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EC concerns raise threat of EU funds freeze

History

Due to the possible uncovering of serious deficiencies in the Hungarian institutional system of distributing EU funds, the European Commission could suspend all transfers to the country, Hungarian online economic news portal portfolio.hu reported today, citing unnamed Brussels-based sources.

According to portfolio.hu, EC experts are presently compiling a report on the management and control mechanisms of Hungaryʼs EU subsidy distribution system for the period 2014-2020, which will highlight specific problem areas identified by Brussels.

The report notes that the final content of the ECʼs report is key because if serious problems are identified, then payments of all structural and cohesion funds to Hungary could be automatically suspended under EC rules. Portfolio.hu notes that this - together with co-funding by the Hungarian state - affects a total of some HUF 9,000 billion, equivalent to almost one quarter of Hungaryʼs GDP in 2015.

Consultations between the Hungarian government and the EC are currently underway, so that this negative scenario can yet be avoided, notes the report. However, if the funds were indeed to be frozen due to deficiencies, two other possible scenarios could arise, according to the online daily, neither offering a fast solution - although for the time being Hungarian public finances would be able to cover any significant temporary burdens. 

Portfolio.hu’s sources suggest that the key concern of the EC is the suspected biased approach of Hungary’s Managing Authority in awarding EU funding for specific projects. “According to our information, the Commission found several points in the Hungarian regulations that raise the possibility of infringement of this principle,” portfolio.hu writes. “This is what is currently under investigation and this is the subject of the ongoing correspondence between the parties,” the news portal added.

The Hungarian government is yet to comment on portfolio.huʼs information, according to reports.

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