Hungary, EU agree conditional release of disputed funds

Reading Time: 2 minutes

The Council of the European Union adopted legislation Friday on releasing funds for Hungary’s EUR 5.8bn Recovery and Resilience Facility (RRF) plan that had been frozen for 18 months, dependent on the country meeting 27 anti-corruption and judicial reforms. Hungary’s steps have so far failed to convince the EU. 

The compromise settlement came after the heads of the member states approved the legislation on Thursday and the Council adopted decisions on the rule-of-law conditionality mechanism and approved the European Commission (EC) assessment of Hungary’s RRF plan.

Cash-strapped Hungary, which is currently running a 22.5% annual inflation rate, also risked losing EUR 7.5bn in EU funding for the 2021-27 period over concerns over state corruption under the Orban administration. 

Hungary retaliated by blocking the setting of a global minimum corporate tax rate, and EU aid package for Ukraine worth EUR 18bn. Poland also held doubts over the bloc showing a united front and adopting a minimum 15% rate, but is believed to have been talked around in discussions on Thursday. 

However on Monday, EU countries agreed to lower the suspension to EUR 6.3bn, in a somewhat pyrrhic victory for Mr Orban. The forint nevertheless strengthened on the news, averting a run on the Hungarian currency and bonds.

The route is now clear for the EU to grant Ukraine loans from money the EC will raise in debt markets, using EU funds as collateral.

Hungary announces that it has seized Russian assets

Hungary claimed to have frozen Russian assets totalling EUR 870mn as of 25 November. This put Hungary, which has repeatedly dissented on Russia sanctions, ahead of most of the other Central and Eastern European (CEE) countries. 

Russian private assets frozen in EU member states total around EUR 19bn. The EU has placed criminal sanctions against 118 entities and 1,241 politicians, oligarchs, soldiers, and propagandists in retaliation to the war in Ukraine. 

In CEE, almost EUR 1.8bn worth of Russian assets have been frozen in Austria, EUR 11.3mn in Bulgaria EUR 10.8mn in Czechia and EUR 4.9mn in Slovakia. The Hungarian state had previously reported only one seizure worth EUR 3,000. Details of the Hungarian seizures were not announced. The EU can now start disbursements to Ukraine from next month.

EU member states will now implement the global minimum tax rate in their own taxation systems, as part of a 130-country initiative.