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Govʼt rechannels EU funding for economic defense measures

The government decided at a cabinet meeting on Wednesday to rechannel European Union funding earmarked for economic development to measures that aim to shield the economy from the impact of the coronavirus pandemic, Finance Minister Mihaly Varga said, according to a report by Hungarian news agency MTI.

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Varga said HUF 310 billion in grant money and HUF 110 bln in 0% credit in the Economic Development and Innovation Operative Programme (GINOP) - a framework for paying out EU development funding - will be redirected to support the governmentʼs plan to shield against economic fallout from the pandemic.

The modification will allow monies from GINOP to be used for HUF 200 bln for payroll support at businesses where working hours have been cut as well as for HUF 30 bln for salary support for Hungarians in research and development, he added.

He said tenders for almost HUF 74 bln in funding to improve productivity and upgrade at technology at companies are being prepared.

A digital development program will start with a HUF 7 bln allocation, but that amount could be raised, he added.

The HUF 110 bln in 0% credit for working capital will be available to the businesses hit hardest by the crisis at the MFB Pont locations of the Hungarian Development Bank, Varga said.

In spite of the "extremely advanced state" of the GINOP, similar to the other operative programs for paying out EU funding, the government has freed up a significant amount of resources through replanning, he said. Changes to the HUF/EUR exchange rate in recent months have also increased the room for maneuver, he added.

Hungaryʼs government has been pre-financing EU-funded projects for years to avoid any backups at the end of funding periods, resulting in bigger cash flow-based budget deficits before transfers from Brussels arrive, MTI notes.