Hungary faces historic loss of EU funds over transparency issues
Hungary will lose CAD1.56 billion from EU funds under the conditionality mechanism, confirmed European Commission spokesperson Anna-Kaisa Itkonen.
Hungary will lose CAD 1.56 billion from EU funds under the conditionality mechanism. This marks the first instance in the EU's history, confirmed by European Commission spokesperson Anna-Kaisa Itkonen in an interview. These funds will be permanently lost, a consequence of the Hungarian government's inaction.
The decision to withhold the funds arises from Hungary not meeting the requirements set by the EU Council in December 2022. The Hungarian government failed to ensure transparency in the spending of EU funds, particularly in public procurement, and did not implement measures to prevent corruption. This scenario positions Hungary as the only country facing such significant restrictions from the EU due to rule of law issues.
The EU Council suspended CAD 9.4 billion, which constitutes 55% of the funds allocated to Hungary under the cohesion policy. Now, Budapest is losing the first tranche amounting to CAD 1.54 billion. These funds, corresponding to the commitments for 2022, will not be recoverable. The Hungarian government's failure to meet the EU funds' usage criteria resulted in the loss of this initial tranche. The conditionality mechanism, enacted against Budapest, aims to protect the EU's financial interests. Additionally, Hungary has also lost access to the National Recovery Plan funds, placing the country in a challenging financial situation.
The amount might increase
Hungary risks losing further funds if it does not implement the recommended remedial measures. By the end of 2025, they risk losing another tranche amounting to CAD 1.65 billion. Brussels holds Prime Minister Viktor Orban’s administration accountable for this predicament. Despite efforts by the Hungarian government, such as reforming public procurement laws, the European Commission remains concerned about transparency in fund expenditure.
As a result, Hungary continues to be the only country with its funds from both the cohesion policy and the National Recovery Plan still frozen. Brussels attributes this situation to Prime Minister Orban's administration.
Currently, Hungary is the only EU country unable to access funds from the European Recovery Plan. The value of Hungary's National Recovery Plan exceeds CAD 15 billion, out of which CAD 9.8 billion are grants, and CAD 5.9 billion are loans.
