EU approves Hungary's recovery plan, but withholds cash, moves to freeze other funds

The European Commission approved on Wednesday Hungary's post-pandemic recovery plan but said Budapest would not receive any payments - worth a total 5.8 billion euros - until it implements reforms to bolster judicial independence and tackle corruption.

The European Commission approved on Wednesday Hungary's post-pandemic recovery plan but said Budapest would not receive any payments - worth a total 5.8 billion euros - until it implements reforms to bolster judicial independence and tackle corruption. Separately, the Commission also asked EU governments to freeze 7.5 billion euros that Hungary would normally receive from the EU budget as part of funds transferred to poorer member states to equalise living standards across the bloc.

The EU executive's move to withhold funds comes after months of talks with Prime Minister Viktor Orban's right-wing government over high-level graft, the independence of courts, non-governmental institutions and media, and minority rights. "We are today giving our positive assessment to Hungary's comprehensive recovery and recovery plan. Regarding the rule of law, Hungary has committed to significant reforms. Only once these reforms are implemented in full will access to the EU's recovery fund be unlocked," European Commission Vice President Valdis Dombrovskis said.

The recovery plan is a spending blueprint prepared by member states seeking EU financial aid to help recover from the huge economic impact of the coronavirus pandemic. Hungary will have to deliver "fully and correctly" on a set of 27 "super milestones" including rule of law reforms in order to unblock disbursements from the Recovery and Resilience Fund (RRF), the Commission said.

Hungary's government was expected to respond to the Commission's decision at a news conference later on Wednesday. The additional move to suspend the 7.5 billion euros of regular EU funds for Hungary is the first use the Commission has made of new powers to protect the European budget if there is a perceived risk that the money could be misspent.

EU governments have until Dec. 19 to vote on the suspension proposal, which requires a qualified majority to pass. If the Commission's recommendation is approved and provided that Budapest has addressed Brussels' concerns on judicial independence and corruption, the funds will be unblocked.

While Hungary has already taken some action to deal with EU worries, it has not done enough, EU budget Commissioner Johannes Hahn told a news conference. As a result the EU executive upheld its recommendation from September to freeze 65% of EU cohesion funds for Budapest until all issues are addressed.