Brussels calls for €7.5B of EU funds to be cut from Hungary over rule of law concerns

The European Commission on Sunday called for an estimated €7.5 billion in European funds to be withheld from Hungary over corruption concerns.

Commissioner Johannes Hahn, in charge of Budget and Administration, said the figure amounts to 65% of the commitments for three operational programmes under cohesion policy and about a third of cohesion funds the country received from the EU budget. 

For Brussels, the recommendation to the Council to adopt this punitive measure is the next step in the rule of law mechanism process that it triggered against Hungary in April. 

The mechanism, which had been approved by the European Court of Justice just weeks earlier following a challenge from Budapest and Poland, allows Brussels to impose financial sanctions on member states “to protect the budget” if they are deemed to have breached core EU values. 

The decision to impose the financial penalty was taken unanimously by commissioners, Hahn said, during their College meeting exceptionally held earlier in the morning. 

Hahn emphasised that Budapest has outlined 17 remedial measures since Brussels triggered the conditionality mechanism and that these “should in principle be capable of addressing the issues described in the notification,” including “systematic irregularities” in the public procurement process, conflict of interest from government officials and weakness in the investigation and prosecution in cases regarding EU funds. 

But he also stressed that this is only if they are “implemented accordingly”, that the timeline remains “very tight” and that concrete changes would also take time to be rolled out in practice 

“A risk for the budget at this stage remains, therefore we cannot conclude that the EU budget is sufficiently protected,” he went on. 

The Council now has one month to decide whether to go ahead with the Commission’s recommendation. If it does, Hungary will also be given one month to reply — although it can request an extension — which means that the earliest the Commission could freeze funds to Budapest would be 19 November.

The decision at the Council level will only require a qualified majority and not unanimity to be adopted so Poland, with which Hungary had in the past struck a deal to block any punitive actions over rule of law, will not be able to prevent the financial penalty on Hungary. 

Yet, the Commission left the door open to compromise as Hungary has committed to rolling out the majority of its remedial measures by 19 November. 

The measures Budapest agreed to take to address the Commission’s concerns include the establishment of a new and independent Integrity Authority and of an Anti-Corruption Task Force, the modification of the criminal code to allow judicial review of prosecutorial decisions, the rollout of an  Electronic Public Procurement System, and training to SMEs and micro enterprises on public procurement practices. 

A senior EU official said that “very intensive dialogue took place” between Budapest and Brussels over the summer over these remedial measures and that “it is going to be an extremely busy period” as Hungary “now comes forward through legislation and rulemaking”.

He noted that the country has “actually stuck to these deadlines” so far. 

Sunday’s announcement comes just three days after MEPs declared that Hungary is no longer a fully functioning democracy but a “hybrid regime of electoral autocracy” instead.

In their resolution, European lawmakers put the blame for the rule of law drift in the eastern European country squarely on Prime Minister Viktor Orbán.