A little less punishment, in exchange for vetoes being lifted: On Monday evening, EU countries reached an agreement with Hungary on an issue that has raged in recent months. With the decision, European member states slightly weaken a financial sanction for Hungary previously proposed by the European Commission. Hungary, for its part, pledged to agree to a major financial aid package for Ukraine (€18 billion in loans) and a minimum tax for large companies — two dossiers it has long been opposed to.
The compromise means that an issue that has been hotly debated in Brussels in recent weeks has been settled — at least for the time being. In September, Brussels proposed to freeze EUR 7.5 billion in EU subsidies for Hungary, due to serious and long-standing concerns about risks of fraud and corruption. In response, Hungary recently blocked some important European decisions. The conflict threatened to come to a climax this week during a meeting of European government leaders this Thursday.
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Collision averted
But with a deal, that collision has now been averted. Instead of the 7.5 billion that the European Commission wanted to deny Hungary, EU countries are now reducing that to 6.3 billion. The official reason is that the government of Orbán has done its best in recent weeks with all kinds of new laws to strengthen the fight against fraud and corruption. But behind the scenes it is clear that it is mainly the fear of Orbán’s ‘revenge’ that has fueled the compromise.
At the same time, EU countries have also stepped up the pressure themselves in recent days. This weekend it became clear that all 26 other EU countries would agree to a ‘plan B’, which would allow the support money for Ukraine to be raised without Hungary. It would mean that Hungary would lose an important lever.
Part of ‘the deal’ is also that EU countries approve Hungary’s plan to claim money from the corona recovery fund. Ultimately, as a result, 5.8 billion euros can flow to Hungary, but the conditions for that payment include strict requirements for strengthening the rule of law. The Netherlands abstained from voting on the plan.
Historically unique decision
The agreement means that Brussels will still impose a financial sanction on Hungary for corruption risks — a historically unique decision. But now that the size of the sanction has been relaxed, Orbán can sell it domestically as a victory on his part over Brussels. The fact that the Hungarian recovery plan has now also been approved is also a victory for Budapest – that approval had been stalled for more than a year and a half due to concerns about the Hungarian rule of law. If the plan had not been approved before December 31, Hungary would lose 70 percent of ‘her’ share anyway.
The billions ahead are of crucial importance to Hungary. The economy is in serious trouble and the value of the Hungarian forint has plummeted recently. At the same time, it is still very uncertain when the first amounts can be transferred. The reforms that Brussels demands from Budapest are substantial and, according to those involved, still require major steps. Also, the 6.3 billion that is now frozen cannot be released just like that: Hungary must also significantly strengthen its fight against corruption for this.