The Commission decided on Sunday to protect the EU budget against breaches of the principles of the rule of law in Hungary by applying the conditionality mechanism and temporarily suspend EU funding to the country.
The decision was taken unanimously by the College of Commissioners on Sunday morning and immediately presented by Johannes Hahn, the Commissioner in charge of Budget and Administration, at a press conference in Brussel.
“Today's decision is a clear demonstration of the Commission's resolve to protect the EU budget, and to use all tools at our disposal to ensure this important objective,” he said. He added that financial pressure on Hungary apparently has an effect and this was also the purpose of the conditionality mechanism when it entered into force in January 2021.
The procedure in the case of Hungary is the first one under the regulation. I would take Commission until April this year to trigger the mechanism and notify Hungary that its breach of rule of law principles poses risks for the EU budget.
The mechanism had to overcome legal appeals to the European Court of Justice by Hungary and Poland, the two most concerned countries where the rule of law is contested by the EU, and administrative hurdles inside the Commission. Only in March 2022, did the Commission adopt its guidelines on how it will apply the mechanism.
Threats to the EU budget
At the press conference, Commissioner Hahn mentioned among others shortcomings in Hungary’s anti-corruption framework and public procurement system. About half of all tenders in Hungary are won by singled bidders in contrast to best European practice. Hungary needs to significantly reduce the percentage of single bid tenders over the course of two years.
Another key measure is the establishment of a new integrity authority in Hungary. Asked about the effect of such a body in view of the overall lack of judicial independence in the country, the Commissioner replied that it depends on its composition. The integrity authority is supposed to consist of members with no political affiliation during the last 5 years.
In a letter of 22 August, Hungary clarified its position and proposed measures to address the Commission’s concerns. According to Commissioner Hahn, the proposed measures “could in principle address the issues at hand, if they are correctly detailed in relevant laws and rules, and implemented accordingly”.
In the absence of details in the letter, the Commission considers that a risk for the budget remains at this stage. It therefore proposes a suspension of 65% of the commitments for three operational programmes under cohesion policy and a prohibition to enter into some legal commitments with the public interest trusts for programmes implemented in direct and indirect management.
The final decision lies with the Council which now has one month to decide whether to adopt such measures, by qualified majority. This period could be extended by a maximum of further two months in exceptional circumstances. An update is expected on 19 November when the Commission will make a new assessment based on information from Hungary.
Hungary ‘electoral autocracy’
It would also require repeated calls on the Commission by the European Parliament to apply the mechanism. In fact, in a resolution on Thursday last week, the Parliament adopted a report condemning the “deliberate and systematic efforts of the Hungarian government” to undermine European values and demands results in the Article 7 process.
According to the Parliament, the lack of decisive EU action has contributed to the emergence of a “hybrid regime of electoral autocracy”, i.e. a constitutional system in which elections occur but respect for democratic norms and standards is absent. The report was adopted with 433 votes for, 123 against, and 28 abstentions.
As previously reported, the parliamentary elections in Hungary in April were marred by the absence of a level playing field. Elections observers from OSCE/ODIHR issued a number of recommendations to Hungary to improve the conduct of elections and bring them in line with commitments made by all OSCE countries and international obligations and standards for democratic elections.
The Parliament called on the Council to act without further delay in the Article 7 procedure on suspending Hungary’s voting rights because of a serious breach of EU values. It also urged the Commission to make full use of the conditionality mechanism and to refrain from approving Hungary’s Recovery and Resiliency Plan for recovery funding.
Commissioner Hahn said that the Commission has taken note of the Parliament’s resolution but declined to comment on the state of Hungary’s democracy. “The measures that Hungary have proposed are steps in the right direction,” he said and was convinced that Hungary will implement the reforms. The conditionality mechanism delivers and is a game-changer, he added.
MEP Gwendoline Delbos-Corfield (Greens/EFA, FR), Parliament’s rapporteur on the situation in Hungary, said: “The conclusions of this report are clear and irrevocable. Hungary is not a democracy. It was more urgent than ever for the Parliament to take this stance, considering the alarming rate at which rule of law is backsliding in Hungary.”
“Beyond acknowledging Fidesz’s autocratic strategy, the large majority of MEPs supporting this position in the European Parliament is unprecedented. This should be a wake-up call for the Council and Commission.”
The Brussels Times