The big question is whether Navracsics will bring in the EU money or take the blame

On paper, Viktor Orbán entrusted a significant task to two of his tried and tested men when he formed his fifth government — the fourth with two-thirds parliamentary support. He tasked Tibor Navracsics and János Lázár with overseeing the implementation of public investments using EU funds. In this role, they will obtain, negotiate, and renegotiate grants and loans that the EU still has not paid out. They will be responsible for making sure that the money is spent in a way that is above reproach – at least on the surface. This appointment is more significant because the European Commission approved Poland's recovery plan on Wednesday, leaving

Hungary as the only country whose plan has yet to be endorsed by the executive body of the EU.

However, on Tuesday Ursula von der Leyen indicated that, despite the acceptance, the body will not pay the Poles until Poland adopts the rules ensuring the independence of the judiciary.

Navracsics is the minister responsible for using EU funds. He is working within the Prime Minister's Office but — presumably with good reason — distinguished from it, enjoying a separate classification. The former EU commissioner, showing off his long-established European attitude, had already stated at his ministerial hearing that he did not want to engage in ideological debates with EU representatives.

Navracsics was Deputy Prime Minister and Minister of Public Administration and Justice after 2010. Between 2014-2019, he acted as a member of the European Commission, and has now been put in charge of regional development and EU funds. He says he would be managing the two areas closely together and also intends to prepare for the season after the end of the EU budgetary period in 2027. He also said that the most urgent thing was to sign the two pending agreements with the EU on the development cycle and the recovery fund by the end of this year. He said he 'has a routine' in this.

“There is a need to build trust between the EU institutions and Hungary and settle disputes so that neither side feels like a loser. Some of the disputes are technical, while others stem from mistrust. These conflicts have been going on for ten years, and a process of building mutual trust is needed. I want to find an agreement. 'My goal is to sign an agreement on the issue of the withheld development funds by the end of this year”

– Navracsics said at the aforementioned ministerial hearing. Although the intention seems clear, and the fact that the old-new minister was previously a member of the European Commission may be to his advantage, the politician reappointed as the chief negotiator is facing significant challenges. For example, Navracsics' contribution to the resolution of the disputes concerning the rule of law procedure may be overshadowed by the fact that he played a critical role in the construction of the Hungarian political system after 2010. One of these reforms concerned the much-criticised court reform.

Despite all this, Navracsics is still one of the most influential pro-European Union politicians of Fidesz. This is perhaps also signaled by the fact that his first ministerial trip led him to the Congress of the European People's Party, which Fidesz had left to prevent its expulsion. As it turned out, Navracsics — a Fidesz member since 1994 — took advantage of his KDNP dual citizenship'. (KDNP is the minority party in Fidesz's coalition and it has retained its place in the EPP.)

On Wednesday, Navracsics told Telex that he does not see much chance for Fidesz to become a member of the European People's Party again, but he is thinking from a historical perspective, and therefore considers it important that there be some kind of connection between the two formations. This vision is different from the one that Italy's Matteo Salvini envisages for Fidesz, which we wrote about in this article.

At the same time, what kind of substantive transformation his return will bring remains an important question. According to the ideas outlined by Navracsics at his hearing, he would like to make the system of accessing funds more straightforward and more transparent, and intends to streamline it and eliminate duplication. At the same time, the managing authorities will now be under the umbrella of the Prime Minister's Office where Navracsics himself has also been placed.

This arrangement somewhat clouds Orbán's real intentions, as many interpreted Navracsics' return as a kind of consolidation. The Prime Minister himself almost rejected this when he said that his old comrade-in-arms

Navracsics “has the best chance of not grinding to a halt between the mill wheels of Brussels bureaucrats and Hungarian MPs.”

However, it will be difficult not to get caught between the Prime Minister's Office and other ministries with economic policy-making powers and EU institutions, as the responsibilities of the Ministry of Finance have changed somewhat compared to the previous cycle. The supervision of EU programmes will be transferred to a dedicated unit within the Prime Minister's Office. Still, neither the staff nor the mechanisms for raising corruption allegations have changed substantially.

At least, this is whatthe legislation affecting the structure of government seems to be saying, which is forcing the ministries — which are running the Hungarian economy to a large extent with EU funding — to work together in many areas. Thus, Navracsics working without an institutional background may be made more difficult by the fact that essentially every major project is led by a different ministry, and he will not necessarily have a role in the substantive supervision of the most critical problems, such as the most significant investments.

Suspected corruption may have justified the restructuring

Moreover, besides Navracsics, Szabolcs Ágostházy will also be responsible for EU funds within the Prime Minister's office. He is working as the State Secretary for EU Development, and has also been in charge of EU funding in the previous government structure. Although he negotiates with the EU institutions in a moderate tone (much like Navracsics), he has not exactly had any great successes, for example, in the case of the repeatedly revised Recovery and Resilience Plan.

