The EU Commission has threatened Hungary with freezing payments from the EU budget worth billions.

This emerges from a decision by the EU Commission at the end of July, with which the responsible budget commissioner Johannes Hahn was authorized to take this step.

This is a procedural step under the new regulation to protect the EU budget in the event of serious rule of law deficiencies in a member state.

Thomas Gutschker

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

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The EU Commission informed Viktor Orbán's government at the end of April that it had opened an investigation against the country.

Budapest responded to this in three letters, but was unable to dispel the Commission's concerns.

Therefore, at the end of July, she informed the Hungarian government about possible financial consequences.

The Commission's proposal, which was only recently published in the Transparency Register, refers to three regional policy programmes, the funds for which are mainly allocated through public tenders: for the environment and energy efficiency, for the construction of main transport routes and for decentralized economic development.

According to the Commission's decision, several audits have demonstrated a "systemic inability, failure or lack of will on the part of the Hungarian authorities to prevent decisions that violate the applicable law on public procurement and conflicts of interest".

Losses of an estimated eight billion euros

She therefore considers it appropriate to freeze 70 percent of the funds earmarked for Hungary from these programs.

Since the exact allocation of funds has not yet been determined, the proportion can only be estimated.

According to calculations by MEP Daniel Freund (Greens), Hungary would have to forego about twenty percent of the total payments from the EU budget if the funds were distributed roughly as in the financial framework for the years 2014 to 2020.

In the previous financial framework, this would have been EUR 8 billion.

The commission is also proposing to stop giving Hungary money that goes to public foundations in the university system, which Orbán has appointed confidants to.

However, these funds from the “Horizon” research program only make up a fraction of the overall budget.

The Hungarian government had one month to comment on the proposal.

In principle, she could avert the cuts through credible reforms, but the previous exchange with the Commission does not point in this direction.

The trust in Budapest is extremely low, it says there.

In Brussels and Strasbourg it is therefore expected that the Commission will officially propose the cuts to the Council at the end of the month.

The member states then have to vote on it by December at the latest – a qualified majority is required.

MP Freund welcomed the Commission's proposal, but criticized it as insufficient.

"Withholding funds of this magnitude would certainly have an effect in the medium term in the current economic situation," he said.

"However, many EU billions would continue to be exposed to the systematic corruption of the Orbán system and, to a significant extent, would not get where they should."

The Greens are demanding that all payments to Hungary be frozen as long as there are serious deficiencies in the rule of law.

However, Justice Commissioner Didier Reynders ruled this out in mid-July to the FAZ as not being proportionate.