European Commission President Ursula von der Leyen announced, on Friday 29 May, that she had reached an agreement with Hungary’s new Prime Minister, Péter Magyar, on “an architecture” of reforms and investments to be carried out by the end of August in order to be able to release more than €16 billion in European funds that had been frozen under the previous ‘Orbán’ government.
Ms von der Leyen welcomed “the strong winds of change” blowing through Hungary since Mr Magyar’s victory in the parliamentary elections of 12 April. “Your government is moving with speed and determination to deliver on the promises you made to the Hungarian people: kickstart economic recovery, fight corruption, and restore the Rule of law. And, in a very short time, we already have concrete progress to share”, she said after a meeting in Brussels with the new Hungarian prime minister.
“We fought for every cent!”, Mr Magyar insisted, referring to negotiations that had taken place the previous night and continued until that very morning. He hailed “a historic breakthrough” that will make it possible to unfreeze funds blocked for “ideological” reasons because of the previous government. The latter “lied to Hungarians” by claiming that the EU institutions did not want to release the funds because the two sides disagreed over “the war in Ukraine and respect for fundamental rights” in Hungary, he said, convinced that “the only reason” for the blockage was in fact “corruption” involving former Hungarian political leaders.
The Prime Minister indicated that Hungarian ministers who have lied in their declarations of assets will now face prosecution.
Both Ms von der Leyen and Mr Magyar stressed that the path outlined for releasing the funds is due solely to the required measures and is - in no way - linked to Hungarian approval for the opening of EU-Ukraine accession negotiations.
On this point, the Hungarian leader said that discussions are under way with the Ukrainian authorities in order to obtain “guarantees so that the 100,000 Hungarians living in Ukraine can continue to use their language”. That is a human right, he stressed, saying he was ready to travel to the Ukrainian region where the Hungarian minority lives in order to meet Ukrainian President Volodymyr Zelensky.
Revised post-Covid-19 recovery plan expected at start of June. The first step for the Hungarian authorities is to submit, by the end of next week, a revision of the Hungarian post-Covid-19 recovery plan, which the Commission is expected to validate and the EU Council to adopt in July. This new plan will incorporate all reforms and investments that can still be carried out by the end of August, the deadline for the European recovery plan Next Generation EU.
It will no longer include the pension reform promised by the former ‘Orbán’ government, a European official said.
In line with requirements already set out at the end of 2022 (see EUROPE 13082/2), the European allocation under the Hungarian recovery plan will be released only if the ‘Magyar’ government first implements ‘super milestones’. Implementation of these preliminary measures - concerning respect for the Rule of law and fundamental rights, and judicial reform - will also pave the way for the release of European funds under cohesion policy and compliance with fundamental rights.
The list in the plan initially approved under the ‘Orbán’ government included 27 super milestones It could be reduced, notably because the ‘Magyar’ government committed to initiatives and reforms that were not initially planned. For example, Hungary officially requested on Friday to join the European Public Prosecutor’s Office. It has also committed to reforming its public procurement legislation.
In addition, “phased-out” in time will be the “structures that presented a high risk of state capture, [namely] the public interest trusts, that covered increasingly large parts of the Hungarian economy”, Ms von der Leyen said with satisfaction.
Such an initiative will make it possible to better protect the EU’s financial interests, the Commission is convinced. According to a European official, an additional deadline, up until summer 2027, will nevertheless be granted to the trusts that manage hospitals.
In concrete terms, the package of European funds that could be released is made up as follows:
(1) €10 billion allocated to the Hungarian post-Covid-19 recovery plan.
At the end of 2022, the approved allocation was €10.4 billion (€6.5 billion in grants and €3.9 billion in loans). The agreement provides for the possible release of the entire ‘grants’ component and up to €3.5 billion in loans.
As regards the ‘grants’ component, investments from the first plan amounting to €2.6 billion will be incorporated into the revised Hungarian plan, along with €1.1 billion in other investments already financed by the Hungarian budget. Added to this will be a new scheme of investments in energy infrastructure (€1.5 billion), while, according to Mr Magyar, “Hungarians pay the highest electricity price in Europe”. Moreover, reformed to increase transparency, the national development bank will benefit from a capital injection of €1.2 billion.
The loans will be used for a capital injection of €1.8 billion into a suburban rail transport company, to recapitalise the National Development Bank (€700 million), and to finance projects linked to the deployment of the IRIS² satellite constellation (€500 million) and gigafactories in the AI sector (€500 million).
(2) €4.2 billion in cohesion funds currently blocked under the ‘Rule of law conditionality’ regulation.
The release of these funds is linked to compliance with the indispensable preliminary measures that will be incorporated into the revised recovery plan.
(3) €2.2 billion in European funds frozen because of breaches of fundamental rights.
On this point, the unfreezing of European funds is linked to reforms of public interest trusts, as well as to the adoption of rules making it possible to combat conflicts of interest more effectively. Other initiatives will have to be taken in order to comply with the Court’s judgment, which held that the Hungarian child protection law stigmatises LGBTIQ+ people (see EUROPE 13853/24). On this point, “more steps will have to be taken – but we are on a good direction of travel”, Ms von der Leyen said.
The Commission President also announced that Hungarian students will once again be able, starting from the next academic year, to take part in the Erasmus+ student mobility programme. (Original version in French by Mathieu Bion)