Commission to trigger mechanism that could see Hungary lose EU funds

European Commission President Ursula von der Leyen announced the EU executive will trigger the conditionality mechanism against Hungary. [Shutterstock/Valery Evlakhov/EPA-EFE/RONALD WITTEK/OLIVIER HOSLET]

**This article has been updated with comments from officials of the Hungarian government

The European Commission announced on Tuesday (5 April) that it will trigger a conditionality mechanism linking EU funds to the rule of law, just days after Hungary’s general election saw Prime Minister Viktor Orban secure a fourth consecutive term.

European Commission President Ursula von der Leyen told MEPs on Tuesday that EU Budget Commissioner Johannes Hahn had informed the Hungarian authorities that the European executive will trigger the so-called conditionality mechanism.

The mechanism, if implemented, could see countries with systemic rule of law problems lose out on EU funds – however, the process will likely take months to complete.

The decision comes just days after Hungary’s general election saw Prime Minister Viktor Orbán’s party Fidesz preserve the two-thirds majority they have held in the Hungarian legislative since 2010, despite polling and analyst predictions.

Orbán gloats at Brussels following supermajority electoral win

Despite polling and analyst predictions, incumbent Prime Minister Viktor Orbán and his ruling Fidesz party were able to preserve the two-thirds majority they have held in the Hungarian legislative since 2010.

The mechanism had posed a significant hurdle in negotiating the bloc’s €1.8 trillion seven-year budget at the end of 2020.

The hard-fought compromise, under which Hungary and Poland agreed to unblock the budget, included a provision that the bloc’s highest court, must first rule on whether the mechanism falls foul of EU treaties.

In a live broadcast in February 2022, the European Court of Justice dismissed the legal challenge in February.

EU top court quashes Hungary, Poland's challenge to rule of law tool

The EU’s top court dismissed on Wednesday (16 February) a legal challenge from Budapest and Warsaw to a recent EU law linking disbursement of bloc funds to rule of law standards, paving the way for the European Commission to launch proceedings against the two countries.

Earlier, in November 2021, the EU executive sent a letter under the conditionality regulation, seen by EURACTIV, in which it asked Budapest to explain ineffective prosecutions and problems in public procurement.

Despite receiving a response from the Hungarian government in January, von der Leyen said in Strasbourg on Tuesday: “We’ve carefully assessed the result of these questions and our conclusion is, we have to move on to the next step.”

Lengthy process

However, the process that could see Hungary lose billions in EU funding support is likely to still take months, potentially more than half a year.

After the official letter triggering the mechanism, Budapest will have between one and three months to “make observations”.

Once comments are received, the EU executive will decide within the “indicative time limit of one month” whether it will move to ask other EU countries to give their blessing for action.

If the Commission moves forward, it will again have to give Hungary a month to “submit its observations, in particular on the proportionality of the envisaged measures”.

Once the EU executive receives the second round of comments on the measures, it will have another month to submit its proposal to other EU countries.

Member states will then have up to three months to adopt or amend the Commission’s proposal with a qualified majority in the Council.

No progress on COVID-19 recovery cash

Hungary recently asked for its €9.6 billion allocation in loans from the EU’s COVID-19 recovery fund, backtracking from its prior position of not requesting the repayable support. This comes on top of the €7.2 billion in grants requested in May 2021.

However, its recovery plan, a key document for the disbursal of the cash, has been under examination by the Commission since the same month.

Budapest U-turns, asks for loan from Recovery Fund

Hungary has asked the European Commission for billions in cheap loans to help manage the fall out of the Ukraine war, Telex reported via 444.hu on Tuesday.

The news was later confirmed by Prime Minister Viktor Orbán’s press chief, Bertalan Havasi to national news …

 

Budapest says Brussels is withholding the greenlight over its controversial law that all-but bans LGBTIQ content in public, but the Commission has denied this, instead highlighting the need for more effective anti-graft measures.

On 23 March, the government said it is now ready to set up a new anti-corruption body modelled on a similar agency in Estonia, which would report annually on its work to the prosecutor general, who would inform MPs at an annual parliamentary hearing.

However, the promises have evidently failed to satisfy the European Commission.

“We are at the moment being not able to find the common ground and to conclude [on the anti-corruption question,” von der Leyen said on Tuesday.

Budapest to Brussels: this is a mistake

Brussels is making a mistake by “singing the same tune” as the Hungarian left, as the Hungarians have just rejected it by a large majority, minister government spokesperson Gergely Gulyás told national press agency MTI, in response to von der Leyen’s announcement.

The minister also called on Brussels not to punish Hungarian voters for expressing opinions that were not to Brussels’ liking in the election and on the child protection law.

The government failed to achieve the necessary number of valid votes in what it called a “child protection” referendum held simultaneously with the elections, widely condemned as a thinly veiled attack on Hungary’s LGBTQI community.

Judit Varga added in a Facebook post that the Hungarian government does not deal with political statements and awaits official notification with concrete details.

[Edited by Nathalie Weatherald]

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