Hungary Loses Access to EU Funding Worth Billions

Hungary has officially forfeited its entitlement to approximately EUR1 billion in EU funds due to violations of rule-of-law principles. This development was confirmed by a spokesperson for the European Commission, who noted that the country failed to implement the required reforms by the end of 2024.

The lost funds, amounting to EUR1.04 billion, were earmarked for programs aimed at supporting economically disadvantaged regions within Hungary. These funds were initially frozen in late 2022 after the EU Commission determined that Hungary was disregarding key EU standards and fundamental values.

In order to unlock these financial resources, Hungary was expected to enact significant reforms by the end of the year. These reforms included changes to legislation designed to prevent conflicts of interest and combat corruption. However, the Hungarian government did not fulfill these conditions.

The Hungarian leadership expressed confusion over the loss of the funds. Hungary's Minister for Europe, Janos Boka, claimed on social media that the government had met all the necessary conditions to access the EU resources. He accused Brussels of withholding funds that rightfully belong to the Hungarian populace for political reasons.

In a bid to address potential funding shortages, Prime Minister Viktor Orban has turned to alternative sources of financing, particularly from China. In April, Hungary secured a EUR1 billion loan from Chinese state banks, a move that was discreet and only publicly revealed in July when the Hungarian State Debt Management Center disclosed some details. The loan is set to mature in three years, though specifics regarding the interest rates and repayment schedules remain undisclosed.

China has a growing presence in Hungary, with significant investments such as the construction of a large electric vehicle manufacturing plant by BYD in southern Hungary and a major battery cell factory by CATL in the eastern city of Debrecen. Furthermore, Chinese companies are involved in building a new railway line connecting Budapest to Belgrade, with Hungary taking out a nearly EUR900 million loan from the Chinese Exim Bank for its section of the project.

Despite obtaining Chinese financial support, Orban continues to seek the release of the frozen EU funds. As of recent reports, approximately EUR19 billion in EU funds remain blocked for Hungary, including essential support and COVID-19 recovery assistance. In December, Orban threatened to veto the next seven-year EU budget unless the suspended funds were released. Negotiations regarding the long-term EU budget for 2028 to 2035 are expected to commence in mid-2025.

Orban has a history of threatening to obstruct key EU decisions. At a recent EU summit in December, he refused to endorse the extension of sanctions against Russia, leading diplomats to speculate that he may be attempting to extract concessions from EU partners, such as the release of blocked EU funds.

In December 2023, despite ongoing concerns over Hungary's adherence to rule-of-law principles, the European Commission approved the release of approximately EUR10 billion in previously frozen EU funds for the country. This decision faced backlash from various European parliamentarians, including those from Germany's ruling parties, who criticized Commission President Ursula von der Leyen for allegedly succumbing to pressure from Hungary. Orban had previously indicated that he would block the initiation of EU accession talks with Ukraine and a substantial EU aid package for the war-torn country unless concessions were made.