New year, new challenges: Hungary loses over EUR 1 billion in EU funds

Hungary’s ongoing struggle to secure EU funds has escalated even more. Over EUR 1 billion was permanently lost due to unresolved issues with rule-of-law compliance.

EUR 1 billion in EU funds lost

As Telex reports, Hungary is facing serious financial consequences as it permanently loses over EUR 1 billion in EU funds—the first time this has happened to a member state. The funds were frozen back in 2022 as part of an EU procedure aimed at protecting its budget from rule-of-law breaches. In that year, member states blocked EUR 6.3 billion, pointing to widespread issues with Hungary’s public procurement system, including corruption risks and lack of transparency.

Although Hungary has taken steps to address these concerns—such as setting up an Integrity Authority and reforming public tender processes—the European Commission recently ruled that the problems haven’t been fully resolved. As a result, vital funding for areas like energy efficiency and transport is now off the table. This loss could further strain Hungary’s budget, forcing the government to borrow more at a time when it’s already under pressure from an EU excessive deficit procedure.

Long-standing issues

Hungary had an additional year to avoid losing EU funds for three key programmes but failed to meet the conditions set by the European Commission. While the government claims the issue has shifted from technical and legal compliance to political negotiation, it made limited progress in addressing the EU’s concerns. Restrictions imposed in 2022 not only froze EUR 6.3 billion in funding but also blocked public interest trusts, including universities undergoing model changes, from accessing new EU tenders.

Despite being able to request a reassessment at any time, Hungary’s efforts have fallen short. The Commission cited unresolved issues, such as conflicts of interest in public interest trusts and a lack of transparency. Attempts to exempt certain entities from restrictions have only exacerbated tensions. As a result, the partial suspension of cohesion programme funding remains in place, further straining Hungary’s institutions

Hungarian students face challenges

Hungary’s struggle to secure EU funds has led to significant financial and institutional strain, with universities, research programmes, and students feeling the impact. A ban on public interest trusts has already cost millions in Horizon Europe collaborations and barred Hungarian students from Erasmus exchanges. The government introduced alternative programmes like HU-rizont and Pannonia, funded by taxpayers, but their budgets pale in comparison to the EU resources lost.

Hungarian politicians’ standpoint

Adding to the burden, Hungary faces daily penalties of EUR 1 million due to non-compliance with refugee rights rulings, amounting to EUR 400 million by late 2024. While Prime Minister Orbán insists that current EU funds will sustain the economy until 2026, the looming n+2 rule threatens further losses. Efforts to negotiate with the European Commission continue, but critics, including opposition leader Ferenc Gyurcsány, accuse Orbán’s government of recklessness, blaming its actions for Hungary’s financial setbacks. In addition, Péter Magyar, leader of the Tisza Party, often emphasises that his goal is to bring home EU funds. However, as political and financial pressures mount, securing EU funds remains a critical challenge for the Hungarian government.

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