EU funds will not arrive on time to Hungary

There is little chance that the European Commission will release significant amounts from the Hungarian budgets before the second half of the year. There is a simultaneous communication that EU funds could come soon, while more and more ministers act as if they are of no importance to the Hungarian economy.

The European Commission launched the rule of law mechanism against Hungary almost immediately after last year’s parliamentary elections. Tibor Navracsics, Minister of Regional Development, was asked to lead the negotiations and was initially optimistic. The deadline, promised for the end of the summer, was slowly pushed back. At the end of 2022, the partnership agreement between the government and Brussels was reached.

Meanwhile, the European Council suspended 55 percent of 3 operational projects, meaning around EUR 6.3 billion in funding. It has stopped transfers for the entire budget of the Hungarian government, due to the non-fulfilment of horizontal eligibility criteria. The conditions were as follows:

• implementation of a judicial reform
• resolving political conflicts of interest in the public foundations that manage universities
• amendments to several pieces of legislation that are currently not legally consistent with the EU Charter of Fundamental Rights

Tibor Navracsics has held several meetings in Brussels and has repeatedly stated that Hungary will fulfil the conditions by the deadline. However, now, the Minister is more cautious when it comes to his statements. The deadline is the end of March, by which point the government must have the legislation passed in Parliament. Under the EU Council’s decision, payments under the EUR 5.8 billion RRF and cohesion funds have been made subject to 4 justice conditions for the 27 “super-milestones”.

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Tibor Navracsics said that based on the Commission’s assessment, the European Council will “either close or extend” the rule of law procedure. Portfolio.hu has been informed that they will almost certainly decide in favour of an extension. This does not mean that the total suspension of payments will not be removed. Several Commission officials confirmed that there will be no immediate removal of the 55 percent of the payments affected by the rule of law procedure.

EU funds in Hungary are no longer that significant

Márton Nagy, Minister of Economic Development, said that the role of EU funds in Hungary is no longer that significant. FDI is now at least as important in investment as Hungarian and EU budget funds combined. There are many other investments such as the combined financing volume of Exim, MFB and the Széchenyi Card Programme, which amounts to HUF 3,000 billion (EUR 7,8 billion). EU funds are expected to reach HUF 2200 billion (EUR 5,7 billion) this year, of which HUF 950 billion (EUR 2,5 billion) would come from the former budget, according to the plan.