Hungary accepts huge penalty to keep EU funds flowing

Portfolio
The Hungarian government has accepted a 1 billion euro financial correction in relation to irregularities linked to public procurement tenders. Further penalties in individual cases are to be expected on top of this, Anton Schrag, Deputy Head of Unit, DG Regio, told Portfolio on the fringes of a conference organised by Transparency International Hungary.
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The Deputy Head confirmed Portfolio's 21 November information about Hungary accepting a HUF 400-420 billion penalty last autumn to settle the multi-year disputes and open the money taps of Brussels again. 

Schrag stressed the EUR 1 billion (cc. HUF 335 bn) financial correction does not mean this is a net loss for Hungary, as this sum may be used to finance other EU projects.

In practice, the financial correction is the volume of items removed from the batch of invoices submitted to Brussels. Only the remaining invoices are to be paid by the EU, and the unpaid ones are to be financed from the budget, i.e. Hungarian taxpayers finance those projects. The sum of the financial correction may be used in other EU projects, though. 

Schrag told Portfolio the EUR 1 bn sanction cannot be regarded as extreme in EU terms, stressing that Hungarian authorities still have time to use the "freed" funds in other projects co-financed by the EU in the 2014-2020 programming period. 

As we pointed out in our analysis on the EU funding processes of 2019, transfers by the European Commission jumped as a result of the deal on the financial correction, state coffers received hundreds of billions of forints in EU funds, and so the gap between the sum paid by Hungarian authorities to tender winners and the funds transferred by the EU with a delay has shrunk. 

Cover photo by Dursun Aydemir/Anadolu Agency/Getty Images

This article is part of the work programme titled "The impacts of EU cohesion policy in Hungary - Present and Future" which is carried out by Net Média Zrt., the publisher of Portfolio.hu, between 1st April 2019 and 31st March 2020 with European Union financing. The views in this article solely reflect the opinions of the author. The European Commission as the funding entity does not take any responsibility for the use of information presented in this article.

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