Hungary is on the verge of forfeiting over €1 billion in EU cohesion funds due to a prolonged dispute with Brussels over the rule of law. The deadline for Hungary to comply with EU requirements and implement remedial measures expires on Tuesday, marking a critical juncture in its relationship with the bloc.
The potential loss is the first instance of an EU member state irrevocably losing funding under the conditionality mechanism, a tool designed to safeguard the EU budget from breaches of rule-of-law principles. The European Commission had previously suspended €6.3 billion in payments to Hungary in December 2022, citing concerns over public procurement irregularities, prosecutorial inefficiency, and corruption.
Irrevocable Loss of Funds
According to Anna-Kaisa Itkonen, a European Commission spokesperson, the €1.04 billion at stake represents the first tranche of suspended cohesion funds. “This loss is irrevocable, and Budapest has no right to appeal,” she stated in comments to Polish news agency PAP. These funds pertain to commitments made in 2022, meaning Hungary will not be reimbursed for investments it undertook under EU cohesion policy during that year.
If Hungary continues to defy EU recommendations, it risks losing an additional €1.1 billion at the end of 2025. Further losses could follow through the end of the current financial period in 2026 unless corrective actions are taken.
EU’s Conditionality Mechanism
The conditionality mechanism was introduced to ensure that EU funds are used in line with fundamental EU values, including the rule of law. The measures imposed on Hungary reflect growing concerns in Brussels about the erosion of judicial independence and transparency under Prime Minister Viktor Orbán’s government.
Hungary has filed legal challenges against various EU measures, including a €200 million fine imposed by the European Court of Justice (ECJ) in 2024 for failing to comply with EU asylum rules. The ECJ also imposed a daily penalty of €1 million for delays in addressing these breaches. This case stemmed from Hungary’s non-compliance with EU procedures on international protection and the return of third-country nationals residing in the EU illegally.
Broader Implications
The ongoing dispute highlights the strained relationship between Hungary and the EU, as Orbán’s government continues to clash with Brussels over governance standards. Hungary’s loss of EU funds could have significant domestic implications, particularly for its regional development projects, which heavily rely on EU cohesion funding.
While Orbán has characterised EU decisions as politically motivated, alleging influence from figures such as American philanthropist George Soros, the financial consequences of non-compliance are becoming increasingly tangible. The withheld funds were earmarked for infrastructure, education, and regional development, sectors critical to Hungary’s economic growth.
Future Prospects
Hungary’s resistance to aligning with EU rule-of-law standards could result in further financial repercussions. With additional funds at risk, Orbán’s government faces mounting pressure to address the EU’s concerns. Failure to do so could exacerbate economic challenges and deepen the rift between Budapest and Brussels.
This case also sets a precedent for the EU’s enforcement of rule-of-law compliance, highlighting the bloc’s willingness to withhold funding to uphold its principles. For Hungary, the path forward depends on whether it chooses to address these issues or continues its confrontational stance with the EU.
