The European Commission allowed on Wednesday the release of €10 billion in cohesion funds for Hungary, almost a year after the money was frozen over the country’s failure to address persistent rule-of-law concerns.
This means the Hungarian government will be able to submit reimbursement requests of up to €10.2 billion to finance development projects across the country.
The decision comes in an increasingly fraught political environment, as Prime Minister Viktor Orbán ratchets up his opposition campaign to prevent the opening of accession negotiations with Ukraine, block a €50-billion special fund to sustain the war-torn nation’s budget and halt further provisions of military aid.
All three high-stakes issues will be discussed later this week during a two-day summit of EU leaders. Unanimity is required to move them forward.
The convergence of events – the release of frozen cash and Orbán’s threatening veto – has fuelled speculation that Brussels is engaging in horse-trading to appease Budapest, something that the European Commission has strenuously denied.
The impression was further reinforced on Tuesday when the prime minister’s political director openly admitted in an interview that a quid-pro-quo was possible.
“Hungary’s EU funding and Ukraine’s financing are two separate issues,” the aide told Bloomberg. “But if the EU insists that Ukraine’s financing should come from an amended EU budget, then the two issues become linked.”
Rejecting political considerations, the Commission insists the decision is simply a procedural response to a judicial reform that Hungary adopted in May to strengthen judicial independence and mitigate political interference in the courts.
“We have responsibilities to discharge. We discharge them according to the rules that govern the budget,” a Commission spokesperson said. “The statements that are made by people external to this institution do not in any way engage us, commit us to anything.”
The overhaul was specifically designed to satisfy the conditions, or “super milestones,” that the executive had imposed to unblock the cash, including measures to strengthen the National Judicial Council, a self-governing supervisory board.
However, according to a joint analysis by Amnesty International and the Hungarian Helsinki Committee, the reform falls short of fixing the shortcomings highlighted by Brussels. “The solutions adopted, including their method of adoption, are makeshift and breach relevant laws and bylaws, as well as rule of law principles,” the analysis said.
In a joint letter, the four main groups of the European Parliament expressed a similarly sceptical view, asking the Commission to wait at least until the elections to the National Judicial Council conclude on 10 January before issuing a positive assessment.
“It is the duty of the Commission to continue to check that none of the reforms are reversed or weakened afterward by an overnight decree or conflicting legislation,” the leaders of the EPP, S&D, Renew Europe and Greens said on Wednesday.
In total, Hungary needs to meet 27 “super milestones,” as well as four “horizontal enabling conditions,” which, in some cases, overlap with each other.
The reform, though, only serves to fulfill the milestones related to the judiciary, meaning the country will still be left without €11.7 billion in cohesion funds, including the €6.3 billion that was paralysed under the so-called “conditionality mechanism” over concerns related to public procurement and conflict of interests that pose a risk to the EU budget.
The rest of the money pertains to thematic areas such as the right to academic freedom (€2 billion) and the protection of LGBTQ+ rights (€600 million), among others.
In addition to this, Hungary will still be unable to access its COVID-19 recovery and resilience plan, which is worth €10.4 billion in grants and low-interest loans. Only €920 million have been paid out in “pre-financing” to provide liquidity for energy projects.
“Given that the super milestones have not been fully complied with, no payment request can be paid out for now,” the Commission said about the recovery plan.
In his interview with Bloomberg, Orbán’s political director said the whole pot of money – over €30 billion, including the €10 billion unfrozen on Wednesday – should be handed over to the country.