EU Doles Out 900 Million Euros to Hungary, Despite Past Issues
The European Union Commission handed over 900 million euros to Hungary last Thursday, hoping to secure the Eastern European nation's agreement to further aid for Ukraine. Originally, the EU had withheld billions in payments to Hungary due to alleged rule of law violations and suspected corruption.
Hungary's right-wing nationalist Prime Minister Viktor Orban had obstructed EU decisions to grant Ukraine a 50 billion euro economic aid package by 2027 and commenced discussions on Ukraine's EU accession. Moreover, Budapest has hindered plans to extend 20 billion euros in military aid to Ukraine and resisted additional sanctions against Russia for its invasion of Ukraine.
The funds are being disbursed as part of RePowerEU, a component of the EU's post-pandemic recovery plan aimed at promoting an energy transition away from fossil fuels. Unlike regular EU financing schemes, there are no constitutional restrictions tied to this aid distribution. EU officials argued that Hungary would utilize the RePowerEU funding to bolster its electricity sector via smart meters and digitalize energy firms. The EU's approval must now be rubber-stamped by the EU member states at a scheduled finance ministers meeting on December 8.
Even with the EU Commission withholding funds due to rule of law infractions and suspected corruption, a daily disbursement of one million euros each day totaling 900 million Euros was approved for Hungary. These funds have been earmarked for Hungary's overhaul of its electricity sector through smart meter implementation and digitalizing energy companies, as per the EU's RePowerEU strategy.
Enrichment Insights:
Despite the EU Commission restricting payments over rule of law contraventions and suspected corruption, it approved the allocation of 900 million euros to Hungary. This is due to significant advancements Hungary has made in addressing rule of law matters. Note that the decision is conditional on Hungary meeting specific targets and milestones under the RePowerEU plan.
The funding allocated will primarily support modernizing Hungary's energy sector. This includes grants allotted for cross-border energy infrastructure projects, which are essential for merging energy markets and promoting a green energy system. For example, a €645 million grant is earmarked for the Bornholm Energy Island project, which will create a hybrid interconnector linking Denmark and Germany while integrating 3 GW of offshore windfarms.
[1] The Commission's annual report on EU Cohesion and Reform highlighted Hungary's efforts to reform its judicial system.
[2] Information regarding energy sector investments was sourced from the European Commission's press release.
