The EU has given Hungary a month to act on the legislation before suspending funding

The European Commission has given Hungary a month to respond to rule of law concerns before asking EU governments to freeze part of the funding it receives under the 2021-2027 budget, Reuters reported.

The new deadline is part of an EU process known as the “conditionality mechanism” designed to protect the EU’s financial interests against legal provisions breached by the EU government. This is separate from other legal proceedings the EU has initiated against Hungary.

The commission believes EU money is at risk in Hungary due to corruption, which can take the form of tenders for EU-funded projects involving a bidder usually linked to the ruling party..

Furthermore, the EU executive is concerned about the independence of the judiciary, the media and non-governmental organizations.

Hungarian Prime Minister Viktor Orbán has dismissed EU and US concerns about corruption in Hungary in the past, but senior Hungarian officials have said in recent weeks that Budapest is willing to work with Brussels to address its concerns.

Hungary proposed this week to limit the number of public auctions in which a single bidder participates to 15% of the total number. Budapest allowed courts to order cases to proceed even if prosecutors decide not to pursue them, and to make Hungary’s legislative process more transparent and inclusive.

Due to its concerns about the EU budget, the Commission introduced a “conditionality mechanism” in April. Finally, it will lead to the suspension of 21 billion euros allocated to Hungary from the EU budget.

The Commission announced on Friday that it had forced Budget Commissioner Johannes Hahn to inform Budapest of measures EU administrators intend to propose to EU governments if Hungary’s remedial measures are insufficient.

“Hungary now has a period of one month in which to provide its observations and additional information, in particular regarding the proportionality of the measures considered by the Commission,” the commission noted.

In addition, Hungary has the opportunity to submit more appropriate remedial measures.

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The affected funds are so-called cohesion funds – which EU countries that are poorer than the Union average receive to improve infrastructure such as roads and bridges, water treatment plants or transport.

The Commission’s proposal to EU governments will not include all cohesion funding for Hungary, as it must be proportionate to the scale of the problem, a senior European official said on condition of anonymity.

“But it will be a serious project and not a token one,” the official added.

The suspension of the cohesion funds, with more than 5.8 billion euros of rescue fund grants still frozen, would be a major blow to the Hungarian economy, which has been hit by a devalued currency, rising borrowing costs, a widening budget deficit and a rise in inflation.

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