Brussels threatens to cut Hungary’s regional funds

Olli Rehn 11 Jan 2012_picnik.jpg

Economic Affairs Commissioner Olli Rehn yesterday (11 January) said Hungary is the sole country on the Commission’s excessive deficit ‘caution list’ and warned that cohesion funds could be frozen it if fails to trim its deficit.

Belgium, Cyprus, Malta and Poland – the other countries that were at risk of not meeting deadlines to correct their excessive deficits for 2011 and 2012 – have all taken sufficient action to bring their deficits into line, Rehn said.

No effective action had been taken in Hungary to bring its deficit below 3% of GDP, Rehn said.

Cohesion fund threat by 2013

Hailing the so-called 'six-pack' of EU fiscal rules as having given the Commission “teeth to act”, Rehn said that he could recommend that Hungary’s cohesion funds be frozen in 2013 if the country failed to make progress on its deficit.

The move came as the Commission simultaneously made a statement in relation to Hungary’s controversial changes to its constitution and basic laws, which legal experts in the EU executive are still picking over.

“As guardian of the Treaties, the Commission remains preoccupied that a number of the new provisions may violate EU law,” the statement says.

Without “prejudging the final outcome of its analysis”, the Commission reiterated its commitment “to fully use all its powers to analyse the compatibility of national law with EU law and reserves the right to take any steps that it deems appropriate, namely the possibility of launching infringement procedures pursuant to Article 258 of the Treaty.”

Constitution remains an issue

The main concerns relate to the independence of the Hungarian central bank, measures concerning the appointment of judges and rules affecting the independence of news media.

Commission lawyers will finalise their analysis in the next few days.

A Hungarian government source told EURACTIV that the Commission should be mollified by a recent letter in support of the judicial measures signed by almost half of the Hungarian senior judiciary.

The source said that Hungary would seek to give assurances on the independence of the central bank, which it hoped would clear the way for it to continue talks with the International Monetary Fund and Commission for much-needed financial assistance.

The Commission put the talks on ice whilst it considers the legality of the new Hungarian constitution, which took effect at the beginning of the year.

The controversial new constitution which entered into force on 1 January brought tens of thousands of protestors onto the streets of Budapest. They believe it undermines the independence of the central bank, the judiciary and the news media. Critics also say that the new measures represent an assault on religious freedom by cutting down the number of recognised religious groups from 300 to 14.

Under its EU accession treaty, Hungary is obliged to adopt the euro as soon as it is ready. However, the new constitution makes the national currency, the forint, the country's only legal tender.

Hungarian media published a letter from US State Secretary Hillary Clinton to Prime Minister Viktor Orbán, in which she expressed regrets that despite Washington's advice, the Constitution and the basic laws had not been reconsidered.

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