Legal grounds for the suspension of EU funding to Hungary now

As always, Hungarian Spectrum welcomes democratic voices from and about Hungary. Today we are publishing an article by Hungarian experts on EU affairs. They asked not to publish their names. The reason for this should be obvious if you have read the study Political discrimination in Hungary.

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More and more high-level politicians are calling for cutting EU funding to Hungary because it does not respect the fundamental values and, in certain cases, even the legislation of the European Union. For example, such statements have been made by Emmanuel Macron, President of the France, Christian Kern, Chancellor of Austria, and Günther Oettinger, Commissioner of the European Commission responsible for the budget. Vivian Reding, member of the European Parliament and former EU commissioner for justice and fundamental rights recently declared: “This would be the most effective way to influence the behavior of a government like the Polish one – making a link with the money. It’s the only thing they understand.” Gajus Scheltema, the ambassador of the Netherlands to Hungary, referring to the Hungarian government in an interview a few days ago, declared: “The argument over what happens with our money is indeed growing ever fiercer. We can’t finance corruption, and we can’t keep a corrupt regime alive.”

However, when speaking about the violations of the principles of democracy and the rule of law in EU member states, it is often said that at present there is no legal ground to suspend EU funding to the countries concerned. The German government started to investigate the possibilities to enable the European Commission to freeze funding for EU member countries that don’t comply with the EU’s standards regarding the rule of law – during the next budget period, i.e. 2021-2027. A recent editorial in The Economist (Stop spoiling Hungary’s prime minister – What to do when Viktor Orban erodes democracy) proposes that “the EU should use upcoming budget negotiations to apply fiscal pressure.” Michael Meyer-Resende, executive director of Democracy Reporting International, proposes in his article in Politico (How to fix Europe’s ‘rule of law’ blindspot – Freezing funding to misbehaving members will arm the bloc to withstand authoritarian assaults on democracy) that after 2020 the multi-year agreements which regulate the paying out of EU funds to member states should stipulate that “funds can be stopped following serious breaches of obligations on democracy, human rights or the rule of law.” All this means that not much would happen until 2021, which is certainly very worrying in view of the tendencies in the countries concerned.

In our opinion, there is no need to wait until 2021, as existing EU legislation provides sufficient legal ground for suspending EU funding to Hungary. Moreover, we are convinced that if the European Commission had acted in accordance with EU legislation, it would have suspended EU funding to Hungary a long time ago.

Article 30 of the EU’s Financial Regulation (966/2012) states, among other things, that EU “funds shall be used in accordance with the principle of sound financial management, namely in accordance with the principles of economy, efficiency and effectiveness.” Also, according to this regulation, “The principle of efficiency concerns the best relationship between resources employed and results achieved.” Let us look at one of the countless concrete examples which prove that the Hungarian government uses EU funds in a way that contradicts this principle. (The readers of Hungarian Spectrum are certainly familiar with the details of this example; however, it seems expedient to summarize it here.)

Lőrinc Mészáros is a simple gas-fitter and mayor of the small village of Felcsút where Hungary’s present prime minister, Viktor Orbán, grew up. After Orbán came to power in 2010, the minor company of Mészáros and his wife suddenly started to get enormous orders from the government to implement investments in a wide variety of fields, almost exclusively funded by EU money. By now Mészáros is one of the richest people in Hungary. Last year the most-read political daily newspaper in Hungary was bought and closed by Lőrinc Mészáros. This move came just after the newspaper published investigative articles about the corruption affairs of two close associates of Viktor Orbán. Lőrinc Mészáros also bought the overwhelming majority of the regional newspapers, which now echo only government propaganda. We are certain that all this contradicts the provision of the Financial Regulation on “the best relationship between resources employed and results achieved.”

Furthermore, according to the Financial Regulation, “The principle of effectiveness concerns the attainment of the specific objectives set and the achievement of the intended results.” Let’s see another striking example of the violation of this principle.

