Proposal for a Council Implementing Decision on measures for the protection of the Union budget against breaches of the principles of the rule of law in Hungary

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Series Details COM (2022) 485
Publication Date 18/09/2022
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Proposal for a Council Implementing Decision - tabled by the European Commission on 18 September 2022 - concerning measures for the protection of the budget of the European Union (EU) against breaches of the principles of the rule of law in Hungary.

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Regulation (EU, Euratom) 2020/2092 established a general regime of conditionality for the protection of the EU budget. It provides that appropriate measures shall be taken where it is established in accordance with Article 6 that breaches of the principles of the rule of law in a Member State affect or seriously risk affecting the sound financial management of the Union budget or the protection of the financial interests of the Union in a sufficiently direct way.

In November 2021, the European Commission sent a request for information to Hungary pursuant of Article 6(4) of the Conditionality Regulation to which the Hungarian authorities replies in January 2022. In April 2022, the Commission sent a written notification to Hungary which presented the findings regarding a number of issues concerning the public procurement system in the country; a high rate of single bidding procedures and low intensity of competition in procurement procedures; issues related to the use of framework agreements; issues in the detection, prevention and correction of conflicts of interest; concerns related to the use of EU funding by public interest trusts. The notification also presented findings regarding investigation and prosecution, and the anti-corruption framework.

In June 2022, Hungary replied to the notification. Further information was later also provided by the Hungarian authorities. However, the Commission considered that the first reply and the additional letters did not contain adequate remedial measures appropriately committed in the context of the Conditionality Regulation. On 20 July, the Commissions sent a letter to Hungary to inform of its assessment and of the measures it envisaged to propose for adoption by the Council of the European Union in the absence of adequate remedial measures. Hungary replied to that letter on 22 August criticising the procedure and contesting the proportionality of the measures.

Even so, a number of remedial measures were presented and technical discussions have taken place. Further commitment were established by the Hungarian authorities in a letter sent to the Commission on 13 September. The Commission's conclusion was that the proposed measures could in principle address the issues if correctly detailed in relevant laws and rules, and implemented accordingly. Pending the fulfilment of key implementation steps, the Commission considered that a risk for the EU budget remained. This explains the draft Council Implementing Decision tabled on 18 September 2022.

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Commentary and Analysis
Carnegie Europe: Strategic Europe, 15/09/2022: Judy Asks: Is the EU Too Soft on Hungary?
Politico, 20/09/2022: EU gives Hungary an off-ramp on democratic norms
Centre for Eastern Studies (OSW): Analyses, 20/09/2022: Conditionality mechanism: Hungary facing the threat of withheld EU funds
Euro|topics, September 2022: Rule of law in Hungary: EU threatens to cut billions

EurActiv, 22/07/2022: EU gives Hungary a month to act before moving to suspend funds
Bloomberg, 05/09/2022: Orban Agrees to Set Up Anti-Graft Agency to Unlock EU Funds
Associated Press (AP News), 06/09/2022: Hungary to set up anti-corruption agency to unlock EU funds
EUObserver, 13/09/2022: EU Commission mulls 70% cut to Hungary's EU funds
Politico, 14/09/2022: European Commission to propose EU funding cut for Hungary
Euronews, 17/09/2022: Hungary faces EU judgement day that could hammer its economy
Reuters, 17/09/2022: Hungary to submit new laws to unlock EU funds next week
The Guardian, 18/09/2022: EU may suspend €7.5bn in funding from Hungary amid corruption fears
Reuters, 18/09/2022: In a first, European Union moves to cut Hungary funding over damaging democracy
Euronews, 18/09/2022: Brussels calls for €7.5 billion EU funding cut from Hungary over rule of law concerns
EurActiv, 18/09/2022: EU Commission proposes to cut €7.5 billion funding to Hungary
Deutsche Welle, 18/09/2022: EU proposes suspending billions in funds to Hungary
Politico, 18/09/2022: Commission proposes €7.5B funding cut for Hungary but opens compromise path
Bloomberg, 18/09/2022: EU Recommends Freezing Funds for Hungary Over Graft Concerns
Le Monde, 18/09/2022: EU recommends suspending €7.5 billion in funding to Hungary
Reuters, 19/09/2022: Hungary submits bills to meet commitments made to EU - justice minister
RFE/RL, 19/09/2022: Hungary Submits Proposals Aimed At Avoiding Loss Of EU Funds
RTÉ News, 19/09/2022: Hungarian govt submits bill to avoid losing EU fund
RFI News, 19/09/2022: EU Commission moves to ban Hungary's access to funds over corruption allegations
The Irish Times, 19/09/2022: Commission outlines plan to cut €7.5bn in EU funding to Hungary
EurActiv, 20/09/2022: Poland to oppose EU rule of law sanctions on Hungary

European Commission: EU Budget: Rule of law conditionality regulation
European Commission: Press Release, 18/09/2022: EU budget: Commission proposes measures to the Council under the conditionality regulation
European Commission: Remarks by Commissioner Hahn at the College Read-out on the protection of the EU budget in Hungary (18 September 2022)
EPP EP Group: Newsroom, 18/09/2022: EPP demands substantial reforms from Hungary

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