There's a good chance for Hungary to draw down all €10.4 billion from EU Recovery Fund, Eurologus reports

“We’re making very good progress, and there’s a real chance of drawing down 100 percent of the recovery funds,”

a European Commission source told EUrologus. As the blog also pointed out, this is a significant change: immediately after the Hungarian election in April, Tisza Party insiders were still saying that the primary goal was to secure the €6.5 billion non-repayable portion of the €10.4 billion package—part of which is a loan. As for the loan portion, the thinking was: “we’ll see” how much would be available.

As previously reported, the new Hungarian government must act very quickly if it is to meet the conditions for the €10.4 billion by the end-of-August deadline. Not only does it have to meet the rule-of-law and anti-corruption preconditions (“super milestones”) for any regular disbursement and to retain the roughly €1 billion in advance payments received so far, but it must also achieve the developments, goals, and reforms (“milestones”) typically expected at interim deadlines for the corresponding portions of the funds. The previous Hungarian government committed to these in its recovery plan, but even other states are moving slowly within the complex system, although the Hungarian government was the only one unable to submit a payment request. The delay was also evident from a regulation allowing for the suspension of slow-moving applications and a reallocation request which was never submitted.

Previously, both Politico and Népszava reported on the European Commission’s uncertain stance on whether the full amount could be salvaged—a position that, according to EUrologus, was still prevalent shortly after the election. One of the blog's sources said:

“we are aware of all the problems, and the Hungarians know the path to solving them”.

A few days ago, however, their statements to Bloomberg were more optimistic.

According to a previous article by Válasz Online, there is a group that has been working on solutions alongside the Tisza Party for a year and a half. Shortly after the election, members of the then-future government started negotiations with European Commission officials, and Péter Magyar also held personal talks with Commission President Ursula von der Leyen. Even then, before taking office, the Prime Minister indicated that they would like to reach a political agreement on the fund during the week of May 25.

EUrologus has meanwhile learned that, additionally, operational working groups remain in constant contact, and next week there will be yet another delegation arriving in Budapest to spend several days here resolving outstanding issues.

It is thus expected that a political agreement may indeed be signed on May 25, presumably including deadlines and a timeline. Bloomberg’s reports are consistent with EUrologus's information, according to which the new Hungarian government intends to submit the amendment to the recovery plan two days later, on May 27. The blog understands that it is this document that is essentially being fine-tuned right now, but according to its sources, the process is on track, and while the schedule is tight, it is manageable.

Eurologus expects that within a week or two, the European Commission will also approve the Hungarian plans submitted for the EU’s SAFE defense loan. Of the 19 applications submitted for the €150 billion fund, Hungary is the only one still awaiting approval. In principle, Hungary is entitled to €16.2 billion, but the Orbán government—after loudly opposing the loan at first—ended up applying for even more, and according to Eurologus, the country could receive as much as €17 billion.

EUrologus did not specifically mention whether they expect any changes from the European Commission. During her confirmation hearing for the post of foreign minister on Monday, Anita Orbán indicated that they will review the Hungarian proposal submitted under SAFE, and said that the task will primarily fall to Defense Minister Romulusz Ruszin-Szendi, but added that they have not yet seen the confidential document.

The European Commission has previously stated that the legislative basis for the conditionality procedure—which caused some of the funding freezes—also applies to SAFE, which would be enforced later, once the loan agreement has been signed.

The Recovery Fund’s requirements include the steps needed for the conditionality procedure, so this would not only count towards the approval of SAFE but, upon the procedure’s completion, would also free up 4.2 billion euros from the catch-up resources of the regular budget. One of the conditions is related to the asset management foundations, so the problem usually referred to as the “Erasmus issue”—which has by the summer of 2023 already led to the loss of millions of euros among universities which transitioned to the new model—would also be resolved.

Although not included in the conditions of the recovery fund, but the former Hungarian government's decision to not participate in the EU Pact on Migration and Asylum in any way has been costing the country one million euros a day, with roughly one billion euros spent on the fine (in addition to the two billion euros permanently lost in the conditionality procedure) so far. According to EUrologus, a solution is also being developed for this through amendments to three pieces of legislation, but it would not mean the resettlement of illegal immigrants or the acceptance of refugees.