Budapest losing two battles at once with Brussels, painful loss of resources to ensue

Two years have not been enough for Hungary to meet the conditions for the unblocking of EU funds, so the European Commission is expected to strip the country of more than a billion euros for good at the end of December, daily Népszava reported on Monday.

under the new seven-year n+2 rule of the common budget, these funds will be completely lost and cannot be recovered later.

We estimate that the final amount of money lost could exceed €1.1 billion, while a further €300 million in fines (non-compliance with EU asylum rules) will certainly be deducted by the European Commission from upcoming payments in a so-called offsetting procedure.

Such deductions will make it even more difficult to reach the 2024 budget deficit target, as the roughly HUF 125 billion will have to be replaced by domestic resources in EU projects.

Although the government says the reforms made in autumn 2023 have met the requirements, the European Commission still considers that the risks to the regular and transparent use of EU funds have not been eliminated.

As Népszava reminds us, the Hungarian government risks losing further EU funds if it fails to meet the remaining conditions.

The amendment to the law on public interest trusts has also failed to win the approval of the European Commission, which means that the universities, i.e. the higher education system which has undergone a transformation, or so- called 'model change' in recent years, will still not have access to the Erasmus+ and Horizon Europe programmes, two sources told the paper.

During this 'model change' process, the majority of public higher education institutions were transformed into institutions maintained by public interest asset management foundations.

The EU argues that the legislation does not cover all the institutions concerned and that its entry into force is subject to authorisation from Brussels.

As previously reported by Portfolio, one of the objections is that the legislation only covers higher education institutions and that it differentiates between institutions that receive EU funding and those that do not.

The freezing of EU funds was justified by systemic breaches of the rule of law, in particular with regard to the misuse of public funds.

The European Commission says the Hungarian government has not adequately extended the powers of the Integrity Authority, for example to check politicians' asset declarations, and has not taken sufficient steps to curb corruption.

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