The Proposal

The measure proposed by the European Commission (EC) would suspend 65 per cent of the funding Hungary is entitled to from the EU’s budget. Budget Commissioner Johannes Hahn said that the EC’s decision is an effort to protect the EU budget in Hungary. At the same time, he praised 17 measures of reform that the government has implemented in the past years. ‘With these measures Hungary has made important and public commitments in the right direction,’ he stated.

For the past 12 years, Hungary has received criticism from liberal media outlets and politicians around the world. Viktor Orbán’s government, however, has stood strong in the face of these attacks. So strong that in April this year Fidesz won the elections in a landslide victory, and secured a two-thirds majority in the Hungarian parliament.        

But while domestically the government enjoys broad support, this is not the case in the EU. The rules of the bloc, according to EU officials, allow them limited options to combat democratic regress in nations that are already EU members. As pressure mounted on EU institutions to take action in late 2020, a new mechanism was introduced that enables the suspension of payments in response to systemic rule-of-law issues that have an impact on European finances. In April, the Commission initiated the new procedure against Hungary, and its investigation concentrated on concerns such as irregularities regarding public procurement and gaps in the investigation of corruption.

However, as a response to the EU’s decisions, the Hungarian government has created an anti-corruption authority with a separate task force that is set to weed out corrupt dealings that would harm the financial interests of the EU budget.

Legality and Reactions

With its vote on Sunday, Berlaymont has now legally handed the issue over to the EU Council, which has the last say. The Commission stated that it is recommending ‘a restriction to enter into legal commitments’ with Hungary’s so-called public interest trusts as well as ‘a suspension of 65 per cent of the commitments for three operational initiatives under cohesion policy.’ The Commission’s recommendations are now up for Member State leaders’ consideration for a month, with a potential extension of two months.

The Polish government indicated that they would resist any decision that suspends EU funds. ‘Poland will strongly oppose any actions of European institutions that intend to illegally deprive any member states of funds, in this case Hungary in particular,’ Prime Minister Mateusz Morawiecki said on Sunday according to the Polish state-run news agency, PAP. He also added that he hopes that the reforms introduced by the Orbán government will lead to a resolution of the dispute between Brussels and Budapest.

A Time Crunch

The European Commission acknowledged the new anti-corruption body of Hungary and stated that they will closely monitor the ongoing events in the country. They added that if the new body proves to be effective, and they establish that the funding would be appropriately used, the suspended sum will be transferred to the country. They also urged Hungary to implement more key steps to prevent and eradicate corruption that would harm the EU budget. The government has time until 19 November to convince the Commission.