EU unblocks billions for Hungary

Brussels, The Gulf Observer: The European Union on Wednesday relented and granted Hungary access to billions of euros in frozen funds just as Prime Minister Viktor Orban appeared ready to defy his EU partners and veto the opening of membership talks and vital financial aid for Ukraine.

A year ago, the European Union’s executive branch blocked substantial amounts of money out of concern that democratic backsliding by Orban’s nationalist government could put the bloc’s budget at risk.

The billions withheld mostly concern “cohesion funds” earmarked for Hungary. This envelope of money, one of the biggest slices of the 27-nation bloc’s budget, helps countries maintain their infrastructure at EU standards. They must apply for the money to fund building and other projects.

Now, the European Commission has ruled that Orban’s government has addressed some of its concerns, notably on justice reforms. So it’s willing to grant access to 10.2 billion euros ($11 billion) to reimburse project spending on approved projects. But Brussels also had a warning.

“The commission will closely and continuously monitor, notably through audits, active engagement with stakeholders and in monitoring committees, the application of the measures put in place by Hungary,” it said in a statement. It underlined, however, that should problems arise “it may again decide to block funding.”

Access to the frozen money will come as welcome relief for Hungary’s ailing economy, which in September only just avoided four straight quarters of contraction. A persistent deficit has caused the government to repeatedly amend its budget and cut social spending.

Skyrocketing prices – Hungary has recorded the highest inflation in the EU for most of the last year, rising over to 20% for 11 months – have undermined consumer demand. In October, Hungarians spent 7.3% less than a year earlier.

Critics say the commission’s decision appears to be an attempt to influence Orban after he demanded that decisions on Ukraine’s EU membership hopes and on a package of around 50 billion euros ($54.1 billion) in aid for its war-ravaged economy be struck off the agenda at an EU summit starting on Thursday.

EU countries pay around 1% of their gross national income into the budget. Hungary was slated to receive at least 50 billion euros in all from the 2021-27 budget, according to commission estimates.

Separately last month, the commission announced that Hungary would receive 900 million euros ($972 million) under a program helping EU nations to recover from the energy crisis sparked by Russia’s invasion of Ukraine last year, and aimed at reducing their dependence on Russian fossil fuels.