EU unfreezes regional aid funding for Hungary

Johannes Hahn Nov 2010 Picnik.jpg

Hungary won access today (9 September) to €2 billion in frozen EU development funds after convincing Brussels its management of projects met European standards.

Johannes Hahn, the EU's head of regional policy, told the Hungarian prime minister's chief of staff János Lázár he was satisfied Budapest was correcting the errors in Hungary's management that prompted Brussels to suspend aid in January – in part over how project engineers were being chosen

"We have arrived at a constructive agreement," Lázár told a news conference. "Two billion euros can now be mobilised after corrections are finalised in the coming weeks," he said, adding that about €250 million withheld by the EU as a fine could be accessed later on so Budapest will not lose any of its money.

The agreement points to better relations between the European Commission, the EU executive, and Budapest, which have worsened over Prime Minister Viktor Orbán's unorthodox economic, centralising policies.

Hungary was also the latest former communist state in central Europe to have funding from the EU suspended. The Commission froze all Czech payments last year after an investigation into allegations of graft.

The money, which the European Union provides to Hungary and other EU countries in central and Eastern Europe, is for transport, environmental, water treatment and health projects, among others and which are seen as vital for the economy.

Between 2007 and 2013, Hungary is entitled to receive about 8.2 trillion forints (€27 billion) in EU aid for development programmes.

However, the Commission had doubts about the way the EU-funded projects were being managed and stopped funding in January this year.

The Hungarian central government has taken over management of 59 EU-funded projects from local government because of severe delays in implementation.

Now, the allocation of EU funds will be centralised under the prime minister's office to improve the way the funds are channelled into the economy. 

European Union funding to Hungary was temporarily suspended last August over failings in the country's financial control systems.

A Commission official said the funds had been frozen because of deficiencies in Hungary's financial management and control systems for the programmes in question, identified in an EU audit in 2012.

>> Read: EU suspends funding to Hungary over weak controls

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