EC: PM Orbán’s Request for Fast Loan Still under Consideration

Hungary Today 2022.03.24.

“The European Commission is still examining the letter that Prime Minister Viktor Orbán sent last Friday to the presidents of the Commission, the European Council, and the European Parliament,” responded Andrea Masini, Press Officer for Economic Affairs at the European Commission, to a query from Hungarian economic news portal Privátbankár. Hungarian Prime Minister Viktor Orbán sent a letter to the European Commission, or Ursula von der Leyen personally, asking for all EU funds allocated to the country to be disbursed, including a loan under the reconstruction fund, having requested it in order to deal with the Ukrainian refugee crisis.

This article was originally published on our sister-site, Ungarn Heute.

The European Commission is considering Hungary’s application for the early mobilization of the stimulus fund, but requires adequate justification and a program, as well as a reassessment and approval of the plan already submitted, according to the EU authority’s response to Hungarian business portal Privátbankár. However, based on past experience with the different EU processes, this could be a lengthy procedure.

As we reported, Hungary’s Prime Minister Viktor Orbán asked the European Commission in a letter to partially draw on the credit line made available to the country under the EU’s Recovery Plan, effective immediately. In addition to the wave of refugees from Ukraine, the Prime Minister based his request primarily on the fact that “the economic impact of the war and sanctions is weighing heavily on the Hungarian economy,” referring to Russia’s invasion of Ukraine and the EU’s punitive measures against Russia.

Orbán Gov't Requests Immediate Provision of Allocated EU Resources

Extraordinary circumstances require extraordinary measures, PM Orbán wrote in his letter to European Commission President Von der Leyen, stressing that a war is under way at Hungary's borders and in the past weeks alone, nearly half a million Ukrainian refugees arrived in Hungary fleeing the war.Continue reading

When asked by the portal whether the Commission was open to the Hungarian proposal and when a decision on this issue could be expected, the press officer did not give a specific answer, pointing out that the evaluation of the letter had not yet been completed.

Andrea Masini added, however, that Hungary has not yet submitted a concrete request for “loan assistance” under the Recovery Plan in accordance with its rules (i.e. Viktor Orbán’s letter could be just a first step).

Fact

According to earlier calculations, Hungary would have been entitled to some 5,900 billion forints (EUR 16.1bn) from the EU stimulus program during the coronavirus crisis. Originally, the development plan was designed for this amount, but when the concrete program had to be presented last spring, the government canceled the entitlement to a loan of 3,400 billion forints (EUR 9.1bn) and then raised money on the market in the fall with a gigantic loan issue at a lower price. Most importantly, the government had already communicated at that point that it was only temporarily waiving the restructuring loans and that there was a possibility that Hungary would (partially) draw down the loans later.

He also noted that member states can apply for loans up to a maximum of 6.8 percent of their GDP (gross national income) for 2019 until August 31, 2023 (according to the Hungarian Central Statistical Office, Hungary’s GDP in 2019 was 47,524 billion forints, of which 6.8 percent is 3,232 billion forints – ed.).

At the same time, he pointed out that Hungary would have to justify the request and demonstrate the need for more funding, further reforms, and investments with agreed milestones and targets.

Background: Orbán Unexpectedly Asks Brussels to Disburse EU Reconstruction Fund and Loans

The government previously waived this loan, but is now requesting it. Accordingly, the Cabinet is asking for a credit line totaling about HUF 3,400 billion (EUR 9.1bn).Continue reading

Masini also said that the Commission would then re-evaluate the plan, which still had to be approved by the European Council.

The press officer referred to the plan the Hungarian government submitted to the Commission last May on how it intended to use the money Hungary was entitled to from the Restoration Fund. However, this plan was “only” for spending grants and the Hungarian government did not want to use loans at that time (the fund consists of two major parts: Grants and Loans – ed.).

However, unlike the plans of most Member States, the Hungarian plan has not yet been approved by the Commission.

Featured image via Zoltán Fischer/MTI/Prime Minister’s Press Office