Hungary risks losing billions in aid from the EU

23 September 2022

For the first time in history, the EU is considering withdrawing aid to a Member State for failing to comply with the rule of law. The EU Commission wants to refuse Hungary subsidies of around €7.5 billion due to violations of fundamental rights and legal uncertainties. In addition, the EU has for some time criticised widespread corruption in Hungary.

There is no guarantee that EU funds from Cohesion Fund funding programs will be used in accordance with the rule of law. This was decided by the College on last Sunday in Brussels. This would mean that 65% of the funding would be withheld from three programs to support disadvantaged regions.

The EU Commissioner Johannes Hahn, who is responsible for the budget, made a corresponding proposal and stated that the money from the EU budget was not sufficiently protected against misuse in Hungary: “Today’s decision is a clear demonstration of the Commission’s resolve to protect the EU budget, and to use all tools at our disposal to ensure this important objective.” At the same time, he acknowledged the 17 commitments that the Hungarian Government had recently made to address the existing shortcomings.

However, Hungary has shown some willingness to do something about the problems. In order to fight corruption, the country’s Government has said it will set up an independent authority to oversee and monitor the use of EU funds closely. Commissioner Hahn said that the promises were a step in the right direction, but they would have to be implemented.

The Commission initiated the procedure under the so-called EU rule of law mechanism in April. Now, for the first time, the conditionality mechanism introduced by the EU as part of the 2021 Recovery Fund is being applied. States that do not respect fundamental rights and in which there are doubts about the correct use of EU subsidies must expect this measure.

The EU Council of Ministers, in which the Governments of the 27 Member States are represented, must now decide on the proposal. The decision will be taken by qualified majority, so at least 15 countries with at least 65% of the EU population must agree to the proposal. The veto of just one country can therefore not prevent the decision. The Council now has four weeks to examine the case and make a decision. Theoretically, this can be postponed for up to three months.