The European Commission has launched an administrative procedure against Hungary over long-standing concerns about the continued misuse of EU funds in the country, the institution announced on Wednesday (April 27th).
The procedure is based on the principle that the disbursement of EU funds is conditional on respecting the principles of the rule of law and could see countries with systemic problems lose their funding.
The procedure, which the Commission says could take between five and nine months, will include two rounds of consultations with Budapest, a process described as “collaborative” by EU officials.
— Johannes Hahn (@JHahnEU) April 27, 2022
“We hope to reach an agreement and have the [national] measures in place that correct the situation without the need to impose them from Brussels, an EU official said.
If the talks come to nothing, the Commission could propose proportionate “administrative remedies”, which it says are not punitive sanctions, to protect the bloc’s budget.
The other EU countries will then have up to three months to adopt or amend the Commission’s proposal by qualified majority in the Council.
The Commission is concerned about public procurement in Hungary, the functioning of the authorities responsible for implementing the EU budget, auditing, the process of control and accountability, transparency, fraud prevention and corruption.
Officials are also concerned about “the constant non-implementation of the recommendations and requests that have been addressed to the authorities for more than 10 years”.
Last year, Hungary topped the EU’s anti-fraud agency (OLAF) list for irregularities in structural and agricultural fund spending, where 2.2% of payments to Budapest were affected by problems of corruption, seven times more than the EU average of 0.29%.
The Commission has now said the exceptionally high level of financial recoveries over the years was compounded by concerns about “the limits to effective investigation and independent prosecution”.
Effects reaching the previous budget
The mechanism had posed a significant obstacle to the negotiation of the bloc’s next seven-year budget, worth 1.8 trillion euros, at the end of 2020.
The hard-negotiated compromise, under which Hungary and Poland agreed to release the budget, included an instruction from EU leaders to the Commission that no measures would affect payments from the 2014-2020 budget.
The Commission has now said that the mechanism, which has been in force since 1 January 2021, can affect all payments made since then, which includes payments under the previous budget which will continue until 2023 under the current rules.
Nevertheless, he acknowledged that there were “mixed messages that have been sent” on the question of the scope but said that the European Council “is entitled to make a political statement but they do not change the legal situation “.
Yet the Commission has followed through on other commitments it made following the same set of political instructions from EU leaders, known as Council Conclusions, such as its controversial promise not to not activate the procedure until the highest court in the EU has ruled on its legality.
In the first-ever live stream of a ruling, the European Court of Justice dismissed the legal challenge in February 2022.
Despite detailed guidelines now in place to govern the Commission’s use of the mechanism, officials refuse to speculate on the amount of payments that might be affected.
“I am completely incapable of being a fortune teller and would not venture to speculate on” Hungary’s response to the letter, an EU official said.
Meanwhile, Hungarian observers fear the Commission’s measures are a classic case of doing too little, too late.
The rule of law mechanism “is an important tool but will only be able to solve a small part of the democratic backsliding in Hungary”, commented Green MP Gwendoline Delbos-Corfield of the Commission’s decision.
“Now that Fidesz [Hungary’s ruling party] has maintained its grip on power by strangling independent media and blocking the electoral system, urgent action by the Commission and the Council is needed to prevent autocracy from spreading across the EU,” he said. she adds.
[Edited by Zoran Radosavljevic]