The EU is giving Hungary a month to act before moving to suspend funds

The EU is giving Hungary a month to act before moving to suspend funds

EU flags fly outside the European Commission headquarters in Brussels, Belgium June 17, 2022. REUTERS/Yves Herman/File Photo

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BRUSSELS, July 22 (Reuters) – The European Commission gave Hungary a final month to address its rule of law concerns before asking EU governments to suspend some of the funds Hungary will receive under the bloc’s 2021-2027 budget.

The new deadline is part of an EU process, called the “conditionality mechanism”, intended to protect the EU’s financial interests against breaches of the rule of law by an EU government. It is separate from other rule of law procedures that the EU has initiated against Hungary.

The commission believes EU money is at risk in Hungary because of what it says is corruption, which can take the form of tenders for EU-funded projects where only one provider, usually linked to the ruling party, participates.

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The EU executive also has concerns about the independence of the judiciary, media and NGOs.

Hungarian Prime Minister Viktor Orban has previously dismissed EU and US concerns over corruption in Hungary, but top Hungarian officials have said in recent weeks that Budapest was willing to work with the commission to address concerns.

Hungary this week offered to cut the number of public tenders in which only one bidder participates to 15% of the total. It has also offered to allow courts to order prosecutors to pursue cases even if prosecutors had decided not to, and to make legislation in Hungary more transparent and inclusive.

Due to its concern over EU budget money, the Commission launched the “conditionality mechanism” against Hungary in April. Ultimately, it could lead to the suspension of the 21 billion euros ($21.3 billion) for Hungary in the EU budget.

The commission said on Friday that it had given budget commissioner Johannes Hahn the mandate to inform Budapest of the measures the EU board intends to propose to EU governments if Hungary’s remedial measures are not sufficient.

“Hungary now has one month to submit its observations and any additional information, in particular on the proportionality of the measures planned by the Commission,” the EU’s executive branch said.

It added that Hungary still had the opportunity to submit adequate remedial measures.

The funds affected are known as cohesion funds – which EU countries that are poorer than the EU average receive to develop their infrastructure such as roads and bridges, water treatment plants or transport.

A senior EU official, who asked not to be named, said the commission’s proposal to EU governments would most likely not apply to all cohesion funds for Hungary, because it would have to be proportionate to the scale of the problem.

“But it will be a serious proposal, not a symbolic one,” the official said.

However, the suspension of cohesion funds, which comes on top of 5.8 billion euros in recovery fund allocations that remain frozen, would be a major blow to the Hungarian economy, which is suffering from a weakening currency, rising borrowing costs, a widening budget deficit and severe inflation.

($1 = 0.9848 euros)

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Reporting by Jan Strupczewski Editing by Philip Blenkinsop and Frances Kerry

Our standards: Thomson Reuters Trust Principles.

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