The European Commission has stripped Hungary of 1.04 billion euros in aid in the latest phase of its ongoing political conflict with the defaulting member state.
The amount of money lost is a blow to Hungary, but the decision also has broader economic and geopolitical implications. Hungarian Prime Minister Viktor Orbán has consistently violated EU standards and democratic principles. Now the question is whether he has run out of options.
The EU raises and redistributes large amounts of collective wealth to its poorer countries and regions. Since the 1970s, a complex set of financing instruments has emerged under the banner of “cohesion policy”.
For the budgetary period 2021-27, the EU has allocated 392 billion euros for cohesion policy, complemented by 750 billion euros in grants and cheap loans from the Next Generation EU programme. These funds can be used for infrastructure development, environmental protection and support to the private sector (especially for the green economy).
No other regional organization does anything like this. For poor countries, these funds can amount to a significant portion of GDP, and distributing such large sums of money gives the European Commission latent power.
The European Union is also notable as an institution because it makes support of democratic values and the rule of law a prerequisite for membership of its club. It considers itself a bastion of liberal values and constitutionalism: there should be no place at the table for authoritarians.
However, the EU was slow to implement this rule with Orbán. After coming to power in 2010, the Hungarian Prime Minister began to implement various repressive and cronyist measures, increasing his personal power and the power of his ruling party (Fidesz).
Orbán was also accused of directly using EU funds for these purposes. He was protected for a time by membership of the powerful European People’s Party (EPP) in the European Parliament and, while raising funds from Brussels, he developed his own form of populist Euroscepticism.
Ultimately, he went too far and alienated his former colleagues (leaving the EPP Group in 2021), as the Commission began to move against him.
In 2020, the European Commission introduced the rule of law conditionality mechanism, making it much easier to suspend or withdraw funding from member states if there are concerns about their commitments to democracy. It was used against Poland and Hungary in 2022. To give an idea of the stakes, Poland’s funds unblocked a total of 136 billion euros when its new government agreed to Brussels’ terms.
In Hungary also, more than 30 billion euros were deposited during the same period. The cat-and-mouse game continued, with Orbán threatening and sometimes using his national veto to thwart EU action in support of Ukraine. In December 2023, just before a crucial vote on Ukraine aid and accession, EUR 10.2 billion of solidarity funds were unfrozen, in a rather harshly worded decision. However, another amount of more than 20 billion euros was still withheld.
In July 2024, a report by a commission on the rule of law in Hungary stated that Orbán’s government had (under pressure) made some reforms, but still observed systemic problems around issues such as judicial and media independence.
At the time, Hungary also held the presidency of the European Union (which rotates every six months). Orbán was using this position to promote himself on the world stage, visiting Moscow and Beijing to promote a different “European” approach and further unsettle the EU leadership.
next move
It should be noted that its decision to snatch 1.04 billion euros from Hungary is in some ways a technical issue. Funds are automatically withdrawn two years after the suspension began. But it is nevertheless extremely important because it implies that the status quo will not continue. Without changes, Hungary could lose the remaining funds permanently.
Its implications are many. The EU was accused of tolerating authoritarians in its midst, but this is clearly changing. However, this is changing at a time when more and more nativist populists are coming to power in the EU.
Can the Commission maintain its hardline approach or will pressure from governments soften it? Donald Trump is a warm ally of Orban, but it is not certain that he would be willing or able to help Hungary in this type of dispute. If it tries, it would signal that the idea of a global nativist populist coalition has some merit.
Orbán himself has reacted angrily to this loss of funding and threatened to use his national veto more aggressively – as he has threatened to do before. Hungary is in a fragile state economically so it is not clear how much conflict it can afford.
Meanwhile, opposition to Orbán is growing within Hungary and the rising opposition leader, Peter Magyar, has announced that he could “unlock” billions of EU funds still outstanding. This could be a powerful election slogan (the next one will come in 2026). This would amount to the EU entering Hungary’s domestic political arena in a very concrete way.
,Author: Patrick Holden, Leader of the Online Masters in International Relations: Security and Development, University of Plymouth)
,disclosure statement: Patrick Holden does not work for, consult, own shares in, or receive funding from any company or organization that would benefit from this article, and he has disclosed no relevant affiliations beyond his academic appointment. haven’t done)
This article is republished from The Conversation under a Creative Commons license. Read the original article.
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