Hungarian gov't gets nasty Christmas present from Brussels - 22 billion euros withheld

Blocking confirmed

The news agency said in an article on Friday that the European Commission is withholding almost all of the HUF 22 billion cohesion fund for Hungary until the government addresses concerns about the rule of law and the protection of human rights. The recent decision in Brussels raises the stakes in the battle between the Hungarian government and the EU, and in the rule of law debate, according to Bloomberg.

According to the Commission's assessment, Hungary has not fulfilled the conditions for receiving the catch-up funds. This is money that EU countries can use to help less developed regions in their countries to catch up economically and socially.

As long as the eligibility conditions for the release of the funds are not met, the Commission cannot pay the expenditure included in the payment claims submitted by Hungary,

Commission spokesman Stefan De Keersmaecker said in a statement on Friday.

In a statement quoted by the news agency, the Commission said Hungary was not complying with the EU Charter of Fundamental Rights. The so-called "child protection law" was highlighted. It also considers that threats to academic freedom and to the right to asylum persist.

"Hungary may proceed with its plans to draw down EU funds, but the Commission may not reimburse - with certain exceptions - the related expenditure submitted until the Hungarian government resolves these concerns," Bloomberg quoted the EC as saying in a statement.

"Hungary is in a particularly difficult economic situation and needs these EU funds," Johannes Hahn, European Commission Budget Commissioner, told the newspaper Der Standard. At the same time, he acknowledged that financial pressure on the country seems to be the most effective tool to improve the rule of law in the country. He stressed, however, that it was not about punishing Hungary, but about creating legal security in the country, which would guarantee the proper use of EU funds. He also stressed that this is not about a lex Hungary, but about the effective application of one of the many rule of law instruments developed by the EU.

According to Bloomberg, the European Commission's recent decision (to withhold money) effectively overrides the agreement reached by Hungary and other member states to suspend €6.3 billion in EU funds.

What is this all about?

In fact, it was already in the news when the EU adopted the Partnership Agreement that there are eligibility conditions without which the EU cannot transfer cohesion funds. However, after the domestic and international interpretations and clarifications of the past few days, it is becoming clear what this means in practice for Hungary. Specifically, it means withholding €22 billion of cohesion funds.

The news agency's article on Friday is essentially in line with what Portfolio reported on Friday. We wrote then that the so-called horizontal cases indicated in the European Commission's decision on Wednesday affect several specific objectives of three cohesion programmes, mainly related to activities in support of higher education and research, as well as activities in the field of education (teaching materials, teacher training) and services for children. In our previous article, we highlighted that Hungary will not be able to draw down any of the €22 billion in cohesion programmes until the government implements the 4 justice reforms it has committed to in the 27 super-milestones of our recovery programme. This means that the Commission is blocking even the €15.5 billion above the €6.3 billion of cohesion funds suspended due to the conditionality/legality procedure. In concrete terms, there are 3 other specific cases, apart from the justice case, for which the Commission has expressed reservations. These 3 cases block a total of around €2.5-3 billion in payments. Reports by Reuters and Free Europe also predicted these developments.

To sum up, here is the situation of EU funding in Hungary:

• Based on the news above, we have in theory been given access to €22 billion of cohesion funds, but payments are not yet close.
• The European Union has also approved the Hungarian recovery plan, but the government has to meet 27 milestones to receive payments from this.
• Of the €22 billion in catch-up funding, €6.35 billion remains blocked until Hungary meets 21 conditions already imposed.

Cover photo: Pier Marco Tacca/Getty Images