EU officials in Hungary to discuss unlocking billions of euros held while Orbán was in charge

BUDAPEST, Hungary (AP) — European Union officials are meeting Friday in Budapest with members of Hungarian election winner Péter Magyar's team about pressing issues including a massive loan for Ukraine as well as unlocking about 17 billion euros ($20 billion) of aid for Hungary withheld during the reign of outgoing Prime Minister Viktor Orbán.

Magyar will take power in May, but the EU is hoping to jump-start talks to fast-track cooperation with the new government, said European Commission spokesperson Paula Pinho in Brussels on Thursday.

“The clock is ticking for a number of topics," said Pinho. The “preliminary talks” in Budapest before Magyar takes office are to "make sure that once the government is in place action can be taken, if appropriate, and that we do not waste any time.”

The EU froze the billions in funding to Hungary over concerns of corruption and democratic backsliding during Orbán's 16-year rule. But both the EU and Hungary's incoming leaders have prioritized releasing them as soon as possible to give a much-needed injection of cash into Hungary's ailing economy.

European Commission President Ursula von der Leyen wrote on X on Tuesday that “there is swift work to be done to restore, realign and reform” Hungary's policies in order to unblock the funds.

"Restore the rule of law. Realign with our shared European values. And reform, to unlock the opportunities offered by European investments,” said the EU executive, who herself was often vilified by Orbán during his campaign.

Magyar, whose party Tisza won a super-majority in parliament which will enable deep and quick reforms, has said his government will prioritize policies affecting judicial independence, academic and media freedom and anti-corruption in order to get access to the money.

In his first public press conference after winning in a landslide on April 12, Magyar said Monday that Hungary “is in a very difficult financial situation,” and that his new government's task will be “to bring home the money that is hers.”

He added that, unlike Orbán, he would stick to a deal struck in December to provide Ukraine with a much-needed 90-billion-euro loan. Orbán had vetoed the bill after initially agreeing to it, enraging EU officials and counterparts across the 27-nation bloc.

Unlocking funds will require economic and government reform

The funds are split between 10 billion euros of COVID recovery funds and 6.3 billion euros in the cohesion funds designed to lift up struggling economics within the EU.

Brussels and Budapest are rushing to first unlock the COVID funds because they are set to expire in August.

Hungary, a major net recipient of EU funds, had come under increasing criticism for veering away from democratic norms. The Commission had for more than a decade accused Orbán of dismantling democratic institutions, taking control of the media and infringing on minority rights. Orbán rejected the accusations and denounced them as interference in Hungary’s sovereignty.

The Commission suspended the money to Budapest in 2022 over what it said was democratic backsliding by Hungary’s right-wing populist government and failures to tackle corruption and ensure judicial independence. A year later, the Commission found that the government had carried out sufficient reforms to have around 10.2 billion euros ($12.1 billion) released.

Magyar can move almost instantly to reform Hungary enough to unlock the funds, said Zsolt Darvas, a fellow at the Brussels-based think tank Bruegel.

“All the legislative work can be done in a single day if there is a will from the Tisza party to do it,” he said. “That's relatively straight forward and not technically difficult.”

That would involve changing how judges are selected and what power they have.

And Magyar can overcome any setbacks because of the August deadline for the COVID funds by following the example of Poland and Portugal where some of the funds were put in a national development bank for later dispersal, he said.

But Darvas said that out of the 16 billion euros, Hungary has already lost about 2 billion euros because the funds were suspend for two years — and Hungary has been paying 1 million euros a day since June 13, 2024, on top of a 200 million-euro fine over Orbán's refusal to align Hungary's asylum processing claims with EU standards.

Again, Darvas said, Hungary could follow Poland's path by staying mostly closed to migration but still respecting EU law and thus ending those fines.

Hungary's economic crisis won't be solved alone by these funds, Darvas said, but by complying with EU regulations, the new government will signal that the country is a stable place for investments.

More money is available for the defense industry

Hungary could also receive mass sums of money if it joins the EU’s 150 billion-euro Security Action for Europe initiative, or SAFE, which is designed to boost Europe’s defense readiness at a time when the U.S. has been diminishing its role in the continent’s security.

So far, 18 of the EU's 27 nations have received low-interest defense loans, and Hungary is eligible for 16 billion euros through the program. With the other two tranches of cash, these funds would roughly equal 15% of Hungary's GDP, according to an analysis by Jeremy Cliffe at the European Council on Foreign Relations.

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McNeil reported from Brussels.