The European Commission has put the Orbán government on a minefield

By RockedBuzz 14 Min Read

Although the deadline at the end of March is only characterized as a soft deadline, until the government led by Viktor Orbán not only has to prepare a judicial reform that is acceptable to the European Commission, but also has to be accepted by the parliament, time is pressing for financial reasons for the Hungarian government – so several independent commission sources described the ongoing negotiations on EU funds to the Portfolio.

As is well known, the European Commission suspended the allocation of approximately 22 billion euros of cohesion funds to Hungary last Christmas, referring to the horizontal entitlement items. In the public discourse, this is often confused with the rule of law conditionality procedure, but in fact it is a question of two separate items, as it only affects an item of around 6.3 billion euros from cohesion funds (the exact procedure will be clarified later – ed.).

The horizontal authorization items are the criteria that underpin the payments of the entire EU seven-year budget, which guarantee the security of the use of the multi-annual financial framework. For these, the fulfillment of judicial reforms is a basic requirement, and it is precisely for these that the negotiations have dragged on, the dynamics of which have been called problematic by several people who are familiar with the case, and the actions of the Hungarian government are partly criticized.

The procedure has already dragged on so much that major banks and investors are already informally asking whether the Hungarian budget can count on resources this year at all.

– said one of our sources, but several people confirmed that such inquiries often come from the financial world.

As explained, there are basically two reasons for the slow process:

  • one is the time-consuming communication of the traditionally slower bureaucratic system,
  • the other is that despite the clearly stated demands of the European Commission, to which the Hungarian delegations respond positively during personal negotiations, the offers from the government often do not meet them.

However, according to our sources, the European Commission is more specific compared to the traditional negotiations in Brussels: while in the regular procedure they do not make precise proposals, but only formulate recommendations and goals, but leave the legal wording to the member states. However, now “the wording is more direct”.

However, now, despite the more direct communication, the Hungarian government often submits proposals for amendments to the law that differ from these, and this is very time-consuming – said one of them, who, in light of this, expects that the cohesion funds are items that are not blocked by the rule of law procedure (that is, the suspended 6 .3 billion) can be transferred in the second half of August at the earliest.

Although for transfers – if the government tolerates the lack of EU money – the deadline of March 31 is more important for the Erasmus and Horizon programs. This is a prohibition that is part of the rule of law procedure, but it is point 2 of the suspension decision of the European Council, which prohibits EU organizations from making commitments with universities and research workshops belonging to public interest trust foundations.

There is no financial source at risk here, because the financing of the Erasmus program is direct financing, that is, Brussels refers to the contracting parties.

The problem is that the contract deadlines for exchange student and research support programs expire in July. Thus, until then, the European Commission must come to an agreement with the rule of law reform, as well as with the conflict of interest and transparency regulations of the foundations.

The deadlines are important because the EC has 30 days to prepare the recommendation, and then the European Council has to vote on it, which can normally analyze the Hungarian commitments for one month, but this can also be extended, which is very likely – said one of our Council sources, which the commission officials who spoke to us also thought it likely.

A member of the committee who is familiar with the matter also stated that “the Swedish presidency is aware of what is at stake”, and according to the current situation, the July deadline can still be met in the Erasmus case.

In the meantime, the government has sent its recommendations to Brussels regarding the conflict of interest rules in the case of public interest trust foundations. Here, the Commission has not yet received an official evaluation, nor has an answer been sent to the Orbán government, but according to our sources, there are still gaps and points of contention in the proposal. As Tibor Navracsics, Minister of Territorial Development and the head of the EU negotiations, said earlier, the ministers and state secretaries not only resigned from the board of trustees, but according to the law, they will also have conflicts of interest.

They don’t ask for the swap attack

However, according to our information in Brussels, this may not solve the problem by itself.

this week it was possible to hear about the appointment of several members of the board of trustees who are identifiable with business circles close to the government, or who themselves have already appeared in public procurement cases

– said one of them, who refused to name who he was thinking of. However, academic circles also confirmed to Portfolio that there have been dubious appointments in the past period.

