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Before urging European Union nations to withhold part of the funding Hungary expects to receive under the bloc’s 2021-2027 budget, the European Commission allowed Hungary one month to resolve its concerns about the rule of law.

The new deadline is part of an EU procedure known as the “conditionality mechanism” which is designed to safeguard the EU’s financial interests in the event that an EU government violates the rule of law. It is distinct from previous processes concerning the rule of law initiated by the EU against Hungary.

The Commission considers that EU funds are at risk in Hungary due to corruption, which may take the form of bids for EU-funded projects in which only one bidder, generally associated with the governing party, participates.

Concerns have also been raised by the EU executive regarding the independence of the judiciary, the media, and non-governmental organizations.

Hungarian Prime Minister Viktor Orban has previously downplayed EU and US worries about corruption in Hungary, but in recent weeks, senior Hungarian officials have said that Budapest is eager to cooperate with the Commission to address the issues.

Hungary proposed this week to reduce the amount of public auctions with just one bidder to 15% of the total. It has also proposed to empower judges to require prosecutors to pursue cases even if the prosecutors have opted not to, as well as to make Hungary’s legislative process more open and inclusive.

The Commission activated the “conditionality mechanism” against Hungary in April due to its worries over EU budget money. In the end, it might result in the suspension of Hungary’s 21 billion euros ($21.3 billion) allocation in the EU budget.

The Commission said on Friday it has tasked Budget Commissioner Johannes Hahn to advise Budapest of the steps that the EU executive intended to propose to EU states if Hungary’s corrective actions are not enough.

“Hungary has now one month within which it can submit its observations and any additional information, in particular on the proportionality of the measures envisaged by the Commission,” the EU executive arm stated.

Hungary, it was stated, still had the option to propose acceptable corrective measures.

The money in question are known as cohesion funds, and they are used to enhance infrastructure in EU nations that are poorer than the EU average, such as roads and bridges, water treatment plants, and transit.

A senior EU official, who requested not to be identified, said the Commission’s recommendation to EU states would most likely not touch all of the cohesion funding for Hungary, since it had to be appropriate to the size of the issue.

“But it will be a serious proposal, not a symbolic one,” stated the official.

The suspension of cohesion funding, on top of the 5.8 billion euros of recovery fund awards that are now suspended, would be a severe blow to the Hungarian economy, which is already suffering from a weaker currency, increasing borrowing rates, a growing budget deficit, and soaring inflation.

Source: Reuters

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