Brussels, 12/01/2012 (Agence Europe) - The European Commission does not rule out freezing cohesion funds to which Hungary is entitled if that country does not stick to its budgetary commitments. The next Ecofin Council, on 24 January, will be a determining stage in the decision to be taken.
The payment of the last cohesion fund instalments due to Hungary was seriously questioned by Olli Rehn, the European commissioner for economic and monetary policy. He was speaking on Wednesday 11 January as he took stock of excessive deficit procedures opened against five member states that have taken the commitment to bring their deficit back below the 3% mark in 2012 (Belgium, Cyprus, Malta, Poland and Hungary) (see EUROPE 10529)). The situation in Hungary is said to have grown more uncertain since internal policies set in place discourage a lasting reduction in the country's budgetary deficit. As a consequence, the Commission recommends that the Ecofin Council on Tuesday 24 January acknowledge the fact that Budapest has not done what it should to take the situation in hand. If the Council does go down this road, Hungary will find itself exposed to sanctions, and will not receive cohesion fund support.
Hungary has already received €8.6 billion from cohesion funds for the programming period 2007-2013. The allocation will be made in several instalments over the next seven years, to be shared out between the various projects meeting cohesion criteria. At this stage, it is difficult to estimate how much of the amount is still to be paid to Hungary, but it is the remaining amount that is at stake if the Commission receives the go-ahead of the Ecofin Council to apply sanctions.
If sanctions are applied, European Commissioner Olli Rehn and Regional Policy Commissioner Johannes Hahn will rapidly work together, after 24 January, to propose arrangements for suspending the payment of cohesion funds, although the final decision will still be up to the Council. The setting aside of Commission commitments could be total or partial, but “should remain proportionate”, Commission officials intimate.
The measure would not take effect until January 2013, the last year in the programming period, which means that sanctions would relate to an even smaller share of the allocations. Although at this stage sanctions are still hypothetical - as Hungary can still turn things round by taking measures to improve its fiscal situation - the sanctions could be rapidly set in place, taking only a matter of weeks, as one Commission source points out.
The freeze in cohesion fund payments in the event of breach of the revised stability pact (“six pack”) is unprecedented. It would therefore be a historic measure if Hungary were targeted in the near future. As Hungary is not part of the eurozone, it is not subject to the same punitive regulations as those set out in the “six pack”. Suspension of the cohesion funds is therefore an alternative. However, it is an alternative that could prove just as damaging for a country whose economy is already suffering. (MD/transl.jl)