Hungary’s recovery cash in limbo
Budapest and Brussels at loggerheads as Commission pushes for anti-corruption safeguards in spending plan.
The European Commission and the Hungarian government are set to blow past an “end of September” deadline without coming to an agreement on the country’s pandemic recovery plan, leaving more than €7 billion in grants hanging.
The standoff over the recovery funds is one front in the Commission's ongoing struggle with Prime Minister Viktor Orbán’s government — another being a battle over Budapest's treatment of sexual minorities. And Orbán isn't shy about bashing Brussels over both issues as part of his reelection campaign ahead of a vote next spring.
Hungary stands to receive €7.2 billion in grants under the bloc’s coronavirus response fund, worth around 5 percent of the country's GDP. But Brussels held up the plan this summer over concerns it didn’t do enough to address corruption. The two sides agreed to extend negotiations until the end of September, aimed at finding a compromise that hasn’t materialized.
“There is no decision today,” a Commission spokesperson said Thursday, adding it was “Not in a position yet to conclude [its] assessment” of the Hungarian spending plan.
In this game of who-blinks-first, the Commission is under close scrutiny from the European Parliament and other EU countries, who will lash out if they feel a weak plan is being approved. At the same time, an outright rejection is unlikely as it would escalate tensions with Hungary and play into Orbán’s Brussels-bashing reelection bid.
A spokesperson for the Hungarian government said on Thursday that "Brussels and the European Left are nowadays attacking Hungary because Hungary does not allow LGBTQ propaganda into schools and the media. That is why they are withholding the funds that Hungary is entitled to." Hungary has started financing its recovery plan with national debt, the spokesperson added.
The government spokesperson was referring to a bill passed by the Hungarian parliament this summer widely perceived as discriminating against sexual minorities, over which the Commission has taken Hungary to court. But the EU executive claims that approval of the recovery plan is a separate issue, depending on whether the country meets specific criteria under the EU fund's rules.
These rules include a pass-or-fail assessment of its anti-corruption safeguards in the spending plan. Countries also need to address “all or a significant subset” of structural issues, which in Hungary’s case include a request to combat corruption in general and to strengthen judicial independence — issues that “remain unaddressed,” according to the Commission’s latest assessment of the rule of law in Hungary. That assessment found that “independent control mechanisms remain insufficient for detecting corruption.”
Meetings between Hungarian and Brussels officials in recent weeks have focused on hashing out a compromise that would allow both sides to walk away victorious. The Commission could approve the plan — and unblock the first payment, worth 13 percent of the total — but link future disbursements to more commitments on behalf of the Hungarian government, according to officials familiar with the talks.
Those commitments could include items such as signing up to a data-mining tool known as Arachne, which would make policing of the funds’ final beneficiaries easier, but so far Budapest has resisted.
Orbán has laid the blame for the delays at the Commission’s door, criticizing “Brussels’ unprincipled, partial and professionally flawed policy.” Orbán claims the delays put Hungary at a disadvantage compared to other EU countries who have already started receiving cash from the EU Recovery and Resilience Fund.
Gergely Gulyás, Orbán's chief of staff, said on Wednesday that negotiations are continuing and some differences of opinion remain.
If a compromise is struck and the Commission eventually approves the plan, it will need the backing of a majority of EU countries. Some countries have been vocal about linking EU funds to the rule of law, including the Netherlands and Scandinavian countries, but there isn’t enough support to block funds. Diplomats are watching the Commission’s moves closely.
“It's not beyond them to find a fudge, but at the moment it's hard to see how they could unless Hungary concedes on something,” said an EU diplomat. "This needs to be seen as credible," they added, referring to the Commission. "I don't envy them."
Meanwhile, pressure is mounting from the European Parliament and civil society, which don’t want the Commission to go for what they see as appeasement politics. Transparency International and other anti-corruption NGOs this week wrote to Commissioners to ask them to delay the approval of Hungary’s plan “until concrete measures are put in place” to address “serious risks of corruption.”
The Parliament will hold a plenary debate on the issue on Wednesday at the request of the liberal Renew Europe group.
