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EU approves Hungary’s recovery plan, holds cash until conditions are met



© Reuters.

By Jan Strupczewski

BRUSSELS (Reuters) – The European Commission is likely to approve next week Hungary’s post-pandemic recovery plan to open the possibility of EU disbursements later, but withhold any payments until Budapest responds. meet all the agreed conditions, sources at the EU executive said.

Under the EU’s recovery plan, Hungary could receive 5.8 billion euros ($6.02 billion) in funding to spend on making its economy greener and more digital – cash without Budapest is in dire need amid rising inflation, slowing growth and soaring borrowing costs.

Separately, the Commission is also likely to recommend next week that EU governments suspend 65% of transfers from the EU budget to Hungary, or about 7.5 billion euros, until more is achieved. Similar conditions to the cash recovery fund, mainly related to judicial independence, were met, the sources said.

The Commission’s move to withhold a total of 13.3 billion euros from Hungary will come after months of negotiations with the government of right-wing Prime Minister Viktor Orban over EU concerns about high-level corruption and protection independence of courts, NGOs and the media. as well as the rights of minorities.

The European Commission sources declined to be named due to the sensitivity of the issue.

Under the agreement with the Commission, Hungary must act on some of these key concerns by November 19, but officials said a preliminary assessment found these steps were insufficient.

Dealing with Hungary’s plan to spend 5.8 billion euros in funding from the EU recovery fund and freezing 7.5 billion euros in Budapest from the so-called EU cohesion fund are two separate legal processes. However, they do share a set of conditions that Hungary must meet in order to receive the cash.

The EU’s approval of Budapest’s recovery plan is one way to open the disbursement option and thus pressure the Orban government to meet many conditions.

Without approval by 2022, 70% of the recovery fund’s funding will be lost forever.

The same logic applies to the recommendation to freeze more than half of the EU cohesion fund for Budapest, which EU countries receive to balance living standards within the 27-nation bloc.

Once Hungary has addressed EU concerns, which mainly revolve around corruption and the independence of the judiciary, so that funds from the EU budget are not at risk of misuse, the payments banking could be unblocked, the sources said.

($1 = 0.9631 euros)

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