Hungary faces new challenges as it loses over EUR 1 billion in EU funds for the new year
Hungary’s Struggle to Secure EU Funds Escalates with Over EUR 1 Billion Permanently Lost
Hungary is facing a significant financial crisis as it permanently loses over EUR 1 billion in EU funds, marking the first time such a loss has occurred for a member state. The funds were initially frozen in 2022 as part of an EU procedure aimed at safeguarding its budget from rule-of-law violations. Member states at that time had blocked EUR 6.3 billion due to concerns about issues with Hungary’s public procurement system, including corruption risks and lack of transparency.
Despite Hungary’s efforts to address these concerns by establishing an Integrity Authority and reforming public tender processes, the European Commission recently ruled that the problems have not been fully resolved. As a result, essential funding for areas like energy efficiency and transport is now off the table. This loss could further strain Hungary’s budget, potentially requiring increased borrowing at a time when the government is already under pressure from an EU excessive deficit procedure.
Hungary had an additional year to avoid losing EU funds for three key programs but failed to meet the conditions set by the European Commission. Even though the government claims the issue has shifted from technical and legal compliance to political negotiation, limited progress has been made in addressing the EU’s concerns. Restrictions imposed in 2022 not only froze EUR 6.3 billion in funding but also prevented public interest trusts, including universities undergoing model changes, from accessing new EU tenders.
The ongoing struggle to secure EU funds has impacted universities, research programs, and students in Hungary, with bans on public interest trusts resulting in significant financial losses for collaborations and exchanges. While alternative programs funded by taxpayers have been introduced, they lack the resources of the lost EU funds.
Prime Minister Orbán maintains that current EU funds will sustain the economy until 2026, despite facing daily penalties of EUR 1 million for non-compliance with refugee rights rulings, amounting to EUR 400 million by late 2024. Negotiations with the European Commission continue, but critics, including opposition leader Ferenc Gyurcsány, accuse the government of recklessness, attributing Hungary’s financial setbacks to its actions. Amid political and financial pressures, securing EU funds remains a critical challenge for the Hungarian government.
