Hungary takes €230m fine from Brussels as it releases funds

Viktor Orban, Hungary’s prime minister, may denounce the European Union for what he calls “double standards” when dealing with Budapest; he may liken the Brussels administration of today to Moscow’s occupation of yesteryear; but when it comes to any loss of EU funding, he pretty quickly sends his top sidekicks to the Commission with strict instructions to talk nice and quietly – and get the money flowing again.

Thus, when last month it emerged that Brussels had suspended some funding to Hungary “due to significant deficiencies identified by Commission audits in the management and control systems of eight operational programmes,” Budapest moved fast and, seemingly, effectively.

Suspended disbursements to Hungary may recommence within days, says EU commissioner,” was how the prime minister’s office saw things on Monday. As a result, €2bn in European Union funds will soon be “in circulation” in Hungary.

As the government put it:

Hungary has accepted the European Commission’s five percent correction proposal in the case of ten EU-funded operative programmes, which was necessary due to deficiencies in earlier contracts, Minister of State heading the Prime Minister’s Office and recently appointed Government Commissioner in charge of the National Development Agency János Lázár announced following talks with European Commissioner for Regional Policy Johannes Hahn in Brussels.

János Lázár estimates that the financial correction amounts to 230-250 million euros. He added that as a result of today’s deal, 2 billion euros of EU financing will again be “in circulation” in Hungary.

It all amounts to a big lift for Budapest, especially as nobody seems to be counting the loss of the €230m “financial correction”.

“This is the latest in a string of positive domestic and external developments affecting Hungary, the most conspicuous of which is the country’s enduring resilience to the sell-off in emerging markets,” Nicholas Spiro of London-based Spiro Sovereign Strategy told beyondbrics.

“Relations between the Orban government and the European Commission, which have been highly strained to say the least, appear to have improved somewhat. With elections round the corner, the government’s overriding priority right now is growth, and this means doing whatever it takes to gain full access to EU structural funds,” Spiro argues.

The boost may have gone a little to Orban’s head, however. On Monday in parliament he predicted growth next year of 2 per cent. Most independent assessments are in a more modest range of 1.3 to 1.5 per cent.

But with his party riding high in opinion polls and the opposition struggling to find any sort of unity, the prime minister can perhaps feel a bit free with the numbers – most especially when they are backed with EU funding.

Related reading:
Brussels suspends funding to Hungary over alleged irregularities, FT
EU weighs fines for democratic breaches after Hungary tensions, FT
Hungary’s economy: looking good? beyondbrics