The EU Commission's rule-of-law proposal is out, quite in line with expectation

HUNGARY - In Brief 18 Sep 2022 by Istvan Racz

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The EU Commission has made up its mind as to what to propose to the European Council (more accurately Ecofin) on Hungary's ongoing rule-of-law procedure. The proposal is to set a financial penalty of €7.5bn of development grants, which represents 65% of Hungary's quota for three cohesion policy programs (transportation, environment and regional development) under the EU's budget for 2021-2027. This is very close to budget commissioner Johannes Hahn's original proposal of July 20, which was leaked by a Hungarian opposition member of the European Parliament last week. However - and this is also in line with widespread expectation - the Commission is proposing to grant Hungary a two-month grace period, during which Hungary should adopt no less than 17 acts of parliament, all with a view to eliminate corruption related to the local allocation and use of EU funds. These pieces of law have been all negotiated, and even worded together, in recent weeks, and so their introduction is indeed the government's existing commitment, rather than a unilateral demand of the Commission. Should Ecofin support the proposal, which we find likely, and Hungary carry out all the required reforms by the November 19 deadline, then sanctions would not be finalised, and talks could proceed towards the composition of Hungary's plan on how to spend its 2021-2027 budget quota and its allotment of the RRF facility. No part of these have been approved by the EU Commission so far, and so disbursements by the EU from these facilities is currently out of the question. Meanwhile, Hungary will continue the implementation of its programs under the 2014-2020 EU budget. The latter are not affected by the curr...