Hungary Faces EC Infringement as Forint Plummets
The European Commission Launches Infringement Procedure Against Hungary
The European Commission has taken action against Hungary, sending a letter of formal notice and initiating an infringement procedure over the country’s controversial Sovereignty Protection Act. The announcement has had an immediate impact on the Hungarian forint, causing it to fall once again.
Just last week, there was a significant rise in the value of the forint following a surprising decision by the central bank to lower the base rate. However, this positive trend has now been reversed after the news of the EC’s infringement procedure. As a result, the forint-euro exchange rate now stands above 388.
The EC’s press release on the February infringement package highlighted the specific provisions of the law that it deems to be in violation of EU laws. The Sovereignty Protection Act, which came into force on December 22, 2023, establishes an office tasked with investigating activities that are perceived to jeopardize Hungary’s sovereignty. The law also contains provisions that prohibit the use of foreign funding to influence elections and introduces criminal penalties for accepting foreign campaign donations.
The European Commission has given Hungary two months to respond to the letter of formal notice. If the issues highlighted in the letter are not adequately addressed, the EC may escalate the procedure by sending a reasoned opinion.
The Hungarian government has staunchly defended the Sovereignty Protection Act, claiming that it is necessary to prevent foreign influence in the country’s affairs. According to Zoltán Kovács, the state secretary for international communication and relations, the law is being targeted by Brussels and foreign financiers because it aims to prevent outside interference in Hungarian politics.
In response, the ruling Fidesz party accused the European Commission of opposing the Sovereignty Protection Act because it criminalizes the acceptance of foreign campaign financing. The party also criticized the Hungarian left for accepting foreign currency for their election campaign, calling it “political corruption” and “foreign influence in Hungarian elections.”
The controversy surrounding the Sovereignty Protection Act has underscored the deep divide between the Hungarian government and the European Commission. As the infringement procedure unfolds, it remains to be seen how Hungary will respond to the EC’s concerns and whether the issue will escalate further.
