions against Russia, a planned minimum global corporate tax, and the issuance of common debt to fund €18 billion of support for Ukraine. 

“If the EU gives in to blackmail once, it will forever lose its only effective rule of law tool,” Dutch MEP Sophie in ‘t Veld (Renew), who sits on the EU Parliament’s Committee on Civil Liberties, Justice and Home Affairs, argued on Twitter.