Hungary starts year with loss of more than €1 billion in EU subsidies

At the beginning of the new year, Hungary lost more than €1 billion (approximately HUF 415 billion) from three EU-funded programs. The government has tried to present the situation as not so definitive, claiming that the money could still be recovered. However, in case of the HUF 400 billion lost at the end of 2024, the European Commission wrote about a definitive loss.

N+3 years = 6.3 – 1.04 – 1.08 billion euros

Similarly to last year’s loss of funds, this one is also linked to the rule of law procedure which has been going on for three years. In December 2022, following months of negotiations, and at the recommendation of the European Commission, the member states blocked €6.3 billion earmarked for Hungary from three EU programs. The decision was almost unanimous, with only Hungary and the then Polish government, which has since been replaced, voting against it.

According to one of the rules of the procedure, "commitments suspended in year n cannot be incorporated into the budget after year n+2." Thus, the amount that became unavailable at the end of 2024 and 2025 is roughly equivalent to the proportionate share of the 2021-2027 EU budget for 2022. The former amounted to EUR 1.04 billion and the latter to EUR 1.08 billion, according to the European Commission's response sent to Telex at the end of October.

As we wrote last year, the EU usually provides ex-post financing for cohesion grants, which means that successful applicants will still receive their money. However, this way, the lost funds will never make their way into the Hungarian budget. It is also possible that some of the calls for proposals will not be issued at all, in which case the non-repayable funds will be missing from here. The funds which were frozen and partially lost were allocated to environmental and energy efficiency, integrated transport development, and regional and urban development programs.

The European Commission took the first step towards freezing funds in April 2022 in order to protect the EU budget "against violations of the rule of law in Hungary." The body had several concerns about the Hungarian public procurement system, including systemic irregularities, deficiencies, and weaknesses in public procurement procedures, problems with framework agreements, as well as with the detection, prevention, and correction of conflicts of interest.

According to the Council's decision imposing the freeze, “these problems and their recurring nature show that the Hungarian authorities are on a systemic level unable to or unwilling to, and are failing to, prevent decisions that violate applicable law in the areas of public procurement and conflicts of interest, and to thereby adequately address the risk of corruption.”

A change of strategy after 2023: waiting for blackmail instead of compliance

In order to access the funds, Hungary had to meet 17 conditions, which, according to the decision, were proposed by the government itself. These include, for example, establishing the Integrity Authority, reducing the proportion of single-bid public procurement procedures, and “introducing a special procedure applicable to serious crimes related to the exercising of public authority or the management of public assets.”

As part of the EU procedure, public interest asset management foundations (or public interest trusts) and all institutions maintained by them were excluded from any new commitments for EU funding. According to the EU's view, these foundations (the ones behind the model-changing universities belong here for example, but so does the foundation that established the MCC University in Vienna or Mol 's New Europe Foundation) do not operate with sufficient transparency, and having political decision-makers on their boards is incompatible with their purpose. Furthermore, the Hungarian government failed to address the Commission's objections, which had been presented months earlier.

Prior to the freeze, the government was making progress on its commitments, which was appreciated by the ministers of the member states. The original Commission proposal would have blocked 65 percent of Hungary's share, but the Council reduced this to 55 percent. Many of "the boxes have already been ticked", EU sources told us in the spring of 2023, and by the fall of that year, a full agreement seemed to be within reach.

Nevertheless, it appears that sometime between 2023 and 2024, the relationship between the Hungarian government and the European Commission soured. For the most part, both sides have since cited the same reason: a lack of political will on the part of the other.

In December 2023, the EU body evaluated the conditionality mechanism ex officio, but did not recommend its termination because it concluded that, despite regular consultations, the Hungarian government had not remedied the problems.

In January 2024, Tibor Navracsics, Minister of Public Administration and Regional Development announced that negotiations had stalled on one of the 17 conditions, namely the one concerning public interest trusts. Up until then, the minister had been in talks with the European Commission and leading up to the fall of 2023 had regularly informed the press about any developments.

Since then, however, it appears that the government has changed its strategy under the leadership of Minister for EU Affairs János Bóka, who stated in 2024 that they no longer consider the conditions a legal and technical problem, but only a political one. As he said: "we do not feel exempt" from cooperating "as constructively as possible" with EU institutions, but added that "they must be fought politically".

The government can request a reassessment at any time, but it only did so in the case of the public interest trusts at the end of 2024, admitting that it had not met all the requirements. The European Commission listed a dozen problems, but the government has neither resolved these nor shown any willingness to do so, claiming that it has fulfilled the conditions.

Permanently lost, unavailable, gone, decommitted

Meanwhile, the messaging from the government and the European Commission about the loss of funds has become reminiscent of Monty Python's parrot sketch.

In January, Bóka said that he did not "feel it was accurate" to say that the EU funds had been lost. In his opinion, this would only be the case if the Hungarian government had failed to meet one of the conditions through its own fault, but he believed that it had fulfilled all of them. Therefore, "we have not lost funds, but they want to withhold certain funds for political reasons."

