Hungary faces a reckoning with the EU that could cost it billions

Hungary’s nationalist-populist government is facing a reckoning with the European Union after nearly a decade of accusations that it has failed to uphold the EU’s democratic values.

The EU’s executive arm, the European Commission, appeared set to impose financial sanctions against Hungary on Sunday over corruption concerns and alleged violations of the rule of law.

Hungary is one of the biggest net beneficiaries of EU funds in the 27-nation bloc, and the sanctions could cost Budapest billions and cripple its already struggling economy.

Prime Minister Viktor Orban denied the commission’s accusations. Today, a lawmaker who is a former member of Mr Orban’s party said the government had channeled large sums of EU money into the businesses of politically connected insiders.

Hungarian Prime Minister Viktor Orban (AP) (AP)

Akos Hadhazy left the nationalist-populist Fidesz party in 2013 after learning of what he describes as rampant corruption developing in the Central European country.

He told the Associated Press: “When Fidesz came to power, I saw more and more that a very serious organization was beginning to develop throughout the country, whose main task was to steal as much European Union money as possible. “

The EU’s executive arm, the European Commission, has for nearly a decade accused Mr Orban of dismantling democratic institutions, seizing control of the media and violating minority rights.

Peter Kreko, director of the Budapest-based think tank Political Capital, said the EU appeared to be hardening its stance against Mr. Orban, who has been in power since 2010, after previous disciplinary measures failed to be followed through. Europe’s longest serving leader of its values.

19th century Tura castle, owned by Hungarian PM Viktor Orban’s son-in-law (AP) (AP)

Mr Kreko said: “The EU institutions are learning slowly, but they are learning. More and more people in the Commission and in the European Union know about Hungary’s deceptive negotiating tactics, as well as about the nature of the Hungarian political regime.”

While it is not clear how much money Hungary will lose, funds cut from its 22 billion euro (£19 billion) share of the 2021-27 EU budget could affect around 70% of funding from some programs, according to an internal July document by Budget Commissioner Johannes Hahn.

Many of the potential reductions are related to public purchases – purchases by the state of goods and services or for the implementation of projects using EU funds.

According to Mr Hadhazy, flawed processes for awarding such contracts allowed Mr Orban’s government to channel large sums of EU money into the businesses of politically connected insiders.

Mr Hadhazy takes pictures of the 19th century castle in Tura (AP) (AP)

“A fortune has been made from those things, and they are the main source of this amazing luxury mansion behind us,” said Mr Hadhazy, in front of the gates of the lavish Schossberger Castle in Tura – which owned by Mr Orban’s son-in-law.

“The system is about having its tentacles … at the highest levels of government.”

Mr Hahn’s EU memo also pointed to irregularities in public procurement in Hungary and the “increasing likelihood of winning by politically connected companies”.

Mr Hadhazy, who has investigated and documented hundreds of cases of alleged corruption, borrowed a car from his mother to visit several places this week where he suspects EU funds are misused.

One is the site of a planned server farm near Budapest where the government says it will store the state’s most important data.

Receiving more than 50 million euros (£43 million) in EU funding, construction of the facility – awarded to a company owned by a childhood friend of Mr Orban’s richest man in Hungary – began in 2016, and completion is set for next year.

But when Mr Hadhazy visited the site on Wednesday, only a concrete frame stood where the server park was planned – a sign, he said, that the funds may have been misused.

“The whole process is a charade,” Mr Hadhazy said of Hungary’s public procurement process, which should normally involve competition between several bidding companies.

“It was decided at the very beginning who could win, and it was decided who would do the work at the end.”

Earlier this month, the Hungarian government pledged to establish its own anti-corruption agency. It has reportedly prepared additional legislation aimed at increasing transparency in public procurement.

But the European Commission is facing pressure from Euro-MPs to fully implement corruption rules and rule of law requirements.

The gate of a planned, but unfinished government server farm (AP) has been closed (AP)

In a resolution passed Thursday with an overwhelming majority, the European Parliament said the Hungarian government had become “a hybrid regime of electoral autocracy” that could no longer be considered a democracy.

Hungary’s justice ministry did not respond to a request for comment. Speaking in Serbia on Friday, Mr Orban dismissed the resolution as a “joke” and maintained that his government’s conservative credentials were the reason for the EU’s tough stance.

In 2021, the Hungarian government opted out of joining the European Public Prosecutors Office — an independent EU body tasked with fighting crimes affecting the bloc’s financial interests. It argued that joining would amount to a loss of national sovereignty.

But Mr Hadhazy said that unless Mr Orban’s government agreed to take office, there was no real guarantee that graft reforms would achieve any meaningful results.

“I say that if the EU gives Hungary one eurocent without us joining the EU prosecutor’s office, then the EU is really as stupid as Orban said,” he said.

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