The Hungarian government announced that it will allocate in 2017 and 2018 most of the EU money available for the funding period 2014-2020, and in fact, it has already started to implement this measure. It is clear that the only purpose of this government decision is to help the victory of Orbán and his party, Fidesz, at the national elections in the spring of 2018, without any consideration of what will happen after 2018 when EU funding will be mostly exhausted. Such jerking of the economy is also extremely detrimental to business in general. Furthermore, the rapid disbursement leads to inefficient use of EU money, and greatly increases the risks of corruption. These are just the opposite of the “intended results” of EU funding. Moreover, the use of EU money for party political purposes is not included at all in the “objectives set” by the EU.

According to Article 59 (2) of the Financial Regulation, “When executing tasks relating to the implementation of the budget, Member States shall take all the necessary measures, including legislative, regulatory and administrative measures, to protect the Union’s financial interests…”

It would fill many pages just to list all those documents that prove that, since 2010, the Hungarian government and Parliament have transformed the whole legislative and institutional system in a way which makes it much easier for certain political and business groups to steal/misuse EU funds. Here we would just like to refer to the five resolutions of the European Parliament between 2011 and 2017 on the situation in Hungary. The smothering of civil society organisations, repressions against independent media, and the wide-spread political discrimination also means much less control over the use of public money, including EU funds. We are convinced that to suspend EU funding it is sufficient to know that a member state has taken many “legislative, regulatory and administrative measures” to eliminate the means for protecting the Union’s financial interests.

According to the EU’s Regulation on the European Structural and Investment (ESI) Funds (1303/2013), these funds “provide support, through multi-annual programmes, which complements national, regional and local intervention, to deliver the Union strategy for smart, sustainable and inclusive growth.” Accordingly, money from ESI Funds and other European funds has been used, among other things, to improve education and strengthen civil society organisations. However, by now, the EU funding for these purposes does not complement national support but only counterbalances to a minor extent the destruction caused by the Hungarian government.

It is also clear that many other interventions by the Hungarian government also contradicted the aim of “smart, sustainable and inclusive growth.” For instance, as mentioned above, the legislative and the institutional system has been continuously tailored in a way to make it possible to steal enormous sums of taxpayers’ money. Thus, what the EU funding complemented to a certain extent was the money missing due to these thefts. (Such thefts are well known to the readers of Hungarian Spectrum. Just as examples of the numerous cases, we mention the changing of the regulation governing the trading of gas via pipeline in order to fill the pockets of Viktor Orbán’s friend, the colossal swindle about residency bonds, and the transferring of an incredible amount of public money from the Hungarian Central Bank to private foundations.)

According to the EU’s Regulation on the European code of conduct on partnership in the framework of the European Structural and Investment Funds (240/2014), the governments of the member states must closely cooperate with “bodies representing civil society at national, regional and local levels throughout the whole programme cycle consisting of preparation, implementation, monitoring and evaluation.” They should also “examine the need to make use of technical assistance in order to support the strengthening of the institutional capacity of partners, in particular as regards small local authorities, economic and social partners and non-governmental organisations, in order to help them so that they can effectively participate in the preparation, implementation, monitoring and evaluation of the programmes.” The difficult and ever worsening conditions in which civil society organisations work make it almost impossible for them to be meaningfully involved in these processes, and this further contributes to the improper and inefficient use of EU funds in Hungary.

In the Treaty of Accession to the EU, Hungary declared the following: “Our common wish is to make Europe a continent of democracy, freedom, peace and progress. The Union will remain determined to avoid new dividing lines in Europe and to promote stability and prosperity within and beyond the new borders of the Union. We are looking forward to working together in our joint endeavor to accomplish these goals.” In our understanding, this means that after the accession to the EU, Hungary should have improved its legislative and institutional systems as much as possible in order to achieve these goals; at the very least Hungary should refrain from any backward measures. It should be convincing enough for the European Commission to suspend funding to Hungary that during the last seven years the Hungarian government took a direction which is just the opposite to what it legally committed itself.