An even bigger problem is that shortly before the new government was formed, the news broke that Finance Ministry officials and a senior official in the Prime Minister's Office were suspected of bribery in connection with the payment of EU funds and related audits involving both ministries. The case is made more interesting by the fact that the person arrested in May on suspicion of corruption was working on EU funds withheld due to bribery. In addition, the case currently has 20 suspects, seven of whom are current or former ministry officials. Five suspects have been arrested, and one has been placed in criminal custody. One of the suspects was found with 190 million forints (approximately 487,500 euros) in his apartment, claiming it was his retired mother's money.

But the division of tasks within the government itself is such that it complicates the likely success of Navracsics' mission. The challenge ahead of him seems to be great because it involves taking the heat for potential concerns and the already existing, quite escalated Brussels-Budapest disputes as well as "translating" government decisions to "European" and obtaining concrete funding authorisations. And who is it that is explicitly preparing for a fight against this?

Judit Varga, the Minister of Justice, who has been given veto power over everything — and with a rather unusual exemption of responsibility — and whose Amazonian communication has presumably undermined Hungary’s position in EU debates, is preparing for further EU legal battles despite this and the serious corruption scandal involving her ministry on top of it all.

In the Ministry of Justice, János Bóka, as State Secretary for EU Affairs, will be in charge of the rule of law and other EU disputes challenging government measures, which are not under Navracsics' authority. Bóka's work has so far been overseen by Orbán himself, as he was the prime minister's state secretary for EU affairs.

The law detailing the structure of the government also makes it clear that while the Finance Ministry, which is suspected of corruption, has not been authorized to allocate resources, Viktor Orbán has distributed a number of important issues affecting EU harmonisation and Hungary's position in the community among his powerful men. Thus, a good number of 'unorthodox' measures will be influenced by Márton Nagy, the Minister for Economic Development, or by Antal Rogán, the head of the Prime Minister's Office, who is arguably one of the most important ministers, since the relevant legislation allows him to have a say on everything from arms purchases to the operation of the secret services and EU representation.

Will János Lázár guarantee the supervision of large investments?

More significantly, Navracsics' work can be influenced by ‘an old friend,’ János Lázár. The other big returnee to the government “fell out of grace” in 2018. The former Minister at the Prime Minister's Office has spent the last four years as a government commissioner and has often said that his heart is in local politics, rural areas and agriculture. In comparison, he is now being given a national role with quite a portfolio, and he spoke at his minister-designate hearing about what he plans to do as the new minister without a portfolio for construction and investment.

As the investments and large public projects, i.e. construction carried out in Hungary since the country’s accession to the EU in 2004 has mainly been financed by EU funds, and it is precisely such priority government undertakings that have attracted the attention of the EU institutions, it is obvious that Lázár will have his hands full in the next four years. Of course, the main question about the new minister's decisions is also how his division of labor with Gergely Gulyás will be organized legislatively.

On paper, it is not Lázár or Navracsics, but the Prime Minister's Office which is responsible for overseeing public construction projects costing more than 10 million Hungarian Forints, the Hungarian Village programmes, the Modern Cities and Active Hungary investment programmes, and the monorails. Nevertheless, the returning minister also said at his hearing that his aim is to increase efficiency and predictability, to reform the system of public investment and to promote transparency in everything.

Tibor Navracsics is in charge of regional development in the capital, János Lázár is in charge of bigger public investments.

– this was said in response to a growing number of questions about the government structure at a government briefing last week. Gergely Gulyás, the minister in charge of the Prime Minister's Office, had a lot to explain in the wake of the confusion arising from the relevant legislation, and this was not exactly rectified after Navracsics subsequently announced on his own authority that, in addition to Central Hungary, five government commissioners will be responsible for the complex economic development of individual regions in the future, instead of the four that have been in place so far, and that their task will be to implement an active development policy in each region. This will obviously involve investments and construction work, in other words, the application for and use of EU funds.

On top of this, the Government Act also shows that the Ministry of Foreign Affairs and Trade will continue to influence EU affairs significantly. Péter Szijjártó's ministry will be responsible for practically all the most important energy decisions, such as the Paks expansion and for strategic or other support given by the Hungarian government to large companies, which has already had a decisive influence on Hungarian-EU relations.

An increasingly urgent need for money

The EU policy of the new Orbán government is significant primarily because leading economic analysts and even the government itself admitted that Hungary would need more and more EU funds. According to our sources, negotiations have intensified since the elections. Events have accelerated. There is greater openness on the Hungarian side to possible compromises, which EU officials say is mainly because Hungary's fiscal position has changed a lot in the past year.

Even though the budgetary situation is far from bright, the Fidesz cabinet has still not fulfilled the recommendations that are a condition demanded by the Union – not only for the disbursement of the so-called recovery fund but also in the case of the rule of law mechanism which has been running at the same time.

