Hungary's EU funds minister hopes Erasmus+ situation is just a "misunderstanding"

As Portfolio reported earlier, following the rule of law conditionality mechanism launched against Hungary, member state finance ministers not only decided in mid-December to block €6.35 billion in cohesion funding but also to ban higher education institutions run by public interest trusts from making EU-funded commitments due to conflict of interest concerns. This therefore affects higher education digitization and research and development programmes planned with cohesion funds - according to information obtained by Portfolio, some €2 billion is blocked by this dispute as a horizontal enabling condition -, Erasmus+ funds and Horizon Europe funds, the latter being assessed in Brussels.

According to Népszava, some foundation-run universities have already been caught out by the Brussels filter when their applications for funding from the Horizon Europe research programme were evaluated.

However, in the title of the communication issued by the Ministry of Culture and Innovation on Monday evening through MTI, they emphasized: "Erasmus+ programmes can be implemented without disturbance this year as well".

They also wrote that "the December decision of the European Commission on public interest trusts performing public tasks does not affect the currently running exchange programmes. The government is continuously negotiating until the March deadline on the further uninterrupted provision of funds for higher education".

They stress that "The exchange programmes for higher education students and lecturers currently running and applied for by universities this year are not affected by the decision of the European Commission." The decisions regarding this year's Erasmus+ programmes were made before 15 December last year, so the decision only affects future applications.

They also underline that

Hungary has fulfilled all its commitments and does not accept the European Commission's decision to discriminate against public interest asset management foundations and universities run by these bodies, by excluding them from direct EU tenders. As with other EU funds, this will be clarified by 16 March 2023.

In a very similar short statement to the above, Tibor Navracsics, Minister for EU Funds, stressed the need for clarifying negotiations. He said, "I trust that this is just a misunderstanding and that the European Commission does not want to make Hungarian students pay the cost of any dispute it may have with the Hungarian government."

According to him, the Commission had two main expectations in the rule of law procedure in its debate on public interest asset management foundations: firstly, that it should be made clear in law that such institutions are also subject to the Public Procurement Act (which has been done), and secondly, that there should be strict conflict of interest rules for the boards of trustees of such trusts. The reason for this is that such bodies are largely composed of government politicians with the power to decide both on the allocation and the use of funds from the state. The Commission's official statement says:

Those issues and their recurrence over time demonstrate a systemic inability, failure or unwillingness, on the part of the Hungarian authorities, to prevent decisions that are in breach of the applicable law, as regards public procurement and conflicts of interest, and thus to adequately tackle risks of corruption. They constitute breaches of the principles of the rule of law, in particular the principles of legal certainty and prohibition of arbitrariness of the executive powers and raise concerns as regards the separation of powers.

"[...]  the regulatory framework still does not prevent top-level officials, including senior political executives from the National Assembly and Hungary’s autonomous bodies, from sitting on boards of public interest asset management foundations, as repeatedly requested by the Commission," it adds.

"[...]  the weaknesses of the regulatory framework combined with the new legislative developments aggravate the possible conflict of interest that the remedial measure was meant to address and therefore renders it inadequate to address the concerns originally raised by the Commission."

As Portfolio reported before Christmas, the dispute could be resolved either by removing political appointees from these boards and/or by strengthening the powers of the Senates over the boards.

Navracsics stressed that in the negotiations so far, the European Commission has not objected to the fact that politicians sit on the boards of trustees of universities. The Minister added that the government would consider it if the European Commission asked them to remove politicians from university boards of trustees because of the strict conflict of interest rule. Asked about this, Tibor Navracsics replied:  

We'll see how it goes.

As Portfolio reported, the Commission's new assessment of the situation in Hungary in early December did indeed include the fact that it was still not satisfied with the revised Hungarian conflict of interest rules for public interest asset management foundations, and therefore maintained its proposal to the Council of Member States to ban commitments of EU funds to such organizations until the situation is resolved. The voting on this ban, with a majority in favour, took place on the same day as the voting for the suspension of €6.35 billion in cohesion funds for Hungary.

Universities learn about fund freeze from the press

Local news portal qubit.hu reported that Hungarian authorities had been notified about the decision on the suspension of Erasmus+ funding in December, but they kept silent about it and higher education players themselves learned only from the press that the cabinet's failure to respect the rule of law mechanism could mean they are deprived of international funding opportunities. 

Over the last 25 years, Erasmus has enabled more than 87,000 Hungarian students to study abroad for a semester or two, including more than 18,000 who took part in traineeships. Since its inception in 1987, more than ten million people have had the opportunity to study abroad through the programme.

The boards of trustees of the foundations are mostly headed by high-ranking political officials or businessmen close to PM Viktor Orbán's ruling Fidesz party, e.g. Finance Minister Mihály Varga of the University of Óbuda, Justice Minister Judit Varga of the University of Miskolc, Minister for Regional Development Tibor Navracsics of the Pannon University, György Kossa of the University of Debrecen, OTP Chairman-CEO Sándor Csányi of the University of Sopron, and Mol Chairman-CEO Zsolt Hernádi of the Corvinus University of Budapest.

A former employee of the Tempus Public Foundation, which coordinates the assessment and payment of Erasmus grants, speaking on condition of anonymity, told Qubit that over the past year or so, many of the lower levels of the organisation and former board members have left because they could no longer cope with the series of irregularities.

When asked about the reasons for their departure, one of them said that on more than one occasion and in more than one project, the results of the applications judged by an independent committee were not made public under pressure from the Board of Trustees, but instead the applications were re-evaluated and new winners were announced as a result of the new process. One of the former chiefs of the foundation declined to confirm or deny such reports, citing an NDA signed upon departure.

He/she stressed that the government is pressed for time and should reach an agreement with the EU as soon as possible because the application deadline for Erasmus grants for the 2023/24 school year is 15 February.

(According to the website of Eramus+, the deadline for applications submission is 31 January 2023, and according to the Tempus Foundation website, the deadline for the application for bilateral state scholarships is 23 February.)

All of the academics interviewed had all heard about the 15 December EU decision from the press, and there were also a good number of those who were so shocked by the news that at first they thought it was a hoax, a journalistic error.

According to János Fazekas, Associate Professor of the Department of Administrative Law at ELTE,

this is like dropping an atomic bomb on higher education in Hungary.

"If it is implemented, there will be little point in continuing to study, teach or research at foundation universities, because it will set back Hungarian higher education to the state it was in 20-30 years ago."

Under the conditionality mechanism the parties must protect the interests of the final beneficiaries - students, professors, and teachers in this case. When asked if Hungary needs to guarantee the fulfilment of this rule or the Commission has a role to play in this, Balázs Újvári, European Commission spokesperson for budget and human resources, humanitarian aid and crisis management, replied at a press conference on Monday that what the regulation means actually concerns projects where there's an existing legal commitment already.

In other words, the EU has a duty to protect the interests of students and teachers in cases that were the subject of a contract by 15 December last year because their applications were successful.

Should funds be interrupted with regard to projects for which a legal commitment exists, the member state in question would have to essentially make up for the debt and would have to basically account for the contribution that is withheld by the Commission,

said Újvári.

Cover photo: Portfolio