As a first step, the European Union takes action to cut funding for Hungary due to attacks on democracy

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  • The EU executive proposes to withdraw 7.5 billion euros from Hungary
  • Says Hungary’s proposed remedies could work if implemented well
  • The 27 EU countries have three months to decide, no veto
  • EU tests new democratic sanction for first time
  • Hungary pledges to honor all commitments to unlock EU funds

BRUSSELS/BUDAPEST, Sept 18 (Reuters) – The European Union executive on Sunday recommended suspending some 7.5 billion euros in funding for Hungary over corruption, the first such case in the bloc of the 27 countries under a new sanction intended to better protect the rule of law.

The EU introduced the new financial sanction two years ago precisely in response to what it says amounts to undermining democracy in Poland and Hungary, where Prime Minister Viktor Orban has subdued the courts, the media, the NGOs and academia, as well as restricting the rights of migrants, gays and women for more than a decade in power.

“These are breaches of the rule of law undermining the use and management of EU funds,” said EU Budget Commissioner Johannes Hahn. “We cannot conclude that the EU budget is sufficiently protected.”

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He pointed to systemic irregularities in Hungary’s public procurement laws, insufficient safeguards against conflicts of interest, weaknesses in the effectiveness of prosecutions and shortcomings in other anti-corruption measures.

Hahn said the Commission recommended the suspension of around a third of the cohesion funds envisaged for Hungary from the bloc’s shared budget for 2021-27, worth a total of 1.1 trillion euros.

The €7.5 billion in question represents 5% of the country’s estimated GDP in 2022. EU countries now have up to three months to decide on the proposal.

Hahn said Hungary’s latest pledge to respond to EU criticism was an important step in the right direction, but still needs to be translated into new laws and practical actions before the bloc is reassured.

Development Minister Tibor Navracsics, in charge of negotiations with the EU, said Hungary would respect the 17 commitments made to the European Commission to avoid the loss of any EU funding.

“Hungary is not committed to confusing the Commission,” Navracsics told a news conference. “We have made commitments that we know can be implemented…therefore we will not face a loss of funds.”


Orban’s government has proposed creating a new anti-corruption agency in recent weeks as Budapest has come under pressure for cash for the struggling economy and the forint, the worst-performing currency in eastern the EU.

Orban, who calls himself a “freedom fighter” against the liberal West’s worldview, denies that Hungary – a former communist country of around 10 million people – is more corrupt than other countries in the EU.

Navracsics said Orban’s government would submit legislation to parliament on Friday to establish a new independent anti-corruption authority to oversee public procurement of EU funds, with the body to be launched by the second half of november.

Hungary has also pledged to implement several other anti-corruption safeguards, including stricter rules on conflicts of interest, expanding the scope of financial statements, and expanding the power of judges to prosecute suspicions of corruption.

Navracsics expressed hope that the Commission would be reassured by the implementation of the reforms and withdraw its proposed sanctions against Hungary by November 19.

The Commission is already blocking some €6bn of funds planned for Hungary as part of a separate COVID economic stimulus for the same corruption concerns.

Reuters documented in 2018 how Orban funnels EU development funds to friends and family, a practice that human rights organizations say has immensely enriched those around him and empowered the man 59 years old to entrench himself in power.

Hungary recorded irregularities in almost 4% of spending of EU funds in 2015-2019, according to OLAF, the bloc’s anti-fraud body, by far the worst result among the 27 countries of the EU.

Orban has also rubbed many in the bloc the wrong way by cultivating close and ongoing ties with President Vladimir Putin and threatening to deny the EU unity needed to impose and preserve sanctions on Russia for leading a war against Ukraine.

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Reporting by Gabriela Baczynska; edited by David Evans

Our standards: The Thomson Reuters Trust Principles.

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