The European Commission said on Wednesday that it plans to suspend 495 million euros in Cohesion Funds from Hungary as the country has failed to reduce its deficit. It is the first time Brussels decides to withhold development funds, which are destined to support infrastructure projects in the EU’s poorer regions.
EC’s vice-president Olli Rehn said that the sanctions come as an incentive for Hungary to amend the situation. But many suspect it could also be a punishment linked to the state of democracy in the country. Only last month, Brussels launched legal action against the Hungarian government over concerns of an anti-democratic constitution.
Hungary’s Prime Minister Viktor Orban asked the EU and the IMF for a rescue loan late last year. But the talks were put on hold with none of the institutions committing to anything. As the country’s situation worsens, these new sanctions can have a real impact on its economy.