Tamás Menczer, Fidesz–KDNP’s communications director said in February that “one loses their phone or handkerchief, but not EU funds, because those are dependent on political decisions.”

In December, Minister of Economy Márton Nagy tried to explain the situation to Index: "The claims that we lost a billion euros last year and will lose the same amount this year are not true. Eventually, the European Union will release all of these funds," he said in response to a question that was not specifically about this subject. He argued that the money is not missing from the Hungarian economy because the total value of the tenders announced is much higher than the available budget.

"But we will. Yes, we will lose money that we have not been able to access up till now,"

– Tibor Navracsics said in mid-December in response to a question about the funds that would be lost at the end of the year.

At the end of October, the European Commission said that Hungary had "permanently lost" €1.04 billion at the end of 2024. These funds will be withdrawn from the EU's budgetary commitments and will “no longer be available.”

In early October, Themis Christophidou, a Director-General at the European Commission, said that Hungary had already “lost” €1 billion at the beginning of the year. In a December debate, Budget Commissioner Piotr Serafin used the official term to say that unfortunately, due to the Hungarian government's failure to provide notification, another €1 billion in cohesion funding would be decommitted at the end of the year.

Based on the European Commission's response sent to Telex in October, the deduction will not be implemented immediately. With regard to the funds lost at the beginning of 2025, the Commission notified the Hungarian authorities in July that they should re-plan the financing of the programs within two months. "If a member state does not adjust its financial plans by supplementing the program" or reducing its commitments, the European Commission will supplement the plan "by proportionally reducing the contribution of the funds for the financial year in question. This reduction will be applied proportionally to each priority," the body said.

Why doesn't the Hungarian government consider the situation final?

When not resorting to semantic clowning around, such as saying that a person can lose their handkerchief but not EU funds, the Hungarian government has contested that the loss is final.

Bóka admittedly wants to use the next seven-year budget, starting in 2028, as leverage and would pursue "reparations" there. Orbán, on the other hand, speaking in July 2025 estimated that "we are talking about at least a two-year negotiation period." The conclusions of the latest EU summit did not specify a deadline, but they did subtly hint that if an agreement were to be reached by the end of 2026, there would still be time to pass the necessary legislation so as not to cause any disruption for applicants.

However, if calculating with mid-2027, we would still be subject to the two-year rule at the end of 2026, and we would also lose the €10.4 billion (approximately HUF 4,000 billion) recovery fund, for which the requirements of the conditionality procedure must be met by September 2026. Not to mention that blackmail could also be legally problematic; as there is currently a case pending before the EU court on similar suspicions regarding Hungarian subsidies that have been released up to now, regardless of this.

Navracsics gave an explanation suggesting that they would not wait until the negotiations about the seven-year budget have concluded. The government is convinced that these funds, which "are part of the seven-year budget," can be recovered through negotiations. According to the minister, the April elections will be a turning point because the European Commission is counting on Fidesz-KDNP not winning, but he believes they are wrong. He said that after the elections, the body will have to sit down and negotiate with the government, as the money is still there in the budget. Márton Nagy also said that he believes the situation will be resolved "as soon as we win the election" – after repeating, among other things, the lie that the EU would force Hungary to abolish the 13th month pension.

Meanwhile, the Tisza Party is campaigning with the promise of bringing EU funds home, which Péter Magyar estimates would amount to a total of 8 trillion forints.

The current, 2021–2027 budget is constantly being reallocated towards various purposes, allowing others to grab the freed-up funds. In this way, even the Hungarian government could recover some of the lost funding, and Bóka acknowledged in June that certain reallocations would make it possible to increase the available resources. He did not consider this to be a small amount, estimating it to be in the hundreds of millions, but said it was “not a significant change.”

Regardless of who wins in the spring of 2026, during the 2028-2034 budget negotiations, the government will be able to find two separate amounts with a difference of at least 800 billion forints – this would be possible even without the loss of funds if the government did not have to start negotiating from such a large deficit.

The current budget for 2021–2027 amounts to 1.15 percent of the EU's gross national income. The European Commission's proposed budget for 2028–2034 would be closer to 1.26 percent, as it would also have to repay the loan behind the recovery credit. In the event of a veto or a delay in negotiations, the old budget would continue on a time-proportional basis, meaning that due to loan repayments, net beneficiaries such as Hungary would receive significantly less money than under the current proposal. The budget must be agreed unanimously by the governments, with the consent of the European Parliament. The EP suspects similar blackmail and shortcomings in the 2023 approval of the judicial package, which was blocking almost all of the catch-up funding, and has therefore filed a lawsuit.

None of this changes the fact that the 400 billion forints from early 2025 have already been deducted from the commitments, nor that ticking off the conditions alone will not be enough to recover the 800 billion, or that, due to the conditionality procedure, universities managed by public interest trusts were already complaining of losses amounting to millions of euros in the summer of 2023, and that the Hungarian government launched supplementary programs for them using billions of forints from taxpayer money.