Critics of the European Union, including many active participants on Hungarian Spectrum, argue that it is the Union’s generous subsidies that keep Viktor Orbán’s “illiberal democracy” alive. Economists repeatedly point out that the yearly amounts distributed as part of the convergence program constitute about 6% of the country’s GDP. Almost every investment sponsored by the Hungarian government is financed by the billions of euros Budapest receives from Brussels. And yet the results are meager. Currently, Hungarian economic growth is under 3%. Without the subsidies the Hungarian economy would be in recession. Not just this past year but most likely ever since 2010.
Of course, we all know on an intellectual level why the Union finds itself in the unenviable position of actively keeping an undemocratic, autocratic regime alive. Yet we find it difficult on an emotional level to accept this ugly reality. While supporters of Viktor Orbán, following their leader’s constant battle cries, accuse the European Union of wielding too much power and attacking national sovereignty, critics of the current Hungarian government would like to see more power given to the European Commission and the European Parliament–power that might more effectively curb the excesses of EU rogue states like Hungary and, lately, Poland.
Recently the EU administration has been flexing its (admittedly undersized) muscles. There is a growing concern in Brussels about the subsidies that keep the Hungarian economy alive, and this concern is being translated into withholding sizable amounts of money from the corrupt Budapest government. Naturally, we rarely hear about these cases because the Orbán government makes sure that they don’t become public knowledge. If they do become known, János Lázár and his “deputy,” the honey-tongued Nándor Csepreghy, explain everything away. They have no compunctions about resorting to outright lies when reporters dare ask them about the large sums of money being withheld by Brussels.
Here I would like to call attention to a few instances where the European Council withheld payment. János Lázár’s office, inside the prime minister’s office, is the central clearing house for all EU subsidies, a relatively new development. Earlier a separate office existed for this purpose but, as Lázár claimed, the prime minister’s office is the only guarantee of corruption-free transactions. Anyone who is familiar with Viktor Orbán’s self-enrichment can only laugh at the suggestion that his office is best qualified to be the guardian of EU subsidies. Of course, earlier the Orbán government tried to shift the blame for corrupt practices in the distribution of the subsidies to the previous government, but it turned out that all of the cases the EU found suspicious occurred after 2010.
The suspension of payment might not be as effective as a total rejection of claims, but it still hurts because, even when the Hungarian government doesn’t receive money from Brussels, it still has to pay for work completed. This “missing money” must be made up from somewhere, and it looks as if this “somewhere” is loans. And loans negatively affect the deficit.
How much money are we talking about? Apparently a lot. According to estimates, about 10% of allocated funds have been withheld, which is €2.5 billion or 775 billion forints. In 2015, in order to fulfill its obligations, the government had to borrow 560 billion forints. That is a tremendous amount of money, the cost of the very expensive M4 line of the Budapest metro.
Sometimes the Hungarian government bargains with the European Commission over what percentage of the total will be taken away. The government also has the option to fight the EU decision. In that case the dispute ends up at the European Court of Justice, which could mean a total loss if the court rules against Hungary.
One of the “problematic” cases is the business venture of Viktor Orbán’s son-in-law, which involves replacing lighting fixtures with more energy efficient ones. There have been so many irregularities in connection with this case that OLAF, the anti-corruption office of the European Commission, launched an investigation. At that point Orbán’s son-in-law immediately “sold” his business to one of Orbán’s favored oligarchs and, according to 444.hu, Hungary no longer submits bills for any public lighting projects.
Another investigation and suspension of payment occurred when it was discovered that for certain projects the government demanded “studies” that were useless or actually plagiarized but cost an inordinate amount of money. Here too, the Hungarian government decided not to press the issue. No bills are sent to Brussels for the worthless “studies.”
Ákos Hadházy, the “corruption sleuth,” discovered incredible overcharging for the modernization of high school chemistry labs. The overcharging must have been really egregious because even the Hungarian government decided to go to the police and ask for an investigation.
What the latest case is all about I have no idea because programs subsidized by the European Union usually have bureaucratic names that give us no clue as to what they actually do. This particular program is called “social infrastructure operative program” (in Hungarian the abbreviation is TIOP). Whatever it is, something must be very wrong with it because a few days ago one could read on the official website of the European Commission that the decision was made not to pay 120 million euros or 37.5 billion forints. This project was a leftover from the 2007-2013 budget, and apparently no money to fund it has reached Budapest for some time. This time we are not talking about a “suspension.” As 444.hu said, “the amount was frozen.” This may mean an outright refusal to subsidize the program.
The reason for the EU’s decision is simple. The Hungarian government was supposed to explain what it had done to correct the problems in the project by February 23. But it looks as if Viktor Orbán’s government, with all its problems with terrorism, forgot about the deadline. Of course, I’m just being sarcastic. Since no answer arrived by the deadline, it is likely that the European Commission will turn to the European Court of Justice where the Hungarian government loses practically all of its cases that end up there.
The latest loss stems from the complaint of former owners of casinos whose livelihood was taken away from them in three days back in 2012. It was announced today that these businessmen had won their case and thus the door is open for demands of compensation, which may be as high as 100 billion forints. The war with Brussels could turn out to be very expensive.