Hungary loses over €1 billion in EU funds amid tensions

Budapest (Brussels Morning Newspaper) – Hungary has officially lost access to over €1 billion in EU funds due to ongoing political tensions with Brussels regarding rule-of-law violations.

European Union, in 2022, started “conditionality” proceedings against Hungary, aiming to block disbursements because of alleged violations linked to public procurement as well as an absence of control and transparency. Budapest did launch reforms that permitted some funds to be cleared, but around 19 billion euros remain frozen. Under the standard formed in the EU’s conditionality law, “the first tranche of discontinued commitments”, which amounted to 1.04 billion euros, ended at the end of 2024 without the suspension being lifted, the EU Commission said.

Hungary’s loss, effective January 1, 2025, will be the first permanent loss of funding by an EU member state under the bloc’s conditionality mechanism. The €6.3 billion is a component of a bigger package that the EU had earlier frozen, citing a lack of transparency in spending and anti-corruption measures. 

The European Commission published its 5th Rule of Law Report in July 2024. The report stated that Hungary does not fulfil EU democratic standards, especially regarding issues that involve corruption, political financing, conflicts of interest, and the independence of media. The report still raised serious concerns about the efficiency of the anti-corruption mechanisms in Hungary and the domination of the media outlets by the government, which limits press freedom.

How will Hungary’s government respond to the EU ruling?

Hungary PM Viktor Orban has vowed to fight to safeguard money “that is ours”. “They frequently try to take the capital of Hungarians by a variety of means and a variety of ways,” he stated in December, threatening to reject the EU’s budget to pressure it into conceding. Hungarian officials, among whom is EU Affairs Minister János Bóka, described the ruling as politically motivated and vowed to appeal the judgment all the way up to a higher court. Another €1.1 billion might be lost if Hungary does not comply with EU requirements by the end of 2025.

Since Viktor Orban returned to power in 2010, the Hungarian government has been accused of consolidating power and allowing associates to accumulate wealth through corrupt practices. It is reported that the distribution of EU funds is often marred by inefficiency and corruption risks, especially in public procurement processes. Hungary ranks amongst the top in corruption amongst EU nations and, as far as the second consecutive year of this ranking, remains an on-going challenge.