The European Commission may soon decide to propose that the Council of the European Union should suspend the payment of certain EU funds to Hungary because of its violation of the rule of law.
This would be the first concrete step in implementing the provisions of the regulation to suspend EU funding in case of violations of the rule of law (see EUROPE 13005/10).
On 20 July, the College of Commissioners discussed the next steps in the procedure against Hungary under Regulation 2020/2092 on a general regime of conditionality for the protection of the Union budget.
The College had mandated Budget Commissioner Johannes Hahn to write to the Hungarian authorities and inform them of the measures the Commission intended to propose to the EU Council in case the corrective measures taken by Hungary were not adequate.
Hungary responded to the Commission’s letter at the end of August with reform proposals to be implemented between September and November. These include anti-corruption measures, such as the creation of an independent authority and stricter monitoring of public procurement.
Sword of Damocles. The Commission must decide by 21 September whether it will propose to put in place measures to freeze funds under this regulation.
The Commission is expected to propose such measures to suspend EU funding to Hungary, but they would only be applied if Hungary has not carried out reforms, an EU source said. This would be a sword of Damocles, as it were: the Commission would make an assessment in November of the reforms undertaken by Viktor Orbán’s government.
“We have until 21 September to determine the next steps”, said Balazs Ujvari, a Commission spokesman, on Monday 12 September. “In its latest letter, Hungary proposed several corrective measures and we are studying them in detail,” he added.
If the Commission proposes restrictive measures, the EU Council then has one month to adopt, by a qualified majority of Member States, a decision containing the measures to protect the Union budget. In exceptional circumstances, the deadline for the adoption of the enforcement decision may be extended by a maximum of two additional months.
70% of the structural funding? In his July letter, Commissioner Hahn reportedly threatened the Hungarian government with the suspension of 70% of EU funding from several cohesion policy programmes.
“Several billion euros would be at stake”, according to some sources.
MEP Daniel Freund (Greens/EFA, German) estimates that the amount at stake corresponds to one fifth of the total EU funding granted to Budapest. However, he does not understand why the Commission wants to “continue to pay the full amount of agricultural subsidies” from the EU to Hungary.
Petri Sarvamaa (EPP, Finnish), the European Parliament rapporteur on the text, told EUROPE on Monday: "We have long called for the Commission to act. If such a decision is finally taken, it would only be a first sign that the teeth we have given to the Rule of law conditionality mechanism are finally used. Mr Orban has to understand that the EU will not stand aside when law is not correctly applied in relation to EU funding".
He added that Hungary had promised to improve "the state of its Rule of law, but without success". He therefore believes that the Commission should not let Hungary get away with it. "We must freeze a sufficient proportion of Hungarian funds so that we are finally beginning to see results", Mr Sarvamaa concluded.
The Hungarian authorities have recently announced their intention to quickly set up an independent authority to fight corruption, in the hope of allaying the Commission’s concerns. The new body, which is to be set up by 21 November, will be responsible for preventing, detecting and remedying irregularities in the management of EU money.
In parallel, an anti-corruption task force, including members of the government, will be set up by 1 December.
At the same time, Hungary is trying to meet the conditions to get the green light from the Commission for its national recovery plan under the Next Generation EU Recovery Plan (see EUROPE 12995/23). It could lose 70% of the €5.8 billion allocated if an agreement is not reached by the end of 2022. (Original version in French by Lionel Changeur)