Dispute over the rule of law
Hungary loses its right to billions in EU aid
Updated on January 1, 2025 – 1:56 p.mReading time: 3 minutes
Hungary’s Prime Minister Viktor Orban refuses to implement rule of law reforms demanded by the EU. This will now be expensive for the country. But money now comes from other places too.
Hungary has lost its right to EU aid worth around one billion euros due to violations of the rule of law. In order to release the money, the country would have had to implement reform requirements by the end of 2024, as a spokeswoman for the European Commission confirmed to the German Press Agency.
The forfeited funds are 1.04 billion euros that were intended for Hungary from programs to promote structurally weak areas. The funds were frozen at the end of 2022 because the EU Commission came to the conclusion after analyzes that Hungary was disregarding various EU standards and fundamental values.
In order to release the funds, the Hungarian government led by Prime Minister Viktor Orban would have had to implement sufficient reforms by the end of the year. These include, among other things, changes to laws to prevent conflicts of interest and combat corruption.
The leadership in Budapest reacted uncomprehendingly to the loss of funds. “The Hungarian government has met all the conditions for accessing EU resources,” Europe Minister Janos Boka wrote on his Facebook page before the turn of the year. “Brussels wants to take away the funds that are due to Hungary and the Hungarian people for political reasons,” he added.
MEPs, however, reacted with satisfaction. “Orban is really costing Hungarians dearly. This billion is just the beginning. The EU is finally showing that it will no longer just put up with everything from the corrupt Orban,” commented Green Party politician Daniel Freund.
FDP MP Moritz Körner said: “Orban has overreached. The cozy relationship with the would-be autocrats is over. Anyone who steals European taxpayers’ money loses the right to EU funds. There is no longer any discount in the EU fundamental rights.”
If Hungary continues to fail to implement sufficient reforms, it risks losing billions more in the future. According to the rules of the EU rule of law mechanism, which has been in force since 2021, funds frozen through this expire at the end of the second calendar year after the year for which they were planned. At the end of this year, the funds planned for 2023 would expire.
In total, around 6.3 billion euros from the multi-year community budget 2021-2027 were frozen for Hungary via the mechanism at the end of 2022. Further billions of dollars for the country are blocked through other regulations. According to the Commission, the most recent figure was around 19 billion euros – the sum corresponds to around a tenth of Hungary’s annual economic output.
In order to fill financing gaps, Hungary’s right-wing populist Prime Minister Orban recently relied on China, among other things. In April, Hungary called off a loan worth one billion euros that the country took out from Chinese state banks. This happened discreetly and only became known in July, when the Hungarian Center for Public Debt (AKK) published some key data about it. The loan therefore has a term of three years. The amount of interest and the repayment intervals are not known.
China is heavily active in Hungary. The electric car manufacturer BYD is building a large factory in Szeged, southern Hungary, and the battery cell manufacturer Catl is building a mega-factory in Debrecen, eastern Hungary. Chinese companies are building the new railway line from Budapest to the Serbian capital Belgrade. For the construction of the Hungarian section, Hungary took out a loan of almost 900 million euros from the Chinese Exim Bank.
Despite the Chinese financial aid, Orban continues to try to release frozen EU funds. At the beginning of December, he threatened to veto the EU’s next seven-year budget if Brussels did not release blocked EU funds. Negotiations on the next long-term EU budget from 2028 to 2035 are expected to begin in mid-2025.
It was not the first time that Orban threatened to block central EU decisions. It was only at the EU summit in mid-December that he refused to agree to the extension of the Russia sanctions, which expire at the end of January. Diplomats suspected that he also wanted to extort concessions from EU partners in other areas – such as the release of frozen EU funds.
In December 2023, despite ongoing criticism of violations of the rule of law in Hungary, the Commission released frozen EU funding worth around ten billion euros for the country. MEPs criticized this at the time and accused Commission President Ursula von der Leyen of allowing herself to be blackmailed by Hungary. Orban had previously announced that he would block the start of EU accession negotiations with Ukraine and a billion-dollar EU aid package for the country attacked by Russia.
