EU Commission proposes blocking billions in funds to Hungary

The European Union’s executive branch recommended on Wednesday that billions of euros of EU funds allocated to Hungary remain frozen over its failure to implement solid rule-of-law reforms, a move highlighting lingering divergences between the European partners.

The European Council, which represents the bloc’s 27 countries, has until December 19 to take a decision based on the Commission’s proposal, which came as Hungary continues to block crucial EU decisions such as the disbursement of 18 billion euros of financial aid to Ukraine and a global tax deal.

Hungarian Prime Minister, Viktor Orban, has also angered the bloc’s officials with his repeated criticism of the EU sanctions targeting Russia for its war in Ukraine.

Although Hungary insists that it does not link the issue of EU funds to other topics, many in Brussels see the vetoes as a sign that Orban is trying to blackmail the rest of the bloc into releasing billions in regular EU funds and pandemic recovery cash that have been held up.

The EU’s executive branch proposed in September that the bloc suspends around 7.5 billion euros ($7.5 billion) in regular funding to Hungary over concerns about democratic backsliding and the possible mismanagement of EU money.

Hungary agreed on 17 anti-corruption measures, including the creation of an anti-corruption task force and changes to its public procurement rules, but the Commission believes that it has not done enough to fix the problems.

“The Commission finds that, notwithstanding steps taken, there is still a continued risk to the EU budget,” the Commission said.

The money can be frozen under a recently introduced conditionality mechanism that allows the EU to take measures to protect its budget.

Any action to suspend the funds must be approved by the EU member countries, and this requires a “qualified majority,” which amounts to 55% of the 27 members representing at least 65% of the total EU population.

The Commission simultaneously approved Hungary’s pandemic recovery plan worth 5.8 billion euros, but only on the condition that the country implements 27 “super milestones” — including the 17 measures previously agreed to solve the dispute over cohesion funds.

“This means that no payment under the (recovery plan) is possible until Hungary has fully and correctly implemented these 27 super milestones”, the commission said.

At the current speed of talks, Hungary is unlikely to receive any money before spring.

Hungary, a large recipient of EU funds, has come under increasing criticism for veering away from democratic norms. The commission has for nearly a decade accused Orban of dismantling democratic institutions, taking control of the media and infringing on minority rights. Orban, who has been in office since 2010, denies the accusations.

If EU members decide to block access to the cohesion funds until Hungary meets the conditions required, Budapest will not lose cash immediately. Hungary would no longer be allowed to apply for the subsidies designed for EU programs and infrastructure projects, but the decision would not stop it from getting money which is still flowing through from the previous long-term budget, as for the 2014-2020 period.