In the midst of all this, the European Parliament is also keeping a close eye on the European Commission, as the majority of EU parliamentarians are quite dissatisfied with the state of play and the Commission's attitude in protecting European financial resources, but also in demanding, for example, an independent judiciary. Although MEPs again called for the immediate launch of the mechanism after the conclusion of the EU lawsuit, the Commission still asked for time to adopt guidelines to clarify the practical application of the legislation.

This was finally adopted on the second of March, thus removing the last obstacle to the application of the rule, but a large majority of the EP considered the Commission's action to be overdue, and several speeches and resolutions made it clear that the EP is seriously concerned that Hungary is damaging the financial interests of the European Union, as no specific corruption concerns have been brought to justice.

In other words, it is almost a fact that Navracsics will have to make a substantial offer to secure some EU funds this year, in line with the promises he made at his ministerial hearing. The Hungarian government formally submitted its recovery fund proposal in mid-May last year, missing the original April deadline but still being the 15th out of 27 EU member states to do so. At the time, it wanted 2,500 billion forints in grant aid from Brussels, and although we reported in May 2021 that the government planned to draw a 13 per cent advance from the funds by the end of the summer, the Commission extended the deadline for adopting the plan and then announced that it would not be adopted in its current state. Didier Reynders, the EU justice commissioner, said that

“the Hungarian government must implement judicial reform to ensure that there is no doubt about the independence of the judiciary and its freedom from political influence, and provide adequate guarantees that national authorities will investigate corruption cases uncovered by the European Anti-Fraud Office (OLAF).”

The government's communication and propaganda reacted to this by saying that the recovery plan was not accepted because of the Hungarian anti-LGBTQ law, which caused a big stir in the EU. Although this was denied by the 'Brussels bureaucrats' all along, it remained in the mainstream of the rhetoric, represented primarily by Judit Varga. That is why it was surprising when, after a long period of wrangling, and at the same time as the coronavirus epidemic was dying down and the Russian-Ukrainian war was breaking out, Viktor Orbán changed his mind and wrote a letter to Ursula von der Leyen, President of the European Commission, saying that the EU credit line that had been rejected last year would be called on.

The Hungarian government has not even received permission from the European Commission to draw the funds, as the cabinet has not promised or implemented any relevant anti-corruption measures in the previous year, and the Commission has not approved the recovery plan initially submitted by the government. However, Orbán has asked the Commission to “approve without delay the Recovery and Reconstruction Plans, Partnership Agreements and Operational Programmes of the Member States of the European Union that protect the eastern borders’ and

to allow for a rapid, targeted and flexible use of EU budget resources by lifting pre-financing, co-financing and reallocation restrictions.”

Meanwhile, the government has not yet sent a new plan to the panel. Although Ursula von der Leyen recently visited Viktor Orbán in Budapest, the recovery fund was presumably discussed alongside the oil embargo plan but no official document is known about the government's intentions. Therefore, the Commission has not responded to the Prime Minister's informal request, either before, after, or since the election. Not only because the government's communication has not been in line with reality, but also because none of the criticisms of the recovery plan — the results of the investigations that led to the launch of the rule of law mechanism — or even the country-specific recommendations issued for Hungary, have anything to do with the so-called child protection law — which the government claims is the reason why Hungary is not receiving EU funds.

The main problem with the recovery plan was that the government would not have spent the money in the allocated areas and did not provide guarantees that the funds would be used without corruption. In 2021, the money would have been disbursed without any preconditions if the Hungarian government had submitted a proper plan. But beginning in 2022 it would have been linked to specific commitments. The EU recovery plan also stipulated that member states must have a monitoring system to ensure no fraud, corruption or conflict of interests in the allocation of funds. But this is the cardinal point why the European Commission has not adopted the Hungarian RRF plan to date:

the Brussels body says that the Hungarian government has simply not put forward a proper proposal for tackling corruption more effectively.

In an interesting parallel, criticism and concerns about the rule of law in Poland have eased considerably, especially after the Polish lower house of parliament (Sejm) voted in late May to abolish the disciplinary chamber of the Supreme Court. The adoption of the proposal — pushed for by the European Commission — paved the way for Brussels' approval of the Polish recovery plan. This proposal means that the Commission will not stand in the way of the funds being called down if the recommendations, which are linked to the mobilization of the money and are also published on paper, have been met. (But the Poles will also not be paid until the requested judicial reforms have been passed.)

Recognising the gravity of the situation of the Russian invasion of Ukraine, Poland has become a hub for the distribution of military supplies from the US and other NATO members. It has realized the economic and diplomatic importance of the alliance. In February, it offered a compromise to the European Commission with the hopes of drawing on strategic financial resources and settling relations.

According to EU officials, the Hungarian government has only switched to negotiating in a more polite tone but it continues to request that Orban continue setting the terms.