EU Members Clear Hungary Recovery Plan, Unblocking of Recovery Funding Expected

  • 14 Dec 2022 8:37 AM
  • Hungary Matters
EU Members Clear Hungary Recovery Plan, Unblocking of Recovery Funding Expected
European Union member states “listened to Hungary’s arguments” and approved the country’s recovery plan which is expected to lead to the unblocking of recovery funding, Justice Minister Judit Varga said in Brussels on Tuesday.

“We woke up to a good news,” Varga said, referring to the decision made in the early hours of Tuesday. Speaking ahead of a meeting of European affairs ministers in Brussels, Varga said adoption of the Hungarian plan “exactly reflects the situation”, citing the European Commission as calling the Hungarian programme “one of the best”.

During the process, the Hungarian government considered “all reasonable professional proposals that were not in conflict with the democratic mandates voters had bestowed on the government”, she said, adding that the government “adopted constructive compromises” in that spirit.

Hungary has fulfilled all its commitments regarding the EU’s conditionality procedure, she insisted, adding that the Hungarian government would continue to work “with the same effectiveness and in the spirit of forward-looking and constructive cooperation” to have now-suspended cohesion funds released to Hungary as soon as possible.

She called it important that the other members had “understood Hungary”, and proposed that the ratio of suspended cohesion funding to Hungary should be 55% rather than 65% as the European Commission had intended. She said it was “a sign that member states have the final say” in the EU, which she called a “cooperative community with member states at the helm”.

The European Council said on Monday that EU ambassadors had positively assessed Hungary’s recovery plan which awaits the decision of EU leaders. The council also said at the same time that the Committee of Permanent Representatives has proposed suspending payment of cohesion funds to the country totalling 6.3 billion euros.

If the proposal is accepted and Hungary completes 27 “milestone” reforms to reinforce the rule of law, it may access 5.8 billion euros of EU recovery funding to offset the impacts of the coronavirus pandemic and finance the transition to a green and digital economy, the council’s statement said.

According to the ambassadors’ evaluation, the Hungarian plan is made up of reforms and projects that would contribute to meeting the EU’s country-specific recommendations, adding that it was designed to provide a thorough and balanced response to the economic and social situation in the country.

The Hungarian plan includes a thorough package of key institutional reforms aimed at meeting country-specific recommendations concerning the rule of law, which serves protection of the bloc’s financial interests.

Stepping up the fight against corruption, promoting competition in public procurement and strengthening the independence of the judiciary will also contribute to the efficiency and resilience of the economy, the statement said.

Hungary will be required to fully and appropriately complete its reforms before the EU makes any payment to the country under the Recovery and Resilience Facility, the statement warned.

Budapest Mayor Welcomes Agreement Concerning EU Funds

“We are glad that the European Union and the government have reached an agreement,” Budapest Mayor Gergely Karácsony told a press conference on Tuesday in reaction to news that Hungary’s EU recovery funding is likely to be unblocked.

The government is “now obliged” to meet the bloc’s requirements before the funds can actually be accessed, the mayor added.

Karácsony said he was glad that Hungary would receive grants from the recovery fund, and urged the government that it should use the mechanism’s loan component, too. Money borrowed under the mechanism could be used in full to rebuild the country’s energy system, he added.

Karácsony, who is co-leader of the Association of Hungarian Municipalities (MÖSZ), said the funds should also go to local councils, adding that “reducing Hungary’s dependence on Russian gas and completing a green transition could hardly be possible without changing municipal energy provision”.

Answering a question, Karácsony said “ideally” the recovery funds should be divided up equally between central investment projects, private investment projects, and municipal services.

Opposition on Decision to Approve Hungarian Recovery Plan

Hungarian opposition parties on Tuesday reacted to the proposal by EU member state ambassadors on approving Hungary’s recovery plan, which is expected to result in EU leaders unblocking of the country’s recovery funds.

The Democratic Coalition insisted Prime Minister Viktor Orbán had been dealt a big blow in Europe, having “failed” to immediately secure recovery funds, while a large portion of cohesion money had also been frozen despite Orbán having “caved” on the issue of the EU loan to Ukraine and the global minimum tax.

Momentum said Orbán bore sole responsibility for Hungary receiving less money from the EU, adding that more than 4,800 billion forints (EUR 11.7bn) in EU funding still hung in the balance.

The Socialists said the risk that a large portion of catch-up funds would be withdrawn was ever present, and Orbán had merely secured a reprieve and must show the government can comply with European norms. The budget, it added, would now have access to enough funding to stave off “an even bigger crisis”.

