Hungary receives another EU transfer, HUF 110 billion this time

The European Commission has transferred the second half of a EUR 608 million liquidity assistance to Hungary about which the EU executive notified Hungarian authorities in mid-March, Portfolio's latest calculations reveal. The sum is between HUF 109 billion and HUF 110 bn, depending on the EUR/HUF exhange rate we use, which is not easy considering the great volatility of the forint in the last few days.
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To quickly direct EUR 37 billion of European public investment to address the impacts of the coronavirus crisis, the European Commission last month proposed to relinquish this year the obligation to request refunding of recoveries of unspent pre-financing for the European Structural and Investment Funds for 2019 and to use this money for investments under the Coronavirus Response Investment Initiative (CRII).

In the case of Hungary, this amounts to around EUR 861 million (indicative amount pending the final outcome of the examination and acceptance of accounts).Additionally, the EC has now paid the 2020 annual pre-financing to Hungary in two instalments over March and early April, which amounted to over EUR 607.7 million.

The money could be used by member state governments to ensure the necessary supplies for the health system, to support citizens and companies, particularly SMEs, and to take measures, such as wage subsidies, suspension of payments of corporate and value-added taxes or social contributions.

As noted above, Hungary was to receive cc. EUR 608 million in 2020, the first half of which was transferred to the Hungarian budget at the end of March and the second half in early April. Both batches were EUR 304 million, according to the Commission's official database.

The first item was a huf 108 billion emergency transfer and the second corresponds to a huf 109-110 bn liquidity assistance.

Practically, Hungarian authorities have received these funds about two months earlier than originally scheduled, so in this sense this is not extra funding

The only extra funding is that item (EUR 861 million worth recovery of unspent pre-financing) which Hungarian authorities do not have to refund by the end of June, as it remains on the account of the general government until 2025 and may be tapped flexibly as the fight against COVID-19 requires.

We must emphasise that strictly speaking the EC cannot help any member state with extra funding by raising their allocations in the 2014-2020 fiscal cycle. This it cannot do for the cycle comes to an end this year and any change to the MFF requires backing by all 27 member states. At an extraordinary EU summit in February, no agreement was reached on the 2021-2027 multiannual financial framework.

Through nine national and regional programmes, Hungary was allocated EUR 25 billion from ESI Funds over the period 2014-2020. With a national contribution of EUR 4.63 billion, Hungary had a total budget of EUR 29.63 billion to be invested in various areas, from infrastructure networks in transport and energy, SME competitiveness, employment measures, to environmental protection measures, the low-carbon economy, research and innovation as well as investments in social inclusion and education.

There is no way to receive additional funding on top of the EUR 25 billion, while Prime Minister Viktor Orbán's government has been castigating the EU for not granting Hungary a single cent of additional funding.

We have a feeling that the cabinet knows exactly that it is an unrealistic expectation (to put it mildly), but bashing Brussels any which way it can might pay off politically. The government has just set up a third crisis management fund demonstratively, which is dedicated to show how much extra funding the EU sent Hungary's way. Needless to say, the tally stands at 0 and it will stay there permanently. What a great way to demonstrate the voters of the ruling Fidesz party that the EU is leaving us behind, but we'll manage "on our own." As Orbán also told opposition parties in Parliament before a vote on a controversial bill that grants his government powers to rule by decree without a cut-off date that "we will solve this crisis without you." 

But let's not forget that the Commission will not request the refunding of recoveries of unspent pre-financing which in Hungary's case amounts to about EUR 861 million. Moreover, this money will be at the government's disposal until 2025. This means that in order to keep this funding Hungary will not have to invite new tenders or submit new invoices to Brussels. This item could, in fact, be shown as extra EU funding. 

The other two newly established crisis management funds also do not rely on new net budget funds. The will operate by using reallocated funds. The EUR 861 million also comes from reallocations in the 7-year EU budget. So, what's the difference?

For the sake of transparency and identical methodologies, the government should put on display this EUR 861 mn as EU funding. But it won't. 

Cover photo by Dursun Aydemir/Anadolu Agency via Getty Images

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