EC Proposes Suspension of Hungary's EU Funding Over RoL Concerns

The proposal was made in the framework of a conditionality mechanism procedure the EC launched against Hungary in the spring over issues the EU's executive body said may breach the rule of law and affect the EU budget.

The council has one month to decide whether to adopt the measures, by qualified majority, although the period could be extended for up to two more months in exceptional circumstances.

The EC acknowledged an "intensive dialogue" with Hungarian authorities in the past months resulting in a range of remedial measures to address the concerns it aired. Those measures could address the issues at hand "in principle", "if they are correctly detailed in relevant laws and rules, and implemented accordingly", the EC said, but added that "a risk for the budget remains at this stage".

The EC proposed suspending 65% of commitments for three of Hungary's cohesion policy operative programs as well as a prohibition on entering into legal commitments with public interest trusts for programs implemented in direct and indirect management.

Commissioner for Budget and Administration Johannes Hahn said the proposed suspension amounts to an estimated EUR 7.5 billion, over one-third of Hungary's cohesion funding. He added that the proposed measures take into account the remedial measures Hungary has submitted.

He said the EC will now "monitor the situation", adding that Hungary has committed to fully inform the EC about the implementation of the remedial measures by November 19.

Hahn noted that Hungary has taken measures to establish an independent Integrity Authority and an Anti-Corruption Task Force with the involvement of specialized NGOs, modify the criminal code to allow judicial review of prosecutorial decisions, make regular use of the EC's data mining and risk scoring tool Arachne for disclosing recipients of EU funding, and make changes to the public procurement act to clarify rules applying to public interest trusts.

At a press briefing on Saturday, Gergely Gulyás, the head of the Prime Minister's Office, said the government had approved the EC's recommendations regarding its concerns or reached compromises "reassuring to both sides". There remain "no unresolved issues", he added.

Bills implementing the recommendations will be submitted to lawmakers on Monday and Friday, allowing legislation to come into force in November, paving the way for the end of the conditionality procedure, he said.

At a press conference on Sunday, after the EC proposal was announced, Tibor Navracsics, Hungary's minister for regional development, said the EC's decision marks "a step forward" and "paves the way for a quick conclusion" to talks on the country's Recovery and Resilience Facility (RRF) and cohesion funding.

Those talks could be closed by year-end, he added.

He expressed the government's firm position on fulfilling the commitments it has made in the course of the procedure and suggested the proposed sanctions would not be approved by the Council.

Navracsics said the EC's decision on Sunday brought to close several months of "intensive conditionality procedure negotiations". Talks will continue on the implementation of steps Hungary is taking, but no new measures will be required, he added.

He confirmed that bills will be tabled on Monday and Friday.

He put the establishment of the Integrity Authority among the most important of the 17 commitments the government made. The body, led by independent experts picked in an open application process, could start operating in the second half of November, he added.

The Anti-Corruption Task Force will operate with an equal number of delegates from the government and NGOs, he said.

The scope of rules on officials' declaration of assets will be expanded, and the declarations will require greater detail, he added.

Conflict of interest rules will become stronger with regard to the management of public interest trusts, and judicial review will be allowed of prosecutorial decisions in cases involving suspected criminal activity related to management of public assets, he said.

Navracsics said he would next meet with Commissioner Hahn on Wednesday.