Hungary Sets Sights on EU’s €10.4B Recovery Fund with August Deadline
Hungary’s Race to Unlock EU Recovery Funds
By Jan Strupczewski
BRUSSELS, May 11 (Reuters) - Hungary is racing to meet an August 31 deadline to become eligible for 10.4 billion euros ($12.2 billion) from the European Union's post-pandemic recovery fund and while the task is ambitious, it is still achievable, three EU officials said.
Background: Frozen Funds and Political Change
Hungary's share of the EU recovery fund money -- 6.5 billion euros in grants and 3.9 billion euros in cheap loans -- was frozen by the EU because of Hungary's rule of law problems under the previous government of Viktor Orban.
Hungary also has some 7 billion euros in EU structural funds frozen for the same reason, but has several years to access this cash, so getting the recovery money has priority.
The country's new Prime Minister Peter Magyar, sworn in on Saturday, and his team have been in talks with the European Commission on how to access the frozen funds since Magyar's party overwhelmingly won elections on April 12.
EU Officials Comment on Hungary’s Prospects
"Meeting the requirements for all the 10.4 billion euros before the end of August is ambitious, but not impossible," one EU official close to the issue said.
Requirements and Plans for Recovery Fund Access
To get the money, which would help Hungary's sagging economy and prop up the forint, Budapest will have to present to the Commission a new plan of how it wants to spend it, in line with the recovery fund's goals of making the economy greener, more digital and more resilient to shocks.
The old plan, submitted by Orban's government at the end of 2022, is no longer viable because all the timelines have changed and investment will have to be refocused with new priorities, officials said.
New Submission and Timeline
The new plan, which Budapest is likely to submit on May 27, after talks between Magyar and Commission head Ursula von der Leyen planned for the previous two days, will have new milestones and targets that Budapest will have to meet before August 31.
Once the targets are met, Hungary can ask for the cash linked to them and it can be paid out until December 31, 2026.
Shifting Focus of Projects
Ambitious Task and Legal Procedures
The task is ambitious because even though Magyar's party has a constitutional majority that allows it to push through any law it wants, some laws require procedural steps, such as consultations, and time to process.
Commission Guidance for Maximizing Payout
Since Hungary is not the only country that faces problems with spending the large amounts of EU recovery funds, the Commission issued tips last June to all governments on how to avoid losing the cash and Budapest is likely to use all these options to secure the biggest possible payout, officials said.
Refocusing Spending Plans
The main advice is for EU governments to refocus the spending plans away from projects that are risky, slow or uncertain, and move money to safer options that can legally be completed before the end of August.
Utilizing Ongoing Projects
Governments can also move the recovery money to projects already under way that have been funded from different sources, like the EU's structural funds, but have the same goals as the Recovery Fund. This would allow governments to take advantage of the advanced stage of the projects to finish them by August.
Splitting Projects and Alternative Funding
Similarly, countries can split some projects into what can be realistically done by the end of August and finish them later with money from different EU or national sources, the Commission said in the June document.
InvestEU and Strategic Technology Schemes
Governments can also move up to 4% of their recovery fund money to their compartment in the EU-sponsored InvestEU investment programme, and another 6% to their part of an EU scheme that supports the development of strategic technologies. They can similarly contribute to EU‑level defence or satellite programmes.
National Promotional Banks as an Option
Finally governments can put their recovery money into national promotional banks that finance the same goals as the recovery fund -- an option used by Poland, which was also late to access the recovery fund, also for rule of law reasons.
($1 = 0.8501 euros)
(Reporting by Jan StrupczewskiEditing by Keith Weir )