There is already widespread discontent in Hungary with the way EU money has been used. This is a further reason for applying the related provisions of EU legislation and suspending EU funding to Hungary until the necessary steps are taken by the Hungarian government to ensure the use of EU funds in accordance with the EU acquis. This is all the more necessary because such funding, in our opinion, is indispensable for the future of the European Union. We fully agree with the author of the article One of the first steps after Brexit must be the reform of the EU budget that “it is absolutely necessary to provide EU funds to the less developed member states with the goal of improving their economic well-being as well as their political stability in order to strengthen the EU as a whole and to make it more competitive globally. But EU taxpayers’ money must be used for this purpose, not against it.”

September 3, 2017
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Minusio
Guest
Sad to say, quite in contrast to its intentions this article illustrates clearly how difficult it is to get a legal handle on Orbán. As elaborate as the process for access to the Union is, post-access procedures lack practically all sanctions in the case of misbehaviour. A case in point are the numerous OLAF investigations against Hungary. They were largely buried in Hungarian drawers because OLAF procedures presuppose a functioning, independent judicial system in the member country concerned. As we know an independent judiciary does not exist in Hungary. But there is no EU law against not having an independent judiciary branch. The misery begins with a lack of definitions. For many citizens of the former Eastern Bloc countries democracy meant the freedom to travel and the prospect of buying a flashy car. Where in the EU acquis do we find a definition and its sub-definitions of democarcy as the following (taken from Wikipedia for the sake of brevity)? “According to political scientist Larry Diamond, democracy consists of four key elements: (a) A political system for choosing and replacing the government through free and fair elections; (b) The active participation of the people, as citizens, in politics and civic life;… Read more »
Member

@Minusio, Your points a) to d) are the issues of article 2 of the treaty of the European Union:

“The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the
rule of law and respect for human rights, including the rights of persons belonging to minorities. These
values are common to the Member States in a society in which pluralism, non-discrimination,
tolerance, justice, solidarity and equality between women and men prevail.”

Jean P.
Guest

“There is already widespread discontent in Hungary with the way EU money has been used. This is a further reason for applying the related provisions of EU legislation and suspending EU funding to Hungary until the necessary steps are taken by the Hungarian government to ensure the use of EU funds in accordance with the EU acquis.”

In my opinion taking steps to ensure the proper use of EU funds is not enough as a condition for keeping the EU cash fountain running. It should also be a condition that the enormous assets acquired by the Gang for money stolen from EU grants should be confiscated and administrated in such a way that they don’t get stolen again.

dos929
Guest

Unfortunately, the EU proved to be a ‘toothless tiger’ when it comes to enforcing its own laws and regulations. In Hungary’s case it is like the UN would finance North Korea’s nuclear programme. There were plenty of warnings right from the beginning of the Orban era; there were the Tavares and Scheppele reports among others. It is some years now that there is the book of Magyar Balint detailing the extent of the corruption practices by the Orban regime, but all these had no affect on the various EU commissions. Thus the appeasement policy of the EU towards Orban is no different from the policies of the world governments towards the North Korean regime. And we don’t have be overly smart to understand where such policies will take us, as yet the EU still just talking without acting. I, for one, don’t hold out for any major step by the EU to defend democracy in Hungary and defend itself from the Hungarian and Polish regimes.

Michael Kaplan
Guest

Thanks for the article. Given the recent “1984” campaign using George Soros as the “enemy”, I can only hope that the EU actually develops a strategy such that Orban’s rule is not enhanced by the threat of the loss of $$, let alone the actual loss of $$. I am only a simple guy who can not offer advice on such matters. As an American of partial Hungarian origin, I have no idea how to limit the damage of our “dear leader”, Mr. Trump, let alone Orban. Still I hope for the best in both Hungary and the USA. Nevertheless, maintaining free and independent thinking is one form of resistance. This is perhaps the “Hungarian Spectrum” gift to Hungary(and other countries).

