As expected, Hungary is the first to face this new power of the EU to withhold budgetary funds to member states accused of undermining the rule of law.

EU Triggers Mechanism to Strip Hungary of Billions Worth of Budget Funds

Hungary’s Prime Minister Viktor Orban at the start of a virtual summit of NATO Heads of State and Government on the security situation in Ukraine at the NATO HQ in Brussels, Belgium, 25 February 2022. Photo: EPA-EFE/STEPHANIE LECOCQ.

Just two days after Prime Minister Viktor Orban won the Hungarian parliamentary election by a landslide, European Commission President Ursula von der Leyen announced that a new mechanism designed to withhold EU budgetary funds from member states accused of undermining the rule of law would be triggered against Hungary.

The Commission informed the Hungarian government in a letter of the move, von der Leyen said on Tuesday, after reviewing the government’s responses to a letter the EU executive sent last November about its rule-of-law concerns.

Earlier in the day, the EU commissioner for budgetary issues, Johannes Hahn, indicated to an Austrian newspaper that the EU Commission intended to speed up its actions against Hungary.

The process could lead to billions of euros of EU funds destined for Hungary being withheld, but it will take months of correspondence between Brussels and the Hungarian government, and a qualified majority vote in the European Council.

Insiders say any suspension of funds  – if decided – could not happen before the end of the year. The EU Commission has to prove precise cases where rule-of-law deficiencies directly led to EU budget funds being misused in Hungary.

However, the EU Commission’s decision is likely to strip Hungary of some short-term funding it is due. The country’s slice of the coronavirus recovery plan has still not been approved by Brussels, and it seems the 7.2 billion euros in grants or the 9 billion euros in loans Orban recently requested out of the 750-billion-euro fund won’t be distributed for the foreseeable future.

With Orban splurging around 4.5 billion euros during the election campaign on vote-pleasing initiatives and the economy facing rampant inflation, skyrocketing energy prices and a deterioration of the national currency, Hungary is desperately in need of the EU cash.

It is likely, therefore, that the EU’s rule-of-law punishment will strengthen Orban‘s anti-EU course, especially after the massive political backing the prime minister feels he was given by the electorate at Sunday’s election. Gergely Gulyas, the minister heading the prime minister’s office, said Brussels is making a mistake when it “follows leftist parties’ rhetoric”.

“The government has just won the election with an unprecedented majority. Brussels has to accept the democratic rules,” he said, urging the EU Commission to return to dialogue with Budapest.

Experts underline that the EU Commission is also entering uncharted waters: the rule-of-law mechanism was only finally approved in February after the Court of Justice of the European Union (ECJ) ruled it was constitutional.

Despite pressure from the European Parliament to take action immediately, the EU Commission was reluctant to press ahead before Hungary’s April 3 election in order to avoid allegations about it interfering in the campaign.

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