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27th Feb 2024

EU approves €920m for Hungary, despite rule-of-law fears

  • The money will be used to improve the electricity market by installing smart metering and investing in the digitalisation of energy companies, EU officials said (Photo: Council of the European Union)
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The European Commission on Thursday (23 November) approved the release of €920m to Hungary under the country's recovery and resilience plan — a decision which has sparked criticism and raised eyebrows.

The move is widely perceived as a pre-emptive attempt by the commission to bypass Hungary's veto power to block additional aid to Ukraine in the upcoming European Council in December.

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Until now, all EU funds linked to Hungary's recovery plan were suspended over concerns over the rule of law and democratic backsliding in the country.

While this set of advance payments (concerning funds to support the transition away from fossil fuels under the so-called RePowerEU) is not tied to any rule-of-law conditionalities, the decision remains controversial.

"Big, big mistake," wrote German Green MEP Daniel Freund on X, formerly Twitter.

"Every cent of EU money should be paid under condition of respect for the rule of law," said Renew Europe Belgian MEP Hilde Vautmans.

The announcement comes the same week as the launch of a controversial billboard campaign targeting EU commission president Ursula von der Leyen and the introduction of a new 'national sovereignty' law deemed as an "authoritarian tool" to silence critical voices.

It also comes after Hungarian prime minister Orbán met with Russian president Vladimir Putin in China — including a handshake photo which was heavily criticised in Brussels.

But the commission has argued that it is following the rules.

"The logic behind it [the approval of these funds] is the urgency to move forward with the RePowerEU objectives, given the ongoing energy crisis," a commission spokesperson said.

The €920m in advance payments, which will take place in two steps, still depend on the green light of EU finance ministers.

EU officials said that the new Hungarian recovery plan is worth €10.4bn, including €4.6bn under the RePowerEU chapter (divided into €0.7bn in grants and €3.9bn in low-interest loans).

Once the decision is adopted by the EU Council, about €90m will be disbursed within two months, and the remainder €830m within a year.

These funds will be used to improve the electricity market by installing smart metering and investing in the digitalisation of energy companies, EU officials said.

Beyond the €920m in pre-financing, the release of all other funds depend on the successful implementation of the 27 designated super milestones—the criteria established by the commission for Hungary's government to unlock cohesion and Covid recovery funds.

"As soon as Hungary submits its first payment request [for funds outside the pre-financing], we will examine if all 27 super milestones have been implemented. No payment at that stage will happen unless all those super milestones have been achieved," a commission spokesperson also said.

Last month, the Financial Times first cited EU senior officials as mulling the release of funds, partly to convince Budapest to back EU long-term support to Kyiv to fight Russia — a top-up of the EU budget opposed by Orbán.

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