According to our more reserved sources in Brussels, there are many political and state positions in the extensive Hungarian institutional system, to which conflict of interest restrictions should probably be extended. Among other things, heads of departments in ministries, or even heads of independent audit offices on paper, would be banned, but according to stricter committee positions, members of parliament should also be excluded.

In addition, it was also suggested that a prohibition period would be introduced, since this week several government commissioners resigned from their government positions in the board of trustees, which is problematic due to political bias. So if someone immediately transfers to a board of trustees, it again raises concerns about conflicts of interest.

The Hungarian government is in a minefield because several members of the European Commission are not willing to consider judicial reform and public interest foundations separately

– said a Brussels diplomat. A person with insight into another case clarified this to the extent that “the Commission’s priority is to settle the two cases at the same time”, but he does not consider it entirely impossible that there should still be a separation.

Budget Commissioner Johannes Hahn, on the other hand, says so publicly he told Free Europe, that the entire package needs to be handled together. Portfolio already learned about this from several sources in January, but this was the first time a committee member expressed it openly, which shows that this may still be the dominant position.

Three birds with one stone

On the whole, however, the government is lucky in that the judicial reforms, which are considered a horizontal empowerment clause, are also part of the rule of law procedure and are also necessary for drawing the resources of the recovery fund, so if they have this, they can technically solve a problem at the same time.

There are also voices within the Council who are dissatisfied with the activities of the Hungarian government: a perfect law reform is needed, because there are plenty of critics of the Orbán government. The Dutch, the Germans and the Baltics are also pro-austerity

– said our source familiar with the relations of the council that brings together the member states, according to whom there is “less tolerance” towards the cabinet headed by Viktor Orbán precisely because of the Hungarian government’s series of vetoes concerning sanctions and other EU reforms. According to his claim, the fact that the Council does not want to confront the European Commission speaks for the Hungarian government.

In the European Commission itself, Hungary is being watched more than usual. According to our unanimous reports, the logic behind this is that the Orbán government went to the wall in the previous 10 years as well, meeting minimum expectations if possible, but the steps of the past period are not evaluated as a positive development either:

the attempt to demand a ransom in the case of the Swedish and Finnish NATO accession, as well as the “disciplinary” legislation against the Hungarian Medical Chamber, which lasted less than two days, also “have a bad optics in Brussels.

The legislation on the abolition of mandatory chamber membership and the seizure of medical ethical procedures from the MOK was adopted by the Parliament this week, with the proposal presented on Monday and voted on on Tuesday. The Commission also confirmed to the Eurologist that they are monitoring the legislation adopted without social consultation.

So when will the money come?

So it is still difficult to answer the 22.5 billion dollar question: it is not known exactly when the EU funds will arrive. According to Tibor Navracsics, in the summer, according to our committee sources, autumn references are more likely.

However, the procedure is no less complicated than the other items, as described above. There are elements of Hungarian EU funds that are frozen on other legal grounds. For the full frame, the system of requirements is that

  1. first, judicial reforms can open the main barrier, the horizontal conditionality system, which blocks 21.5 billion euros of cohesion funds,
  2. the 17 commitments to be fulfilled in the rule of law procedure free up an additional 6.3 billion euros in cohesion support,
  3. in the case of the recovery fund, the full implementation of the 27 super milestones can start with 5.8 billion euros (in installments) in the budget,
  4. while there are pre-authorization items that “only” block around 2.6 billion euros, these require the amendment of the Child Protection Act, the provision of academic freedom (which is also related to the issue of public interest trust foundations behind universities), and in the field of asylum, a reform from the government in accordance with the charter of fundamental rights.

The diagram below shows the process for each item:

resources are coming
The size and conditions of access to EU funds.

When it will all end depends even on EU infighting. As indicated by our sources – and it can be seen from the public statements made in the media – Vice President Vera Jourová and Budget Commissioners Johannes Hahn, for example, would only allow the transfer of Hungarian funds to begin according to the strictest possible rules. And in some cases, many are calling for follow-up systems to take into account the practical application of laws and to build an emergency brake system into payments.

Thus, the debates within the European Commission may also be important in the next period, even if a set of resources has already arrived in the Hungarian budget. The OECD has also been participating in the evaluation process since February.

Cover image source: Getty Images.

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