Brussels Releases €10 Billion in Frozen EU Funds for Hungary Amid Orbán's Threats

On Wednesday, the European Commission gave the green light for the release of €10 billion in cohesion funds for Hungary, nearly a year after the funds were initially frozen due to concerns about the country's ongoing issues related to the rule of law.

This approval implies that the Hungarian government can now submit reimbursement requests for up to €10.2 billion to support development projects throughout the country.

This development unfolds in a tense political climate, with Prime Minister Viktor Orbán intensifying his opposition campaign. He aims to thwart the initiation of accession negotiations with Ukraine, block a €50-billion special fund intended to support the war-torn nation's budget, and put a halt to further provisions of military aid.

These critical matters will be on the agenda for discussion during a two-day summit of EU leaders later this week. Achieving unanimity is essential to move forward on these issues.

The unfolding events, marked by the release of frozen funds and Prime Minister Orbán's threat of a veto, have sparked speculation about potential horse-trading between Brussels and Budapest. However, the European Commission vehemently denies engaging in such negotiations.

This speculation gained traction on Tuesday when the prime minister's political director openly acknowledged in an interview that a quid-pro-quo arrangement was possible. The aide told Bloomberg, "Hungary's EU funding and Ukraine’s financing are two separate issues. But if the EU insists that Ukraine's financing should come from an amended EU budget, then the two issues become linked."

Despite these political considerations, the Commission maintains that its decision is solely a procedural response to Hungary's adoption of judicial reforms in May. These reforms were aimed at strengthening judicial independence and reducing political interference in the courts.

"We have responsibilities to discharge. We discharge them according to the rules that govern the budget," stated a Commission spokesperson. "The statements that are made by people external to this institution do not in any way engage us, commit us to anything."

The comprehensive overhaul was specifically crafted to meet the conditions, or "super milestones," set by the executive to unlock the funds. This included measures to enhance the National Judicial Council, a self-governing supervisory board.

However, a joint analysis by Amnesty International and the Hungarian Helsinki Committee contends that the reform falls short of addressing the deficiencies identified by Brussels. The analysis states, "The solutions adopted, including their method of adoption, are makeshift and breach relevant laws and bylaws, as well as rule of law principles."

In a joint letter, the four main groups of the European Parliament shared a similarly skeptical perspective. They urged the Commission to withhold a positive assessment until at least after the elections to the National Judicial Council conclude on January 10.

On Wednesday, the leaders of the EPP, S&D, Renew Europe, and Greens emphasized that it is the Commission's responsibility to ensure that none of the reforms are reversed or weakened by subsequent decrees or conflicting legislation.

Hungary faces the task of meeting 27 "super milestones" and four "horizontal enabling conditions," some of which overlap. The recent reform, however, only addresses the milestones related to the judiciary. Consequently, Hungary remains without €11.7 billion in cohesion funds, including the €6.3 billion frozen under the "conditionality mechanism" due to concerns about public procurement and conflicts of interest jeopardizing the EU budget.

The remaining funds are tied to specific themes, such as the right to academic freedom (€2 billion) and the protection of LGBTQ+ rights (€600 million), among others.

In addition to the challenges with cohesion funds, Hungary remains unable to access its COVID-19 recovery and resilience plan, valued at €10.4 billion in grants and low-interest loans. Only €920 million has been disbursed as "pre-financing" to support liquidity for energy projects.

The European Commission clarified that, due to the incomplete compliance with super milestones, no payment requests for the recovery plan can be processed at the moment.

In an interview with Bloomberg, Orbán's political director argued that the entire sum of money, exceeding €30 billion, including the recently unfrozen €10 billion, should be allocated to Hungary.