The 326 billion down payment for Hungary has jumped: our recovery plan will no longer receive a green light in Brussels this year
The point
According to MTI, Minister of Finance Mihály Varga only expressed hope after the meeting that the Hungarian government would succeed in convincing the Commission to approve the HUF 2,511 billion program.
With Ecofin meeting last year in Brussels today, it seems essentially unlikely that the Hungarian program will be approved this year, following a possible green signal from the Commission. For this reason, it also seems unlikely that the Hungarian budget could receive the 13% advance of HUF 326 billion this year.
Important: this money is not lost. Later, after strict adherence to the measures undertaken in the program (milestones, indicators), it will be possible to draw from Brussels, so this money is only temporarily missing from the Hungarian budget, it is true that this will mean many months at a time. Until then, the projects implemented at home must be paid purely from the advance resources of the Hungarian budget.
There is only a theoretical chance of approval this year
We also pointed out in our analysis last week that there is little chance of our recovery program being adopted in Brussels this year, or even until the elections. Commission Vice-President Valdis Dombrovskis has now confirmed the low chance of accepting this year’s program and disbursing advances.
He said that although negotiations between the Hungarian government and the European Commission were constructive at the level of technical staff, Commission expectations that it will not meet the government and therefore cannot accept the program from the Commission. However, this is essential, because only after a positive recommendation from the Commission can the program be placed on the table of Community ministers at all to decide.
As the last meeting of the Minister of Economy and Finance (Ecofin) was held in Brussels today, this body would not be able to approve the Hungarian program this year, if there is a breakthrough between the government and the Commission in the next 1-2 weeks. Legally, not only Ecofin, but any other Council formation (eg the Council of Foreign Ministers, the General Affairs Council, etc.) could approve the Hungarian program if there were a positive Commission recommendation, but based on the above, this is no longer expected this year.
Dombrovskis said today: The Hungarian government is expected to comply with the EU recommendations on the fight against corruption, the predictability, quality and transparency of decision-making, and the reliable monitoring of the regular spending of EU funds. As we have written in detail on the basis of the Commission’s letter requesting information in preparation for the rule of law procedure: a total of 16 are awaiting the panel, including on the decision-making process for the application and the control of the allocation of resources. Thus, although the adoption of the recovery plan and the forthcoming rule of law procedure are separate, in practice they are interlinked and indeed these issues hinder the adoption of the Hungarian plan in Brussels.
As the commitments of the Hungarian government require the amendment of certain two-thirds domestic laws, which may be politically risky before the elections, we wrote last week that the big question is when the Hungarian recovery plan will be adopted in Brussels at all and the disbursement from it. By the way, Prime Minister Viktor Orbán said on public radio on Friday that there will be a deal with Brussels in time and that he will not break the trajectory of the Hungarian economy due to the possible suspension of EU funds.
Mihály Varga, who is attending today’s Ecofin meeting, told MTI that the European Commission has still not decided to approve recovery funds for Hungary to offset the downturn following the coronavirus epidemic. He emphasized that the committee was keeping resources for restrained political reasons and the Child Protection Act passed by the Hungarian Parliament in this attitude. He pointed out that the committee measures by double standards: Malta, for example, has made similar objections, but the country has already received the funds for recovery.
It is incomprehensible and inexplicable what is happening on the part of the committee, Hungary, like all other member states, is an equal member of the EU. We contribute to joint borrowing to help all members provide non-refundable support.
– laiter ki.
The Minister expressed the hope that the Hungarian government would convince the European Commission during the ongoing negotiations that they should approve the support for Hungary.
As we wrote in our separate articles today, Mihály Varga vetoed the proposal for a code of conduct for EU corporate tax at the meeting, but he also supports the amendment of the EU VAT directive with all his colleagues.
Cover image: European Union, European Council media outlet on the press conference following the Ecofin meeting of 7 December 2021