After long resistance, Hungary’s government has promised reforms to the judiciary and public procurement system. It is questionable whether that will be enough to avoid losing EU funds.
Will Hungary still get its billions from the EU’s Corona reconstruction fund, which have been blocked for more than a year? And will Hungary’s government avoid the embarrassment of being the first member state to fall over its share of the cake from the Union budget by virtue of the new conditionality mechanism to prevent abuse of EU funding? Both of these questions will be answered in the coming weeks. At stake are the weal and woe of the Hungarian economy, which according to the European Commission’s forecast will show an inflation rate of 11.8 percent this year, while the forint has suffered the strongest depreciation of any currency in Central and Eastern Europe for months. Without the billions from Brussels, Hungary will almost certainly plunge into an even deeper recession than Europe as a whole is already threatened with.
Heavy corruption in Orbánland
On Monday, the European Commission received the Hungarian government’s long-delayed written response to its rule of law demands. As a reminder: Since the beginning of this year, the so-called conditionality mechanism has been in force, which for the first time allows the Commission to recommend that the EU finance ministers stop paying funds from the Union budget to a member state if there is legal control of the correct handling of these funds funds is not guaranteed. According to the Commission, this is the case in Hungary, there is serious systemic corruption in the award of public contracts (which are largely paid for with EU funds), of which, as has been reported several times, friends, followers and above all Prime Minister Viktor’s son-in-law Orbán have been benefiting for years.
That is why the Commission has initiated the procedure under this conditionality mechanism for the first time. In the extreme case, Hungary runs the risk of no longer having access to its share of around 21.7 billion euros in the budget framework for the years 2021 to 2027. While it is unlikely that the Commission would propose to block this entire amount. But even part of this would be an alarm signal for international investors, who are already increasingly withdrawing capital from Hungary (which also helps explain the forint’s collapse).