The EU Commission wants to freeze 70 percent of the funds from three operational programmes under Cohesion policy to Hungary due to rule of law violations. In addition, no more money is to be paid to the so-called “Public Interest Foundations” in Hungary, which are de facto under the control of Prime Minister Viktor Orban and his allies. This proposal stems from a letter that Budget Commissioner Johannes Hahn sent to the Commission as early as 20 July 2022. According to rough estimates, the proposal would correspond to cuts of 20% of all EU payments to Hungary during the current financial framework. According to our information, the recommendations were adopted by the EU Commission and sent to the Hungarian government. The next step for the Commission in the so-called rule of law conditionality procedure would be to submit the proposal to the Council, which would have to decide on the freezing of funds by qualified majority. 

An independent legal opinion commissioned by the Green Group in the European Parliament had concluded in July 2022 that only a 100% suspension of EU payments to Hungary is an adequate measure in view of the violations of the rule of law in Hungary.

Daniel Freund, Green rapporteur on the rule of law conditionality mechanism in the Committee on Budgetary Control, comments:

“It is right that the Commission finally acts and wants to freeze funds. Withholding funds of this magnitude would certainly have an effect in the medium term in the current economic situation. However, many EU billions would continue to be exposed to the systematic corruption of the Orban system and considerable parts would not arrive where they should. Above all, it is incomprehensible that the Commission wants to continue paying out in full the agricultural subsidies that are so lucrative for Orban.” 

“In order to seriously fight the systematic corruption and the dismantling of the rule of law in Hungary, more pressure would be needed. The EU Commission must not allow itself to be blinded by sham reforms now. Orban is making proposals that will continue to secure him EU funds without really ending the systematic corruption of his friends and family. The goal must be to restore democracy and the rule of law in Hungary. When it comes to defending fundamental European values, EU Commission President Ursula von der Leyen must not make any foul compromises!”

Letter from Budget Commissioner Johannes Hahn to the EU Commission:

https://ec.europa.eu/transparency/documents-register/detail?ref=C(2022)5313&lang=en 

Legal opinion on the amount of budget cuts to Hungary:

https://danielfreund.eu/wp-content/uploads/2022/07/100-suspension-Hungary.pdf 

Calculation of the share of cuts in the total budget

What percentage of total EU payments to Hungary would be suspended in the current Multiannual Financial Framework (MFF) with the proposal cannot be said with absolute precision at this stage. First, the budget of the three operational programmes is not yet known for the current MFF. We also don’t know exactly how much funding is foreseen for the so-called Public Interest Foundations. Furthermore, the total budget that will flow to Hungary in the coming years is also not yet known. 

Our calculations are therefore based on the assumption that the three relevant operational programmes will be allocated roughly the same budget as in the previous MFF. The payments to the Public Interest Foundations, which would be suspended, are not included in the calculation. However, these are expected to come mainly from the Horizon EU Fund, which is only a fraction of the total budget. Instead of the total budget, the money Hungary will receive from the Cohesion Policy and the agricultural funds has been used for the calculation. These represent the bulk of EU payments to Hungary.