“The Commission has some leverage to force Orbán to fix Hungary’s most egregious corruption problem," said Dacian Cioloş, president of Renew Europe. "It must use it. Now.”
The standoff over the recovery funds is one front in the Commission's ongoing struggle with Prime Minister Viktor Orbán’s government — another being a battle over Budapest's treatment of sexual minorities. And Orbán isn't shy about bashing Brussels over both issues as part of his reelection campaign ahead of a vote next spring.
Hungary stands to receive €7.2 billion in grants under the bloc’s coronavirus response fund, worth around 5 percent of the country's GDP. But Brussels held up the plan this summer over concerns it didn’t do enough to address corruption. The two sides agreed to extend negotiations until the end of September, aimed at finding a compromise that hasn’t materialized.
“There is no decision today,” a Commission spokesperson said Thursday, adding it was “Not in a position yet to conclude [its] assessment” of the Hungarian spending plan.
In this game of who-blinks-first, the Commission is under close scrutiny from the European Parliament and other EU countries, who will lash out if they feel a weak plan is being approved. At the same time, an outright rejection is unlikely as it would escalate tensions with Hungary and play into Orbán’s Brussels-bashing reelection bid.
A spokesperson for the Hungarian government said on Thursday that "Brussels and the European Left are nowadays attacking Hungary because Hungary does not allow LGBTQ propaganda into schools and the media. That is why they are withholding the funds that Hungary is entitled to." Hungary has started financing its recovery plan with national debt, the spokesperson added.
The government spokesperson was referring to a bill passed by the Hungarian parliament this summer widely perceived as discriminating against sexual minorities, over which the Commission has taken Hungary to court. But the EU executive claims that approval of the recovery plan is a separate issue, depending on whether the country meets specific criteria under the EU fund's rules.
These rules include a pass-or-fail assessment of its anti-corruption safeguards in the spending plan. Countries also need to address “all or a significant subset” of structural issues, which in Hungary’s case include a request to combat corruption in general and to strengthen judicial independence — issues that “remain unaddressed,” according to the Commission’s latest assessment of the rule of law in Hungary. That assessment found that “independent control mechanisms remain insufficient for detecting corruption.”
Meetings between Hungarian and Brussels officials in recent weeks have focused on hashing out a compromise that would allow both sides to walk away victorious. The Commission could approve the plan — and unblock the first payment, worth 13 percent of the total — but link future disbursements to more commitments on behalf of the Hungarian government, according to officials familiar with the talks.
Those commitments could include items such as signing up to a data-mining tool known as Arachne, which would make policing of the funds’ final beneficiaries easier, but so far Budapest has resisted.
Orbán has laid the blame for the delays at the Commission’s door, criticizing “Brussels’ unprincipled, partial and professionally flawed policy.” Orbán claims the delays put Hungary at a disadvantage compared to other EU countries who have already started receiving cash from the EU Recovery and Resilience Fund.
Gergely Gulyás, Orbán's chief of staff, said on Wednesday that negotiations are continuing and some differences of opinion remain.
If a compromise is struck and the Commission eventually approves the plan, it will need the backing of a majority of EU countries. Some countries have been vocal about linking EU funds to the rule of law, including the Netherlands and Scandinavian countries, but there isn’t enough support to block funds. Diplomats are watching the Commission’s moves closely.
“It's not beyond them to find a fudge, but at the moment it's hard to see how they could unless Hungary concedes on something,” said an EU diplomat. "This needs to be seen as credible," they added, referring to the Commission. "I don't envy them."
Meanwhile, pressure is mounting from the European Parliament and civil society, which don’t want the Commission to go for what they see as appeasement politics. Transparency International and other anti-corruption NGOs this week wrote to Commissioners to ask them to delay the approval of Hungary’s plan “until concrete measures are put in place” to address “serious risks of corruption.”
The Parliament will hold a plenary debate on the issue on Wednesday at the request of the liberal Renew Europe group.
“The Commission has some leverage to force Orbán to fix Hungary’s most egregious corruption problem," said Dacian Cioloş, president of Renew Europe. "It must use it. Now.”