Guest
The amount of corruption in Hungary really is a kind of record – on a similar scale this has only happened in outright dictatorships in Asia, Africa and the Middle East, never in Europe afaik! Even in Fascist times and under the Communists there was nothing comparable – the rulers of course had more money and privileges than the regular people but making billionnaires out of simpleminded party honchos is quite an achievement. Their showing off (Rolexes, Gucci handbags, SUVs of course) is spectacular and it also seems to say something about Hungarians: Is it possible that Hungarians instead of indignation just get envy and admiration for people like that? PS: This is similar to the situation in conservative Bavaria where people also kind of admire Seehofer (my brother in law usually calls him the “god king” – he’s a history buff) who is a perfect example of the DAISNAID syndrome: Do as I say not as I do! PS and OT: My sister and her husband visited us right now and we had interesting discussions on European politics – for them it is also unbelievable that the EU doesn’t react! Just driving through the country side, looking at the… Read more »
Ferenc
Guest

re: your sister and her husband
The problem is that Europeans can hear and read a lot about current things in Hungary, but it’s impossible for them to really imagine what’s going on without having seen (incl.explainations/translations) with their very own eyes.
I strongly recommend to all media (paper/radio/TV/internet) in EU countries to start making really insightful reports about current Hungary. That’s the way to inform all Europeans and get them demanding from their own governments to act!

Observer
Guest
The prime issue here is POLITICAL WILL, which was, and is still, lacking – e.g. not long ago EU commissioner for justice (!) Vera Jourova stated that democracy is fine in Hun, so did/do many EPP leaders, who at best speak about “dangers to democracy” or “dangers” of corruption. While there are no sanctions provisions, the conditions for the use of funds are there to be complied with and, it can be argued, enforced by appropriate measures to ensure compliance and in no way as a punishment. If the political issues are too sensitive, the brazen and overwhelming corruption would be a straightforward thing, one would assume. But the beating about the bush and feet dragging proves there isn’t enough political will here either. As all familiar with administration and law know, there are many subtle, technical ways to suspend payments by way of investigations, paper pushing, milking deadlines, etc. – ask Sir Humphrey Appleby. It’s appeasement again, (i.e. no trouble in out term in office) reinforcing the rouges’ view of the EU as weak and impotent and encouraging them to continue their loot and pillage. The short term individual interests of EU politicians let the rot spread and undermine… Read more »
Ferenc
Guest

imho the EPP is the main problem!
Look the differences in approach to Hungary and Poland!
When EPP finally kicks out FID things might seriously change…

ambator
Member

There is a school of thought claiming that the European infusion of massive amounts of money, approximately the 4% of the GDP, is outright detrimental to Hungary. I share this view, because this monies distort the market, eliminate competition, finances the rise of the cleptocracy, prevent efficient developement, and increases poverty, as it is sucktioning budgetary resources away ifrom those who are entitled to it.
In political terms the harm is probably greater, because the Fidesz government uses the EU funds much like an oil sheikdom would use oil money, that is financing the largess and greasing the wheels of business. As a conequence the ill-gotten money buys, through illicit channels, more political and finnacial power for the movers and shakers of the system. The increased political power next enables more economic gaines for the kleptocracy.
There is no need to look further than Venezuela to see the type of interaction of cheap money and corrupt power. The result is well-known and the outlook is as bleak as can be. Therefore, the sooner the EU stops the transfer of those funds, the greater good it will do for Hungary.

Observer
Guest

ambator
“the European infusion of massive amounts of money, approximately the 4% of the GDP, is outright detrimental to Hungary…”

Correct. Same findings by the authors of Dictators Handbook.

Observer
Guest

Guys,

Check out the Politico article above mentioned.

wrfree
Guest
The EU has finally moved after many years of showing a fair amount of patience to some who appear to prefer a rather caustic relationship with the democratic club. And as Orban has constantly harped on the tremendous ‘endurance’ of the Magyar nation in the face of multiple iniquities the EU must be aware that it must be prepared for the perilous long haul to deal with some countries who obviously have different ideas on the trappings of democracy. They better have the stamina to deal with ‘starving’ aggressive dogs who always seem to know where food and sustenance lies. The EU so far has lost an arm. Next could be the entire torso. In the case of Magyarorszag its intransigence not only on the migrant question but also in its flouting of democratic principles indicates it is on a road diametrically opposed to the EU. When Orban identifies Brussels with blackmail well that part of the continent is in alternate universe. The EU whether they realize it or not is the ‘Empire’ under attack. And a Russian Vlad as Vader waits in his galaxy far far away. But he can as his ‘aliens’ are of great use as they… Read more »
exTor
Guest

I had tried to send this just past midnight BP time,
however my Internet access crapped out on me then.

comment image

https://euobserver.com/migration/138857
EU rejects Hungary’s demand to finance border fence

Viktor Orbán had to have known that his request that the EU pay for half of the antirefugee-fence cost was a nonstarter, so why initiate the demand in the first place? Is Orbán’s demand some kind of election ploy to make him look sympathetic in the face of ‘EU bullying’?

