Hungary working to reach agreement on EU recovery funds by year end

BUDAPEST (Reuters) -Hungary is working to reach an agreement with the European Union by the end of the year on gaining access to billions of euros worth of pandemic recovery funding, state news agency MTI cited the country’s new European affairs minister as saying.

The EU’s executive Commission froze access to the funds for Hungary and Poland over their nationalist governments’ track record of undercutting liberal democratic rules by restricting the rights of migrants, gays and women, as well as increasing state control over media and the courts.

Hungarian minister Tibor Navracsics told MTI late on Thursday that Budapest would do everything it could to be able to sign an agreement on Hungary’s recovery plan “in the second half of the year or toward the end of the year.”

Navracsics however added that the process leading to the signature of the agreement was “complicated”, striking a less optimistic note than on Tuesday, when Hungary had indicated that negotiations were in their final phase.

Asked for comment, the Brussels-based Commission, however, reiterated its long-standing position that Budapest must step up efforts to fight corruption to unlock the money.

“The Commission takes its role in safeguarding the respect of … the rule of law … very seriously,” a spokeswoman said.

Poland scored a political win this week as the Commission granted it access to nearly 36 billion euros ($39 billion) that had been blocked over Warsaw’s judicial overhaul that the top EU court struck down for not protecting courts from political meddling.

Warsaw has only offered some concessions, rather than fixing the problem in full, but the political calculus changed in its favour as Poland won praise for welcoming some 3 million refugees from neighbouring Ukraine since Russia’s invasion.

Conversely, tensions between Brussels and Hungarian Prime Minister Viktor Orban have grown in recent months, including over Budapest stalling more sanctions against Russia.

Hungary initially requested 7.2 billion euros in grants under the EU’s pandemic recovery stimulus, but after Russia’s February invasion Orban signalled he also planned to tap the cheap loans offered under the programme.

The absence of an agreement on accessing the funds for Budapest and recently announced windfall taxes on banks and energy firms have pressured Hungarian financial markets, sending the forint to all-time-lows versus the Polish zloty this week.

The EU has long criticised Hungary’s public procurement laws as failing on anti-corruption safeguards. Rights groups accuse Orban of channelling EU funds to his close associates, enriching them and ensuring their loyalty.

Only two of the EU’s 27 countries have not yet had their recovery spending approved by the Commission.

($1 = 0.9309 euros)

(Reporting by Gergely Szakacs and Gabriela Baczynska; Editing by John Stonestreet and David Holmes)