By Thomas Fazi
Hungary is at risk of losing more than €1 billion in EU cohesion funds due to an ongoing conflict with Brussels over the country’s alleged violations of the rule of law. The deadline for Hungary to meet EU requirements and implement corrective measures expired yesterday, December 31, marking a pivotal moment in its relationship with the European Union.
This would be the first time an EU member state permanently and irrevocably loses funding under the Rule of Law Conditionality Regulation, a mechanism introduced in 2020 purportedly aimed at strengthening the member states’ compliance with “EU values” by allowing the European Commission to withhold funds to governments that are found to be in breach of the rule of law — as defined by Brussels, of course.
Following the introduction of the new regulation, the EU proceeded to freeze €6.3 billion in EU cohesion funds to Hungary, as well as approximately €6 billion in grants from the Covid-19 NGEU recovery fund, citing concerns over irregularities in public procurement, inefficiencies in prosecution and corruption. Meanwhile, raising similar concerns, the Commission also froze approximately €140 billion in EU funds to Poland — then governed by the conservative Law and Justice (PiS) party.
Anna-Kaisa Itkonen, a spokesperson for the European Commission, confirmed that the €1 billion at stake represents the initial tranche of suspended cohesion funds. “This loss is irrevocable, and Budapest has no right to appeal”, she said in a statement to the Polish news agency PAP. The funds relate to commitments made in 2022, meaning Hungary will not be reimbursed for projects it carried out under the EU cohesion policy that year. Failure to address the EU’s recommendations could result in Hungary losing an additional €1.1 billion by the end of 2025. Further penalties may follow through the conclusion of the current financial period in 2026 unless substantial reforms are implemented.
The decision, if confirmed, marks a substantial escalation in the EU’s war against Orbán — and the principles of national sovereignty and democratic self-determination in general. It’s important to understand that the conditionality mechanism is more than just a way for the EU to impose its “values” on member states by resorting to financial blackmail, which would be concerning enough, especially where such “values” are misaligned with national sensitivities and democratically approved policies, on issues ranging from immigration to LGBT topics, as is clearly the case with Hungary.
The reality is that the rule of law is, more than anything, a convenient pretext for targeting dissenting governments that resist aligning with the EU’s expanding supranational authority and broader political agenda — including on matters largely unrelated to the rule of law, such as economic and foreign policy. This is why the EU is more than happy to close an eye to rule of law violations when pro-EU governments are concerned, so long as they comply with EU policy on the issues that really matter, such as Ukraine.
Poland is a textbook example: within a year of the left-liberal pro-EU coalition led by Donal Tusk taking power, the country has experienced an unparalleled attack on the rule of law. The new government has launched an authoritarian power grab against the media, the judiciary and its political opponents. Yet, all this has been met with silence in Brussels — and even cheered on. Indeed, the European Commission’s reaction has been to unblock up to €137 billion in EU funds frozen for years under the conservative PiS government. This highlights the hypocrisy of the whole rule of law debate — and the EU’s willingness to turn a blind eye to rule of law violations where “friendly” governments are concerned.
As far as Hungary is concerned, the €1 billion at stake doesn’t pose a huge problem from a financial standpoint, amounting to around 0.5% of GDP. However, the latest move signals the EU’s growing aggressiveness against governments that refuse to toe the line. Its willingness to trample over basic democratic principles was on full display in Romania recently, where the EU supported the constitutional court’s decision to annul the results of the presidential election, in which the independent populist candidate Călin Georgescu came out on top, on grounds of alleged — but unproven — “foreign interference”.
This presents Hungary with a dilemma: so far it has managed to maintain a high degree of policy autonomy even in the context of the EU straightjacket; but as the latter continues to tighten the screws on recalcitrant governments, leaders like Orbán may find themselves with no real option but to choose between national autonomy and EU membership.
