EU 'Plans' to Threaten Hungary With Funding Cuts as Budapest Breaks Bloc's Ranks on Russia Policies

The European Commission, the EU’s executive arm, announced on 5 April that it would wield its new rule-of-law mechanism, agreed to by all 27 EU leaders in late 2020, to ostensibly ensure stronger safeguards to prevent the misuse of EU funds.

The European Commission plans to formalize its assessment on “erosion of the rule of law” under Prime Minister Viktor Orban’s administration on Sunday and recommend cutting funding for Hungary, Bloomberg reported, citing senior EU officials.

The EC has until 21 September to make its recommendation to the European Council, where it will reportedly suggest that EU leaders give Orban time to rein in corruption, according to senior EU officials originally cited by Budapest-based Nepszava newspaper.

Hungary will be offered a deadline of one month to act on the EU executive’s recommendations, added the report, with the possibility of the term being extended to a maximum of three months.

After that, a qualified majority of EU member states will be required for the executive’s proposal to penalize Hungary to take effect. The scheme affects all of the bloc’s joint funding worth 1.8 trillion euros in 2021-27. Budapest will have the opportunity to appeal the process.

‘Money For Democracy’ Scheme

The European Union’s politically independent executive arm has been probing alleged widespread corruption in Hungary since April using a new legal process agreed by all 27 EU leaders in late 2020. The new mechanism granted the European Union the power to withhold funding from countries that are seen as failing to follow the bloc’s fundamental rules.

Nearly 4 percent of Hungary’s spending of EU funds in 2015-2019 had irregularities, according to the bloc’s anti-fraud body OLAF.

The Hungarian government slammed the decision to use the mechanism a mistake. Gergely Gulyas, Orban’s chief of staff, urged the European Commission “not to punish Hungarian voters for expressing an opinion not to Brussels’ taste”.

He urged the Commission to “return to common sense and dialogue”. Both Hungary and Poland challenged the new procedure in the EU’s top court, but the European Court of Justice (ECJ) rejected the motion in February.

Accordingly, the EU’s “conditionality mechanism” against Hungary was set into motion in April, just days after Hungarian Prime Minister Viktor Orban was reelected on 3 April with an overwhelming majority.

Hungary is the first country to be subjected to a probe under the new rule-of-law mechanism. Pending the inquiry’s results, the country lost access to the bloc’s funding.

In a note to the College of Commissioners, dated 20 July and published on the Commission’s transparency register, Budget Commissioner Johannes Hahn pointed to 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.”

As a last-ditch move to tap into the billions, Orban’s government offered to set up an anti-graft agency on 12 September which would step in on cases where Hungarian authorities have failed to prevent “fraud, conflict of interest, corruption and other illegalities or irregularities” that jeopardize the handling of EU funds, according to the decree published Monday.

Should Budapest fail to reach an agreement with the European Commission by the end of 2022, it faces losing 5.8 billion euros ($5.8Bln) in COVID-19 recovery funds, according to Bloomberg. Furthermore, it would jeopardize a potential six-year funding program under the bloc’s budget to upgrade its national infrastructure.

On the reported uncertainty of EU funds for Hungary, its currency the forint fell as much as 1.1 percent against the euro.

‘Unenforceable’ & ‘Unjustifiable’ Sanctions

Hungary has had numerous troubles with the authorities in Brussels over its stance on a plethora of policies, ranging from same-sex marriage and transgender rights to migration and, more recently, the sanctions policies unleashed by the US, the EU and their allies against Moscow over its special military operation in Ukraine.

Orban insisted that although the sanctions had failed to destabilize Moscow, they had affected western economies, causing record-high inflation and soaring gas prices.

Hungary, which imports approximately 65 percent of its oil and some 80 percent of its gas from Russia, has rejected Brussels’ “unenforceable” and “unjustifiable” plan to cut gas consumption by 15 percent.

“Europe is in trouble, economically and politically,” he warned in late July, adding that if the European Union failed to review its sanctions policies, a “war economy may descend upon Europe as early as October”.

“Sanctions and weapons deliveries are ineffective. You do not usually put out fires with flamethrowers,” Victor stated on Kossuth radio.

Reprinted from Sputnik News.