On Wednesday, European Commission President Ursula von der Leyen proposed new rule-of-law conditions for payments in the upcoming budget cycle that could significantly affect Hungary and further restrict funding from Brussels. Emphasizing the need for unconditional respect for the rule of law, von der Leyen insisted that these conditions would be essential for all elements of the European Union’s budget. She pointed out that the National and Regional Partnership Plans (NRPs) will now integrate the rule of law and fundamental rights into their fabric, thus captivating investment and reform discussions under a system termed “smart conditionality.” Von der Leyen also assured that EU funds would be utilized responsibly, with strong safeguards and clear conditions tailored for the benefit of EU citizens.
The NRPs are an integral component of the seven-year budget framework, accounting for approximately half of the proposed total spending, estimated at €865 billion. While von der Leyen did not disclose specifics about the mechanisms to enforce rule-of-law checks within these programs, draft regulations demonstrate that adherence to EU core values is now non-negotiable for member states seeking funding. Notably, the legislation references the EU Charter of Fundamental Rights and mandates compliance with principles such as gender equality.
A pivotal aspect of the new proposals is the connection between funding disbursement and the annual rule-of-law assessment reports. If a member state fails to meet the outlined conditions, the European Commission will notify the government involved. In the event of non-compliance, the Council has the authority to suspend payments. The regulations not only aim to foster open, rights-based, and democratic societies but also include initiatives to strengthen judicial systems, combat corruption, and enhance media diversity. An important transparency measure proposed is the establishment of a central database listing the final beneficiaries of EU funds, facilitating greater accountability in the spending process.
Financially, Hungary is currently the country within the EU facing the most scrutiny regarding rule-of-law issues, which complicates its situation in the upcoming budget cycle. It is the only member state subjected to Article 7 proceedings—an action that could potentially result in the withdrawal of voting rights—alongside being under the Rule of Law Procedure, responsible for suspending EU funds due to systemic corruption risks. The Hungarian government has characterized these actions as politically motivated attacks rather than legitimate concerns.
In practical terms, Hungary can presently only access cohesion and agricultural funds from the EU budget. However, these funds are slated to be incorporated into the NRPs, raising the stakes for Hungary if the EU determines its rule-of-law framework is inadequate. The proposed budget plan still needs to undergo negotiations with the European Parliament and the other member states; every state holds veto power over the finalized seven-year budget, making consensus essential yet challenging.
Overall, von der Leyen’s proposed regulations mark a significant advancement in linking EU funding to compliance with fundamental EU values and the rule of law. While the potential impact on Hungary could lead to a tightening of financial resources, the outcome relies heavily on negotiations within the EU framework and Hungary’s forthcoming responses to these developments. The tension between the Hungarian government’s stance and EU expectations may result in broader implications for the future governance of financial distributions among member states.
