EU Recommends Withholding Funds for Hungary for Concerns

EU Recommends Withholding Funds for Hungary for Concerns

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The European Union’s executive arm has proposed suspending 7.5 billion euros ($7.5 billion) from its budget earmarked for Hungary over allegations of corruption and fraud.

The European Commission proposed suspending the funding as part of its new power under its so-called conditionality mechanism, according to a statement on Sunday. The bloc’s member states still need to approve the penalty.

“The European Commission has today proposed budget protection measures to the Council under the conditionality regulation,” according to a statement on Sunday. “This is done to ensure the protection of the EU budget and the EU’s financial interests against violations of the principles of the rule of law in Hungary.”

Hungarian Prime Minister Viktor Orban has challenged the democratic foundations of the EU after an unprecedented consolidation of power that has seen him rewrite the constitution, reform electoral rules and expand his influence over the courts, media, culture and education. Under his leadership since 2010, Hungary has fallen in Transparency International’s Corruption Perceptions Index and now ranks lowest in the EU after Bulgaria.

Financial Interest

Without efforts to undermine the independence of the judiciary, the erosion of minority rights and the primacy of EU law, the Bloc has implemented a new mechanism to protect its financial interests against members accused of democratic backsliding. Hungary is the first country to be targeted although Poland, where the leadership has mimicked Orban’s policies, could be at risk of similar scrutiny in the future.

The weakening from the EU has affected Hungarian assets, and the euro has fallen by almost 10% this year. Investors cited the uncertain outlook for EU funds as contributing to a disproportionate sell-off.

In the past month he has offered to set up an anti-graft agency and amend laws including public procurement to ease the EU executive’s concerns.

EU governments must make the final decision within a month on cutting Hungary’s funding, with the possibility of extending the deadline by up to two months. A qualified majority of Member States is required for the Commission’s proposal to come into force.

Orban wasted no time in sending his officials to convince his counterparts to vote against funding cuts.

“The Hungarian government is ready to provide guarantees to ensure that the Hungarian people receive the funds they are entitled to,” Justice Minister Judit Varga wrote on Facebook on Thursday after a meeting in Paris with Garance Pineau, adviser to the President of France Emmanuel Macron for EU affairs. .

EU lawmakers said this week that the bloc’s executive had let problems in Hungary fester for far too long and that the lack of decisive action had “contributed to the breakdown of democracy” there.

“Leaving violations of governance unchecked undermines democratic institutions and ultimately affects human rights and the lives of everyone in the country where these violations are committed,” the European Parliament said in its resolution.

(Updates with the extent of the suspension in the first paragraph.)

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