Hungary to submit €3.9 billion loan request to European Commission – Navracsics

Hungary will submit a loan application for €3.9 billion to the European Commission using the loan component of the Recovery and Resilience Facility (RRF), and the documents will be submitted to the Commission by the deadline on Thursday, Minister of Regional Development Tibor Navracsics announced at the Semmelweis Summer University in Budapest. The deadline for submitting the application is 31 August, i.e. today.

The deadline is today, so we will be sending our programme [for the Recovery and Resilience Facility] this afternoon.

- the minister was quoted by Portfolio.

According to MTI (the Hungarian State News Agency), Navracsics said that the loan application will be submitted for €3.9 billion, and just as before, for financing energy infrastructure, energy efficiency tenders and green transition projects.

The European Commission had not received the request before noon

Radio Free Europe's Brussels correspondent asked about the Hungarian request at the European Commission's Thursday press briefing. At the press conference held at noon, spokesman Daniel Ferrie said that, as far as he knew, no official request had been received from Hungary, nor from Slovenia, which is also planning to apply for a loan. They are in contact with all member states and will be able to say more after the official midnight deadline.

First they criticized it, then requested it

The EU set up a one-off recovery fund in 2020 in the wake of the coronavirus epidemic. This consists of two parts: a grant and a loan. The former was previously requested by the Hungarian government and the spending plan for the fund was approved by member states in December, but payments are conditional on the completion of 27 'super milestones', so these funds are among the EU funds currently being blocked.

Speaking on Thursday, Navracsics said that it would depend on the European Commission's assessment when the first transfers would begin, and he added that it was unclear whether complying with the super-milestones would be a condition for drawing down the loan, which could still be a point of contention with Brussels, Portfolio reports.

As for the loan, the Hungarian government has previously both slammed the idea (calling it part of "the Soros plan") of member states taking out a joint loan to deal with the effects of the epidemic and wanted its tranche of the loan approved through a priority procedure. In the end, it announced that it would apply for this too. Given that on its own, Hungary can presently only borrow from the market very expensively and is one of the countries most vulnerable to Russia in terms of energy, it would have been a shame to have missed out on this.

Letting go of almost two-thirds of the maximum credit

The spending plan for the Recovery Fund had to be modified anyway, because it was agreed back in 2022 that member states would supplement the documents with energy improvements as part of the REPowerEU programme.

The Hungarian government launched a public consultation on how it would revise the recovery plan at the end of July, which included what it would spend its portion of the loan on. The requested amount listed in the uploaded document is much smaller than what the government had previously communicated to the European Commission. According to an April article in Szabad Európa, the plan was to request a loan of €6.6 billion, but the draft submitted for public consultation showed €4.8 billion, and on Thursday, Tibor Navracsics said that the total amount requested would be only €3.9 billion out of the roughly €9.8 billion available to Hungary. According to Portfolio, the reason for the reduction is that out of the 14 planned projects, the government cancelled a big one.

According to our information, the government intended to use the EU loan to leverage resources, rather than to use the full available budget.

According to the plan put up for public consultation – i.e. not final and based on the lower final amount probably cut back – three, roughly equal amounts would have been allocated for

• network development,
• industrial development,
• and energy efficiency and renewables.

The biggest chunk would have been for energy network development and digitalisation. The government would have only modified the non-reimbursable part of the Recovery Fund, which had already been submitted earlier, for this part alone. According to the non-final version, the loan would be used for energy efficiency, geothermal energy, hydrogen-powered buses and rail improvements, among other things.

Navracsics isn't aware of any universities being dropped from Erasmus

According to Portfolio, Tibor Navracsics said that he would be in talks again with Johannes Hahn, the European Commissioner for Budget and Administrative Affairs, in early September. The minister said that no deadlines had been included in official communications, so he was not aware of any universities being dropped from Erasmus after 1 September, and said that

funding is guaranteed until the second half of 2024.

On the Commission's recommendation, last December member states barred public foundations and universities with such backgrounds from making new commitments for EU funding due to concerns over transparency and conflicts of interest. For Hungarian universities that have switched to this model, this presents a problem mainly for two programmes, Erasmus and Horizon Europe research programmes.

The agreement was originally scheduled for the end of March, but Tibor Navracsics said that this was abandoned based on mutual agreement. At the time, the minister said that the European Commission, for its part, had no problem with "the necessary legislative proposals being adopted a day or two later" in order to ensure that they were ready.

During the summer, the European Commission warned that the Hungarian government should reach an agreement with the Commission and the other Member States by the beginning of September at the latest for foundation universities to have access to the funds of the exchange programme, and that it should adopt legislation addressing the concerns. A few days later, however, the Tempus Public Foundation, through which the European Commission manages Erasmus, adopted a conditional decision of approval. The organisation stressed that

"the existing mobility framework and financial resources are available to ensure that the universities' needs are fully met until 30 June next year".

Tempus indicated in a statement that the ban should be lifted by 23 November. On Thursday, Tibor Navracsics told Portfolio that, by counting back from the decision-making deadlines, they believe that an agreement should be reached by the end of November to ensure smooth funding.

The European Commission had previously claimed that they were clear about their demands for the lifting of the ban, but according to the Minister of Regional Development, they had "painted a positive picture of themselves with too much ambition", while in Brussels they "negotiated as a moving target".

Public foundation-run universities were already complaining in June about losses of millions of euros, not because of Erasmus, but because of Horizon Europe tenders. For the time being, thanks to the Hungarian state providing five billion forints in funding, they can participate in these as associate members and, in principle, can have the EU pay the money back later. At the same time, the universities that have switched to being run by public trust foundations have said that the other applicants don't even include them in the tenders, which are typically announced for several cooperating institutions.