The parliamentary elections in Hungary were hardly over when Ursula von der Leyen let the cat out of the bag: the EU Commission will initiate proceedings against the country to protect the EU budget, its President announced in the European Parliament.

"With Hungary, we were very clear, the problem is corruption," she said.

The necessary administrative act followed on Wednesday: the college of commissioners instructed the responsible budget commissioner Johannes Hahn to send an official letter to Budapest to start the procedure.

It is a first: This new sword is being drawn for the first time in EU budget law.

At the end of the skirmish, Hungary could lose part of its payments from the EU budget.

Thomas Gutschker

Political correspondent for the European Union, NATO and the Benelux countries based in Brussels.

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Summarizing the content of the letter, an EU official said: The Commission has "serious concerns" related to public procurement in Hungary, national control of payments from the EU budget, transparency, the prevention of fraud and Corruption.

The government has "consistently failed to implement recommendations and corrective actions for more than ten years".

During this period there was therefore an "unusually high need" for financial corrections.

In the last financial period from 2014 to 2020 alone, the Hungarian authorities had to admit that payments amounting to 1.4 billion euros were not in line with EU regulations.

Beginning of a multi-stage process

No other member country even comes close to this value.

It was therefore clear early on that the Commission would open the first proceedings against Hungary.

Although there are serious deficits in the rule of law in Poland, there are far fewer indications of actual corruption.

"The Commission has come to the conclusion that there is currently no obligation to open proceedings against Poland," said the EU official.

He pointed out that while there was "margin of judgment" on the one hand, there was an obligation to act as soon as there were "reasonably clear indications" that the EU budget was being or could be harmed.

The Commission firmly expects that Hungary will appeal to the European Court of Justice again against financial restrictions.

Then, at the first test, you want

A multi-stage process that can last up to eight months begins with the official notification.

As a first step, the Hungarian government now has two months to comment on the shortcomings set out in the Commission's letter.

No big surprises are to be expected here, as both sides have already had a dry run.

In November, the government commission in Budapest set out its concerns on eleven pages and asked for information – before the start of the official procedure.

In reply from Budapest, von der Leyen said: It is currently not possible to find a common denominator.

If the re-elected Prime Minister Viktor Orbán sticks to his stance, the next step will be for the Commission to propose measures to correct the rule of law deficits in connection with the implementation of the EU budget.

Budapest can then react to this again.

Then a total of four months will have passed - and the Commission can pass the ball on to the Council, i.e. the body of the member states.

In concrete terms, this means that she proposes restricting payments to Budapest from the budget or restricting the country's participation in EU programs.

Qualified majority of at least 15 states

In this case, Orbán would probably call the European Council next to complain.

He pushed through this option in the negotiations for the new instrument.

It is often referred to as an "emergency brake", but in fact the process is only delayed by a maximum of three months.

The heads of state and government play no formal role - politically, of course, they determine the voting behavior of their ministers in the Council.

A qualified majority of at least 15 states is required there, which together represent at least 65 percent of the EU population.

Only then, after a total of eight months, can funds be frozen or reduced.

How sensitive this is is one of the open questions.

The EU official said any action must be proportionate to the damage done to the EU budget.

The duration and severity of violations will be taken into account - both factors that speak against Budapest.

Incidentally, the state itself would remain obliged to financially compensate the legitimate end recipients of EU services.

But he would no longer get this money back in Brussels.