Hungarian officials say a deal on funding for the country’s Recovery and Resilience Facility (RRF) now depends only on the European Commission, with the government having accepted the body’s position on the contentious issues.
Gergely Gulyas, the prime minister’s chief of staff, said in a recent interview that in a letter sent to the EU’s executive body, the government had made concessions and a deal was now a technical matter.
Hungary submitted its RRF plan 14 months ago with its request for cohesion funds for the 2021-2027 budget period, but none has been approved by Brussels, citing a lack of transparency in public procurement and a high level of corruption.
Hungary asked for 7.2 billion euros in funding from the EU recovery fund, but based on Hungary’s economic performance in 2020 and 2021, the final amount would be €5.9 billion.
The government initially turned down the other strand of the RRF facility, a €9bn loan, but was forced to do an about-face after dealing with the fallout from a massive pre-election spending spree and the deterioration budget balance.
Budapest urgently needs to seal a deal with Brussels on access to vital EU funds to prop up its struggling currency and shore up public finances. The tax adjustment announced so far has done little to console investors.
The exceptional tax of 800 billion HUF (2 billion euros) is not a market friendly way to consolidate the budget, according to analysts. A deal with the EU could bring imminent relief to the market and reverse the forint’s slide, they said.
Based on Gulyas’ comments, Hungary has committed to reducing the single-bid procurement ratio to less than 15%.
The government will take steps to allow judicial review of decisions of the Attorney General in corruption cases; it will reduce the use of accelerated procedures to legislate to respond to the EC recommendation on social consultation, and it will use a “significant” part of EU resources to strengthen the country’s energy independence, he said. he adds.
Hungary will modernize the country’s second largest power plant, Matrai Eromu. The lignite power plant represents 50% of the country’s CO2 emissions and 15% of its electricity needs. Three gas-fired power stations with a capacity of 500 MW will be built over a period of two to three years.
A significant increase in teachers’ salaries is also part of the conditions for accessing EU funds, according to local media. Teachers’ salaries are the lowest among EU countries that are members of the OECD and represent only 58-66% of the salaries of other higher education graduates, according to the EU national report. About 10% of positions are vacant and the situation in poor rural areas is critical.
The Orban government has claimed that Brussels is blocking RRF funds because of the country’s controversial anti-LGBT regulations. The government has used this argument for the last 12 months, but there could be a change in communication.
Hungarian Regional Development Minister Tibor Navracsics told commercial television Atv in a recent interview that legislation that stigmatizes LGBT people and confuses sexual and gender diversity with pedophilia is not the reason the EU had withheld the funds.
Monday’s meeting between Navracsics, a former Hungarian EU commissioner, and the liberal mayor of Budapest could also mark a turning point. Mayor Gergely Karacsony welcomed the establishment of the Regional Development Forum which is supposed to coordinate development proposals made by the government and the city of Budapest for EU-funded infrastructure projects.