Hungary government submits first anti-graft bill to avoid losing EU funds

During the general session of the Conservative Political Action Conference in Dallas, Texas (USA), 4 August, 2022, Viktor Orban, prime minister of Hungary, waves at the audience.

Hungary's government submitted Monday's (19 September) first of several anticorruption bills to Parliament as Budapest tries to keep billions of euro in European Union funding.

Sunday's European Union executive recommendation was to suspend funds in the amount of €7.5 billion (or $7.48bn) because it believes Hungary has failed to fight corruption and uphold the rule law.

The European Commission set forth additional requirements that Hungary must meet to continue accessing the funding. This included new legislation.

Judit Varga, Justice Minister, stated on her Facebook page that she had presented the first bill to Parliament. The government will now "focus on drafting (and implementing) the EU commitments (to be implemented in the coming weeks and months".

Varga stated that Hungary could enter 2023 without having to lose any EU funds.

This bill modifies legislation relating Hungary's co-operation to the EU anti-fraud officer OLAF. It ensures that OLAF receives support from Hungarian tax authorities officials in its investigation of EU-funded project investigations and has access to relevant data.

It also changes the rules governing state asset foundations, making them explicit to issue public procurement tenders and tightening conflict-of-interest rules.

Hungary's case is first to be heard in the EU as a result of a new EU sanction that aims to improve the rule-of-law and fight corruption within the bloc of 27 nations.

Since 2010, Viktor Orban, the nationalist prime minister, has been at odds with Brussels over his policies it considers to be eroding Hungary's democracy.

The veteran prime minister is willing to meet EU demands to create institutions that reduce corruption risks in EU-funded projects, despite the challenges of rising energy costs, double-digit inflation, weak forint, and slowing economy.

"The recent developments in Brussels are certainly a bad time to Orban, who is currently struggling with a wide range of political and economic issues caused by both global problems, most notably rising oil prices. So he is likely go further to satisfy Brussels’ demands," Mujtaba Rahman (Managing Director Europe, Eurasia Group).

He stated that Budapest would be likely to secure the pending agreement, but this would not resolve all outstanding disputes over other EU funds.

Rahman stated that Orban's biggest problem is the money in the Recovery Fund. Rahman explained that the Commission has greater control over whether or not it grants the green light.

Last year, Hungary submitted its blueprint detailing how it would use EU grant money to improve its economy's environmental and high-tech capabilities following the COVID-19 pandemic. This has not yet been approved.

The forint, which has fallen 8% this year, will likely fall further if Budapest doesn't receive EU funds. This will complicate efforts to curb inflation and expose Hungarian assets to negative sentiment shifts.

Tibor Navracsics (the EU's Development Minister) stated that Hungary will fulfill all 17 of the commitments it made to the Commission to avoid any funding cuts.

($1 = €1.0025)