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Commission proposes funding cut for Hungary but paves way for compromise – POLITICO

The European Commission proposed on Sunday to suspend 65% of funds allocated to Hungary under three EU programs for rule of law reasons, but also laid the groundwork for a possible compromise that would allow Budapest to keep the money.

“Today’s decision is a clear demonstration of the Commission’s determination to protect the EU budget and to use all the tools at our disposal to ensure this important objective,” said Budget Commissioner Johannes Hahn, in a press release after a meeting of the college of commissioners.

For more than 12 years, the government of Hungarian Prime Minister Viktor Orbán has drawn criticism from watchdogs, civil society groups and European bodies for undermining checks and balances in the country. Critics point to the ruling party’s influence over the judiciary, control of much of the media landscape and rampant corruption as key concerns.

Brussels, however, has struggled to address rule of law issues in Hungary.

Officials have argued that the bloc’s rules give them few tools to fight democratic backsliding in countries that are already EU members. In late 2020, as pressure grew for the EU to act, the bloc created a new mechanism that allows funds to be suspended in the event of systemic rule of law issues that impact European finances.

The Commission triggered the new mechanism against Hungary in April, with its investigation focusing on issues such as public procurement problems and shortcomings in corruption investigations.

With Sunday’s decision, the Berlaymont now officially passes the buck to the Council of the EU, which is the ultimate decision maker. In a statement, the Commission said it was proposing “a 65% suspension of commitments for three operational programs under cohesion policy” as well as a “prohibition on entering into legal commitments” with the so-called public interest trusts of Hungary.

Member states now have one month to decide whether or not to adopt the Commission’s suggestions, with the possibility of extending this deadline by two months.

But if the Commission has recommended the suspension of part of the financing of Hungary, it has also engaged in many round trips with the authorities of Budapest. Hungarian officials say they can put in place new mechanisms to reduce corruption risks and have put forward various proposals in this regard.

“The Commission’s conclusion is that the proposed remedies could in principle resolve the issues at issue, if properly detailed in the relevant laws and rules, and implemented accordingly,” the Berlaymont said in its statement. “Pending completion of the main implementation stages”, she notes, “the Commission considers that a risk for the budget remains at this stage”.

And while it remains unclear how some of the reforms would be implemented and whether they would be effective in tackling high-level corruption and reducing risks to the EU budget, the Commission has signaled that the Council could give Hungary time to show it is serious about reform — and therefore a possible opportunity to keep its funds.

“The Commission will monitor the situation and keep the Council informed of any relevant elements that may affect its present assessment,” he said.

Hungary, according to the Berlaymont, “is committed to fully informing the Commission of the achievement of the main implementation milestones by November 19”.

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