EU Commission moves to suspend $7.5B EU funds for Hungary

BRUSSELS

In a first, the European Commission proposed on Sunday to suspend some €7.5 billion ($7.5 billion) in EU funds designated to Hungary over corruption and breaches of rule of law.

“The (European) Commission proposes a suspension of 65% of the commitments for three operational programs under cohesion policy, amounting to an estimated amount of €7.5 billion which is over 1/3 of Hungary's cohesion envelope,” EU Commissioner for Budget and Administration Johannes Hahn told reporters at a news conference.

The announcement comes three days after the European parliament declared that Hungary is no longer a full democracy.

Hahn spoke after a meeting of EU commissioners that was exceptionally held on Sunday because of next week’s busy international agenda.

The 27-member bloc took the measures in the framework of its conditionality mechanism meant to protect the financial interest of the EU budget from democratic backslides.

Hahn said the European Commission acknowledged the draft measures and legislations that Budapest proposed since the EU executive body triggered the mechanism in April, but they have to be first adopted and implemented.

He asserted that the European Commission “cannot conclude that the EU budget is sufficiently protected” at the moment.

He explained that there are “systematic irregularities and deficiencies” in public procurement,” insufficiencies “in the effective pursuit of investigations and prosecutions” when addressing conflict of interest concerns regarding public, and shortcomings in the country’s anti-corruption framework.

Therefore, the EU executive body recommends suspending 65% of the commitments for the operational programs in environmental protection, transport and urban development of the EU’s cohesion policy, the commissioner said.

The Council of the European Union, representing EU member states, now has one month with a possible extension of further 60 days to decide on the proposal.

In the meantime, the European Commission will monitor the developments in Hungary and publish its assessment by Nov. 19.

The proposed cut amounts to around 5% of Hungary’s GDP.

The regulation on the conditionality mechanism was approved in 2020 in parallel with the adoption of the 2021-2027 budget.

Hungary and Poland, who have been in a long-standing conflict with EU institutions over democratic backsliding, had challenged the act at the European Court of Justice, but it was dismissed in February.

The court said “sound financial management of the EU's budget" could be seriously compromised by breaches of rule of law.