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In major first, EU triggers power to cut Hungary’s funds over rule-of-law breaches

The European Commission on Wednesday formally triggered a powerful new mechanism that could result in Hungary losing EU funds over rule-of-law violations — the first time the bloc has deployed the authority. 

The Commission had been seeding the ground for months to take the step, but repeatedly delayed the final sign-off. The commissioners met Wednesday and gave the official go-ahead. 

The decision marks a significant moment for the EU. The bloc has never before used this authority, which allows it to slash payouts to members when rule-of-law problems threaten the EU budget. The new mechanism was created in recent years after existing tools to police wayward member countries proved incapable of changing behavior. 

A Commission official told reporters that Hungary is being targeted due to “serious concerns” about its use of EU funding. The official pointed to misgivings over how Hungary doles out public contracts and how it controls and audits EU funds. The official also dinged the country for a lack of transparency and hampering effective investigations and prosecutions.   

These concerns, the official said, have been “ignored” for over a decade, pointing to “continuous breaches” without “any improvement.” 

While the EU officially gained its new powers in early 2021, a court battle and political considerations prompted the Commission to wait for over a year before formally triggering it.

Wednesday’s move heralds the beginning of a months-long process that could end with Hungary losing a significant amount of EU funds, with the decision ultimately up to the Council of the EU, composed of representatives from each country. 

Any funding reduction will need a “qualified majority” to pass — meaning support from at least 55 percent of EU countries representing at least 65 percent of the bloc’s population.

Under the regulation governing the mechanism, the EU may cut funding when rule-of-law violations affect, or could risk affecting, the EU budget in a “sufficiently direct way.”

Officials say that the Commission ultimately opted to trigger the mechanism against Budapest — and not against fellow rule-of-law troublemaker Poland — due to rampant high-level corruption and lack of proper prosecution of graft in Hungary that gave the Berlaymont a strong case. 

Brussels and Budapest have been at increasing odds since Hungarian Prime Minister Viktor Orbán came to power over a decade ago. During Orbán’s time in office, civil liberties groups say the Hungarian leader has gradually taken control of democratic institutions and funneled taxpayer money to friends and family. 

Orbán recently won a fourth consecutive term, after which the Commission announced it would soon trigger the rule-of-law mechanism. 

In a letter to the Hungarian authorities late last year that laid the groundwork for the decision, the Commission pointed to systemic problems and lack of accountability for corruption in Hungary, posing 16 questions on issues such as conflicts of interest and who benefits from EU funding. 

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