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RRF: HOW FAR WILL THE EU GO TO PROTECT ITS FINANCIAL INTERESTS IN HUNGARY? 24 Sep 2021

Many Member States have already received the first tranche of billions of euros made available from the EU Recovery Instrument, but Hungary's Recovery and Resilience Plan (RRP) has not yet been approved by the EU. 

It has become clear over the past decade that the only means by which the EU can put pressure on the Hungarian government is essentially through controlling the disbursement of funds. The stakes are indeed high as to what commitments the EU will consider sufficient to give the green light to the Hungarian Recovery Plan. 

This is a rare opportunity for the EU to enforce meaningful anti-corruption measures that the government would not take on its own. While we do not believe that political corruption in Hungary could be stopped by Brussels alone, appropriate measures can be taken to make it more difficult to divert EU funds from the purposes they were meant for. It is also important to bear in mind that the funds to be disbursed after the approval of the RRP could become a source of illegal campaign funding before the elections, for example through supporting the outsourced public interest trusts or investments fostering patronage.

In the summer months, several articles reported that the Commission had extended the deadline for the approval of the Recovery and Resilience Plan (RRP) submitted by Hungary. In practical terms, this means that Hungary will certainly not have access to around a billion EUR in advance from the Recovery and Resilience Facility (RRF), for at least a few more months. This is probably also one of the reasons behind the recent decision of the government to issue a historic volume of USD and EUR bonds in order to pre-finance activities proposed in the not yet approved RRF. The volume of the transaction significantly exceeds the value of the first RRF installment and will likely also cover a variety of pre-election government spending.

In the present analysis, we want to look in particular at the anti-corruption commitments of the latest RRP, and whether they address the problems that the EU has been emphasising for years. Also, we assess the extent to which the planned measures can be taken seriously. See more