Jobbik said the government had “backed down” on EU support for Ukraine and the global minimum tax, and yet its single biggest duty to secure the funding to help Hungarian citizens had not been fulfilled.

LMP said the decision of EU ambassadors was good for large European companies, given that Hungary has been exempted from applying the global minimum tax. “Hungary can remain a tax haven,” it added.

Ruling Fidesz said in reaction that the left was “working obsessively against Hungary”. In a statement, the party said the left had been doing “everything they could” to get Hungary to lose the EU funds it was entitled to.

“But they failed,” Fidesz said, adding that the approval of Hungary’s recovery plan and operative programmes meant that “after half a year of political stalling”, Brussels had admitted that Hungary was entitled to those funds.

Gov’t 'Reaches Goals on Recovery Funding'​​​​​​​

The government's goals set in June have been fulfilled, the regional development minister said after EU ambassadors on Monday sent a proposal to the European Council to approve Hungary's recovery plan and unblock its recovery funding.

Also, the goal was to strike a deal with the European Commission on cohesion funding by Dec. 31 to ensure that Hungary does not lose any of these monies, Tibor Navracsics told a press briefing, adding that agreement was reached.

Navracsics said he trusted that the partnership agreements on the recovery fund and the operative programmes would be signed within days. Under the arrangements of the RRF, access to some 5.8 billion euros will be available to Hungary, he said, while by the end of 2027, some 14,000 billion forints can be accessed, including for operative programmes with Hungarian co-financing.

Monies involved in the RRF will be spent on programmes that help achieve climate and energy policy goals and enable the development of digital infrastructure and public services and supporting companies’ digital transition, he said.

Concerning the monies available under the arrangements of the operative programmes, more than 4,000 billion forints have already been approved for agricultural and rural development so 9,000-10,000 billion forints will be left for other areas, he added.

Navracsics: Hungary Maintained Open Strategy at EU Talks

Hungary maintained an open strategy at its talks with the European Commission, Tibor Navracsics, the regional development minister, said after European Union ambassadors on Monday sent a proposal to the European Council to approve Hungary’s recovery plan and unblock its recovery funding.

He added that the government had given serious consideration to all requests and concerns coming from the Commission, and it was open to compromise if a good solution was offered.

Accordingly, an agreement was reached with the EC concerning the rule-of-law procedure by September, allowing the sides to focus on the talks concerning the two large funds, and this brought about results by late November, he said.

At the end of November, the EC said that it considered Hungary’s national recovery plan “excellent” and saw no further concerns regarding the cohesion funds, either, he added. The current development demonstrates the Council’s recognition of the efforts made so far, he said.

In response to a question, Navracsics said the last stage in the schedule of implementation was at the end of March and then the package of laws will have to be approved by Hungarian parliament.

The EC said that if the end-of-March deadline is sustainable, then the freezing of funds can be lifted in April or May, he added. He said he trusted that there would be no further demands by the EU.

Continuous dialogue has been maintained with the EC, and the milestones currently achieved demonstrated that Hungary’s efforts had been recognised, he said.

The government will make an effort to clarify any possible problems raised during the talks with a view to preventing the need to raise any further demands, he added. Navracsics said there was no date set as yet for the signing of the partnership agreement.

Monday’s deal had to be reached first and now within a few days, the date of signing the agreement will be announced, he added. The plan is to announce 25 new tender invitations by the end of March, he said. Commenting on the loan part involved in the recovery fund, he said there were six months left to decide whether a loan would be taken out or not.

The government will make its decision depending on the economic environment at the time, he added.

Commenting on the milestones set for Hungary during the EU talks, he said Hungary had a good chance of showing an example to other member states how to “handle an ideologically driven campaign of hysteria” by means of substantive measures, and how to make further steps in the areas of public procurements and the whitening of the economy.

The future and legitimacy of the rule of law procedure will depend on how it can be kept at a distance from current politics and party politics, he said. The problem is not that the EU wants to protect its budgetary and financial interests, but the mixing of political considerations with legal ones, he said.

Gergely Gulyás, the prime minister’s chief of staff, said the series of talks had resulted in a victory for the EU; and “we are also a member of the European Union”.

Maintaining European unity is especially important in the current situation, he said.

​​​​​​​ Gulyás also said that anti-corruption measures did not harm Hungary, and the situation concerning corruption was not worse in the country than in western Europe or countries that joined the EU more recently.

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