Lack of reforms

Hungary loses billions in EU aid

The Hungarian government - pictured here is Prime Minister Viktor Orban - claims to have fulfilled all conditions.

(Bild: APA/AFP/VYACHESLAV OSELEDKO)

Hungary has lost its entitlement to around one billion euros in EU aid due to breaches of the rule of law. In order for the money to be released, the country would have had to implement reform requirements by the end of 2024.

The forfeited funds are 1.04 billion euros that were earmarked for Hungary from programs to support structurally weak areas. The funds were frozen at the end of 2022 because the EU Commission came to the conclusion following analyses that Hungary was disregarding various EU standards and fundamental values.

Lack of reforms
In order to release the funds, Hungary would have had to implement sufficient reforms by the end of the year. These include changes to laws to prevent conflicts of interest and combat corruption. However, this has not happened.

The leadership in Budapest reacted with incomprehension to the loss of the funds. "The Hungarian government has fulfilled all the conditions for drawing down EU resources," wrote Europe Minister Janos Boka on his Facebook page before the turn of the year. "Brussels wants to take away the funds that are due to Hungary and the Hungarian people for political reasons," he added.

The Europe Minister's post:

Billion-dollar loan from China as plan B
Hungary's right-wing populist Prime Minister Viktor Orban has recently turned to China, among others, to fill financing gaps. In April, Hungary called in a loan of one billion euros, which the country took out from Chinese state banks. This was done discreetly and only became known in July, when the Hungarian National Debt Center (AKK) published a few key figures. According to this, the loan has a term of three years. The amount of interest and the repayment intervals are not known.

China is very active in Hungary. The e-car manufacturer BYD is building a large plant in Szeged in southern Hungary, while the battery cell producer Catl is building a mega-factory in Debrecen in eastern Hungary. Chinese companies are building the new railroad line from Budapest to the Serbian capital Belgrade. Hungary took out a loan of almost 900 million euros from the Chinese Exim Bank for the construction of the Hungarian section.

Despite the Chinese financial aid, Orban is still trying to free up frozen EU funds. According to earlier information from the EU Commission, around 19 billion euros in EU funds for Hungary were still blocked, including further subsidies and coronavirus aid. At the beginning of December, Orban threatened to veto the EU's next seven-year budget if Brussels did not release the EU funds currently blocked for Hungary. Negotiations on the next long-term EU budget from 2028 to 2035 are expected to begin in mid-2025.

Brussels between pressure and compromise
This was not the first time that Orban has threatened to block key EU decisions. At the EU summit in mid-December, for example, he refused to agree to the extension of the Russia sanctions, which expire at the end of January. Diplomats suspected that he also wanted to extort concessions from EU partners in other areas - such as the release of frozen EU funds.

In December 2023, the Commission released around ten billion euros in frozen EU funding for Hungary despite persistent criticism of violations of the rule of law. Several MEPs criticized this at the time and accused Commission President Ursula von der Leyen of allowing herself to be blackmailed by Hungary. Orban had previously announced that he would block the start of EU accession negotiations with Ukraine and an EU aid package worth billions of euros for the country attacked by Russia.