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EU delays aid to force Hungary to reform

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TEuropean Union has struggled for years to cope corruption in Hungary, where the ruling party has packed the courts and government contracts tend to go to friends of Prime Minister Viktor Orbán. Now it seems it’s getting serious. Since last year, two new powerful tools have appeared in the block. The first is its €750 billion ($750 billion) COVID recovery fund, which requires each country’s spending plan to be certified by the European Commission. The second is a “conditionality mechanism” that allows blocking EU aid and demand reforms.

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Mr. Orbán is usually condemnatory EU complaints as interference by Brussels bureaucrats. But with billions of euros on the account, Hungary suddenly became interested in cooperation. In August, he proposed 17 reforms to preserve the conditionality mechanism. Nevertheless, in September EUThe budget commissioner has recommended halting 7.5 billion euros in aid until Hungary shows progress. Its request for €7.2 billion in COVID recovery grants has yet to be approved. If it is not approved by the end of 2022, Hungary will lose 70% of this money. Both the plan and the conditional reform mechanism will be put to a vote at the meeting EU of Finance Ministers (Ecofin) in December.

Hungary desperately needs money. The forint has fallen 24% against the euro since 2018. Inflation is 21%; even worse, core inflation (excluding fuel and food) reached 22%. The government froze the prices of potatoes, eggs and fuel, which led to shortages. It also caps the interest rate on deposits to force depositors to buy the bonds needed to finance the budget deficit of around 6% GDP. With a debt of more than 75%. GDPthe government will need his transfers from EU to prevent the worst if, as is likely to happen, the economy goes into recession.

Rule of law experts say the proposed reforms are flawed. The government created a new control body EU funds, but most of its members are close to the ruling Fidesz party. Citizens will be able to appeal if prosecutors drop a corruption case, but they rarely bring such cases in the first place. The judges with whom Fidesz spied on the Supreme Court will remain there. The presiding judge, appointed and approved by FIDES, controls which judges are given which cases, so government officials usually receive favorable hearings. Moritz Körner, German mep who acts as one of the rapporteurs of the European Parliament on the matter, said that the release of cash flows could “irreversibly turn Hungary into a swamp of corruption”.

The Hungarian government responds that the European Parliament “was held hostage by loud and aggressive far-left activists.” Meanwhile, he blocks EUA request for a loan of 18 billion euros to help Ukraine, which must be approved by all member states. Hungarians say that they are against such loans, because they have not received them themselves: the recovery fund provides for joint borrowing, but “we have not seen a penny.”

They may have to wait a while. The commission is expected to inform Ecofin next week that Hungary has not met its conditions. It recommends freezing €7.5 billion under the conditionality mechanism and approving recovery funding only conditionally, with 27 milestones to be met before the cash starts flowing. However, European leaders can soften these conditions: they will get a final vote at the summit on December 19.

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