According to the European Commission, Hungary has failed to correctly implement all the requirements.Continue reading
A “megadeal” was struck in Brussels on Monday evening about Hungary’s recovery plan, the suspension of its EU funds in the rule of law mechanism, the EU’s Ukraine aid, and the global corporate minimum tax.
EU ambassadors approved Hungary’s national recovery and resilience plan in Brussels on Monday evening. A written procedure for formal adoption has been launched. According to the European Council’s statement, following the formal adoption of the decision and the fulfillment of 27 “super milestones” set by the Commission regarding institutional reforms to strengthen the rule of law, Hungary will be able to use the facility’s funds up to a total allocation of 5.8 billion euros in grants.
Given the European Commission’s announcement at the end of November, the decision on the rule of law mechanism is not surprising. The EU ambassadors recommended the Council to suspend 6.3 billion euros. They “acknowledged” the work done by the Hungarian authorities but decided that its remedial measures “do not sufficiently address the identified breaches of the rule of law and the risks these entail for the EU budget.” The Commission was not satisfied either with how Hungary implemented the 17 measures set by the Brussels body, originally proposing the suspension of 7.5 billion euros.
The Council stated that the new measures are of a temporary nature and can be lifted without loss of EU funding if the situation is fully remedied within two years. This means that while part of the funds is suspended, no money is lost.
According to Politico, this outcome “amounts to a win for Hungarian Prime Minister Viktor Orbán,” as the recovery plan was approved and the proposed suspension was lowered to 6.3 billion euros.
EU ambassadors reached an agreement to implement the minimum taxation component, known as Pillar 2, of the OECD’s reform of international taxation at the EU level. Hungary has been against this decision and only agreed to support it with a condition. The Hungarian business tax is included in the global corporate minimum tax, therefore Hungary does not have to raise taxes.
The Council also decided that the EU will grant Ukraine a macro-financial assistance of 18 billion euros. Hungary’s exact role is not yet known, but according to Magyar Nemzet, the package does not include a joint borrowing section – which is why Hungary did not originally support the initiative – and Member States will provide aid to the war-torn country through bilateral agreements with the Commission. It is important to note that Hungary was not against supporting Ukraine in general, and the government already allocated the country’s share of the 18 billion euros in next year’s budget.
On Tuesday morning, Minister for Regional Development Tibor Navracsics stated at a press conference that Hungary can sign its agreements with the EU within days. Regarding the suspension, he said that the government has so far completed everything to the day, with one last package of laws to be passed at the end of March to get the EU funds. The suspension could be lifted in April or May, he said. Navracsics confirmed that the deal on the global minimum corporate tax will not lead to tax increases in Hungary.
At the press conference, it was also mentioned that the ratification of Sweden and Finland’s accession to NATO will be on the agenda in February. The government has previously been accused of delaying the decision because of a freeze on EU funds.
Featured photo by the Council of the EU