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EU launches process to slash Hungary’s funds over rule-of-law breaches

The European Commission will soon trigger a powerful new mechanism to cut funding to Hungary for eroding the bloc’s rule-of-law standards, Commission President Ursula von der Leyen said Tuesday. 

The announcement comes two days after Hungarian Prime Minister Viktor Orbán won a fourth consecutive term in an election that international observers said was marred by an uneven playing field benefiting the ruling Fidesz party. It’s a theme that has played out over Orbán’s decade-plus in power, which civil liberties groups say the Hungarian leader has spent gradually taking control of democratic institutions and funneling taxpayer money to friends and family.

Von der Leyen said her team informed Hungary of its decision on Tuesday after reviewing Budapest’s responses to an informal letter the Commission sent last November asking for information on its rule-of-law concerns.

“We’ve carefully assessed the result of these questions,” von der Leyen said, speaking to the European Parliament. “Our conclusion is we have to move on [to] the next step.”

Hungary is the first country to face proceedings under the new power, which gives the EU the authority to cut millions in EU payouts to countries where it determines rule-of-law breaches are putting the bloc’s budget at risk. The Commission’s decision to move ahead could signal a turning point in Brussels’ willingness to go after wayward members accused of corruption and democratic backsliding. 

Still, while von der Leyen is now prepared to move ahead after months of deliberation, significant bureaucracy and political debate must unfold before it’s known whether Hungary will ultimately lose out on critical EU funds. 

Once the Commission formally begins the process, a lengthy back-and-forth with Budapest is expected. Then it will be up to the Council of the EU, composed of representatives from each country, to ultimately determine whether to slash the money. Any funding reduction needs a “qualified majority” to pass — meaning at least 55 percent of EU countries representing at least 65 percent of the bloc’s population.

Hungary has long served as a test case for the EU’s ability to combat rule-of-law violations within its own ranks. 

Since coming to power in 2010, Orbán’s government introduced a new constitution and changed the electoral system, while the ruling Fidesz party extended its influence into the judiciary, state media and education system, placing Orbán loyalists at the helm of institutions ranging from the chief prosecutor’s office to a media oversight body. 

At the same time, high-level corruption has run rampant in Hungary, with Orbán’s family members and close friends becoming some of the wealthiest individuals in Hungary — in part thanks to EU-funded public procurement projects. 

As a result, experts and political opponents say, Hungary is now no longer a fully-fledged democracy. The Hungarian government, meanwhile, has long denied there are any problems with democracy at home, rejecting the new mechanism as a politically-motivated tool.

But Brussels has struggled to address democratic backsliding in Budapest, with officials often underscoring that the bloc’s underlying treaties didn’t envision a scenario where a member country goes down an autocratic path. 

For several years, the EU’s various institutions vainly attempted to use existing measures to bring Hungary to heel. The Commission repeatedly took Hungary to the EU’s top court over its controversial moves, but Orbán continued to consolidate power. The European Parliament triggered the bloc’s Article 7 censure proceedings in 2018 — an extreme move that can ultimately result in an EU country losing its voting rights for contravening the bloc’s core values — but the process has stalled. 

Under pressure from frustrated western EU governments and members of the European Parliament — who complained that governments flouting democratic norms are misusing EU taxpayer funds — the bloc created a new mechanism at the end of 2020 that allows the bloc to reduce EU funding to member states where rule-of-law violations affect, or could risk affecting, the EU budget in a “sufficiently direct way.”

But under a political agreement reached among EU leaders, the Commission agreed to hold off on deploying the new power until Hungary and Poland challenge the legality of the new mechanism before the Court of Justice of the EU — a delay that sparked deep frustration among civil society groups and many MEPs.

Ultimately, the court gave the mechanism a legal green light in February, but the Commission opted to wait until Hungary’s election was over to proceed. 

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