The EU Commission is intensifying the fight against the dismantling of the rule of law in Hungary: The authority wants to withhold 7.5 billion euros in subsidies because of the rampant corruption. At the same time, the Commission would like to pave the way for the government of authoritarian Prime Minister Viktor Orbán to receive 5.8 billion euros in grants from the Corona aid pot. However, tranches will only be released once Hungary has implemented important reforms to strengthen the independence of the judiciary and the fight against corruption. So Brussels relies on the carrot and stick principle.
Both resolutions fell the commission on Wednesday. However, the final decision on this will have to be made by the EU governments by the end of the year. This could happen at the planned meeting of EU finance ministers next Tuesday. However, it is quite possible that the finance ministers will convene a special meeting a week later. Freezing funding would be a severe blow to Orbán. He also secured his election victory in April with expensive promises; the budget deficit is expected to be more than six percent of economic output this year. Orbán therefore had to raise taxes. In addition, the country suffers from an inflation rate of more than twenty percent.
The shrewd tactician Orbán recently blocked important EU projects that require unanimity. This should improve his negotiating position. Specifically, it is about support for Ukraine of 18 billion euros for 2023 and the introduction of a minimum tax for corporations in the EU. These two projects plus the freezing of funding for Hungary and the approval in principle of the Corona aid will probably all be decided at the same time in December – for Christian Lindner and his 26 colleagues there is a dramatic showdown at the end of the year. EU diplomats hope that Orbán will give up his resistance to the minimum tax and aid to Ukraine if the other EU governments in return follow the Commission’s proposal and clear the way for money from the Brussels Corona pot.
Hungary has to reach 27 super milestones
Because there is massive time pressure here: Hungary is the only EU country whose reform and investment plan for the Corona Fund has not yet been approved. wait there 5.8 billion euros in grants until the end of 2026 that do not have to be repaid. If no agreement is reached by the end of the year, 70 percent of the grants will be forfeited. Of course, an agreement does not mean that money will flow immediately. The plan stipulates that Hungary must meet 27 “super milestones” before the Commission releases the first tranches. These intermediate goals include, for example, establishing independent and effective anti-corruption authorities, working with the European Anti-Fraud Office (OLAF), keeping the Supreme Court free from political influence or no longer preventing Hungarian judges from referring legal issues to the European Court of Justice.
However, the Commission does not only use the grants from the Corona Fund as a means of pressure. At the same time, Hungary is the first country against which the authority new rule of law mechanism applies. This allows subsidies to be withheld if deficiencies in the rule of law and the fight against corruption endanger their proper use. In April, the authority opened the procedure; in the September threatened Budget Commissioner Johannes Hahn to freeze 7.5 billion euros if Orbán does not implement 17 reforms by mid-November that improve the fight against corruption and nepotism. In total, Hungary is to receive more than 34 billion euros in regional funding or agricultural subsidies by 2027.
The Commission has now come to the conclusion that the government has not satisfactorily fulfilled the promises. “Hungary has undoubtedly moved in the right direction,” Commissioner Hahn said in Brussels on Wednesday. “But overall there is still a risk for EU funds, as there are still gaps in key areas of the reforms.” Hahn therefore recommends that the EU finance ministers really freeze the funding. The 17 reform promises are now part of the 27 super milestones for the Corona aid pot. So if Orbán succeeds in clearing all the hurdles for paying out the Corona grants, this would also free the frozen 7.5 billion euros.
The EU finance ministers decide in the Council of Ministers, the body of the member states, with a so-called qualified majority. Accordingly, at least 15 of the 27 countries that together make up 65 percent of the total population of the EU must agree. It is not certain that enough governments will approve the freezing of subsidies, but it is likely. There was a lot of support for the Commission’s decisions from the European Parliament on Wednesday.