Regardless of Viktor Orbán’s rationale, the immediate start of EU action against Hungary should have some sort of antiOrbán payoff with respect to the 2018 election. The rejection is ammunition against the VO regime.

MAGYARKOZÓ

Observer
Guest

Of course it is a propaganda ploy, like everything else: it is a warmed up Hungary defending Christian Europe myth and the We are so good and righteous, but everybody is against us.
Reality, contradictions have no place here, e.g.
– 200 k were allowed to pass through Hungary to DACH countries;
– Greece, Italy and Spain bear the burden of 200 + thousand,
– but there are no refugees in Hu.
– the fence redirected the flood to Serbia/Croatia, Slovenia and Romania,
– Hu is receiving substantial money from the EU to handle the refugees, but doesn’t do much,
– the fence defense was supposed to be max. 22 billion ft, now it is 270 !?

Lies, damn lies, Orban.

Member
Sierra Leone warlords recounted how they recruited child soldiers and ordered mass murder, rape and maiming for the explicite purpose of attracting international aid from which they could take their share. The parallel may be extreme, but the Orbán’s government’s main financial lifeline is EU funding, and after diverting it, the country stays behind and gets even more funding. (One could argue that the secondary source of income is peddling our position in EU and NATO to countries outside the alliances: Russia, China, Iran, Azerbaijan, Kazakhstan etc.) So, the key step should be a comprehensive examination of who benefited from the 2007-13 funds in Hungary. There is ample evidence that we can talk about institutional grand corruption, i.e., the total failure of the Hungarian state to distribute the funds responsibly, in the interest of the EU members. This is where the EU could take a move: freeze the distribution of funds until a thorough audit of all awarded projects and those who benefited from them. Everybody is aware of the obvious bias and bid-rigging in construction projects, favoring the most visible government-friendly billionaires. But in addition to the few hundred stinking multi-billion forint projects, there are tens of thousands of… Read more »
Guest

Thanks for this!
And of course there thousands of little things, new rules in new laws that are only meant to further the illegitimate (can’t say illegal …) transfer of money, just think of the tobacco shop licences aka licences to print your own money!
So whenever Fidesz makes a new law (and they often need just one day in parliament without any discussions) the first question has to be:

Cui bono?

wrfree
Guest

After reading ‘Political Discrimination in Hungary’ the decriptions of Magyarorszag as being democratic must be amended fortwith as simply as a dog cannot be a cat. It is inconceivable that the repression described in the document can coexist along with what is in reality a phony appellation.

Perhaps the only things that can be noted definitively is that the country believes it is one ….wholeheartedly Christian and two …..it is now of the ‘illiberal’ persuasion. And finally three… if they’re a hotel they always leave the light on for the ‘next- door’ visitors from the East. That’s Magyar ‘hospitality’…..just hovering on the edge of darkness.

wrfree
Guest

Sorry.. Getting it right….’fortwith’ should be ‘forthwith’..

Member

That study cannot be considered serious political research. It just aggregates news reports, without comprhensively citing sources. One of the few footnotes actually refers readers to an article by the Gawker.

Emil W. H.
Guest

In 2014 and 2017 the money from the EEA and Norway Grants going to Hungary got frozen by the Norwegian government because of the Hungarian governments attempt at hindering the funding of independent organizations working against Fidesz’ political agenda in the country. To my understanding this was effective in 2014 and the money was “unfrozen” again.

Can someone clarify for me why this isn’t possible in the case of the EU money? How can the EEA Grants be frozen and not the EU funds?

wpDiscuz