Financial Times: Hungary may soon be given access to billions of euros previously blocked by the EU

October 03. 2023. – 01:21 PM


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The European Commission is preparing to unfreeze billions of euros of funding allocated to Hungary, partly so that the Hungarian government would agree to the reviewed EU budget, according to an article in the Financial Times on Tuesday.

The government spoke of a "technical agreement" as early as April

As we have previously reported, through a complex rule of law conditionality mechanism, the EU has blocked most of the funding available for Hungary as of 2021. To gain access to the biggest chunk of this money, the Hungarian government was expected to have the judicial reform passed. This could in principle open up as much as €13 billion in catch-up funding.

It was in April that then Justice Minister Judit Varga announced that a "technical agreement" had been reached with the European Commission on what was intended to be the final version of the judicial conditions. Parliament then passed the legislation, which she said would complete the requirements. Then in mid-July, she wrote a letter to the European Commission stating that the government had fully implemented all its commitments laid out in the judicial milestones. At the time, head of the Prime Minister's Office, Gergely Gulyás said that the European Commission had three months to make its evaluation. According to leaked information, the EU body sent further questions to Hungary last week, thus "stopping the clock", but Gulyás Gergely said they were only stalling for time.

The government linked it to the EU budget top-up

Meanwhile, the Hungarian government has been trying to connect the lifting of the blocking with its approval of the reviewed EU budget until 2027. The European Commission would like to increase the joint budget by €66 billion, much of which would go to Ukraine, including a €33 billion loan. Early on, the Hungarian government started attacking the proposal with various forms of obfuscation, most notably with the claim that "our money was given to Ukraine" – we wrote in detail about where and how the government's arguments fail – but this has given them an excellent blackmailing opportunity, as the budget's approval requires the unanimous backing from all member states.

According to the Financial Times' Tuesday article, the European Commission would be prepared to accept the judicial conditions as fulfilled, partly in exchange for Hungary's approval of the budget review.

Three sources with insight into the matter told the paper that the EU body could lift the freeze by the end of November.

Two of them said that part of the reason behind the expected decision was to secure the Hungarian government's support for the budget increase.

What is this judicial package?

As part of the judicial package, the EU expects:

  • the role and powers of the National Judicial Council (OBT) to be increased
  • a strengthening of the independence of the judges of the curia – the former supreme court – to protect them from political interference;
  • a removal of the possibility for the authorities to challenge final judgments before the Constitutional Court;
  • a removal of obstacles which – as previously ruled by the Court of Justice of the European Union – may have resulted in Hungarian judges being restricted in their right to refer cases to the EU body if they perceive a conflict between Hungarian and EU law.

Exactly how much money is at stake?

The package is blocking almost all of Hungary's catch-up funding – some €22 billion in total. However, due to other conditions and the rule of law procedure approved by member states, some of it cannot be included in the Hungarian budget – which is how we arrive at the €13 billion mentioned by the Financial Times. (Certain technical conditions would also have to be met for some of the money, but according to a July Szabad Európa article, the government has only ticked off a few of these, so at the time it was estimated that the amount that could be released next year would be €6 billion at the most – and this would not be done immediately, but until 2027.)

The four elements of the justice package are part of the 27 "super-milestones" that have left the Hungarian government without access to the recovery fund on top of the frozen funds from the budget. These would all need to be met if the €5.8bn non-repayable tranche is to be drawn down, but it is unclear whether the €3.9bn loan requested at the end of the summer will be fully blocked.

The withholding of payments from the fund was also criticised during Tuesday's plenary debate at the European Parliament. Fidesz MEP Andor Deli said that "some EU circles" would expect Hungary to voluntarily make new contributions to the EU budget, for example to pay off the growing interest rates of the recovery programmes, even though the country has not received a single euro cent from the fund.

The Financial Times suggests the EP may still present a problem

According to the paper, any decision on funding could still be rejected by the European Parliament, which has repeatedly called for a more stringent treatment of Hungary. The EP has no direct role in blocking payments (so it cannot prevent unblocking), but it could in principle delay the budget increase.

The paper does not elaborate on this, but the EP is due to hold an election for the head of the European Commission next year, and the current president, Ursula von der Leyen, is expected to run again, so she will need the MEPs' support. In her annual State of the Union speech given at the EP in September, which may be seen as a campaign speech, the German politician declared that it was "totally unacceptable that a member state wants to have access" to the recovery fund without adherence to the rule of law conditions that were agreed when the treaty was signed.

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