Hungary's Lost Funds: How We Got Here and What to Expect Next

€1.04 Billion Gone for Good for Hungary?? This week, Hungary has lost EU funds for the first time since the EU initially froze €32.4 billion in 2022. It’s a bit of a saga, so let’s dive into the details ??

Initial Fund Freeze: In December 2022, the EU froze €32.4 billion it had earmarked for Hungary due to corruption, human rights and rule of law concerns. The freeze is based on three different EU conditionality regulations and together impact +10 EU funds. The unlocking conditions and affected programs overlap. It’s complex, but we’ve mapped it out for you here:

?? Partial Unfreezing of Funds: A year after this large freeze, the EU Commission released €10 billion. Many criticized the move, pointing out that Hungary's judicial reforms were far from adequate, and suggesting that the Commission was just giving into Orbán’s blackmail.

?? Legal Troubles: Neither the EP nor RECLAIM were convinced. The EP took legal action against the Commission, accusing it of yielding to Hungarian blackmail. RECLAIM (that’s us!) has filed a separate case at the EU’s top court to challenge the murky decision-making process around the fund unfreeze.

But Billions Remain Frozen While our legal battles rage on, the European Commission's latest conditionality regulation review paints a stark picture—zero progress on anti-corruption measures. As a result, Hungary remains locked out of €11.7 billion in cohesion funds and an additional €10 billion from COVID recovery funds. Even worse, €1.04 billion is now irreversibly lost.

Why the Permanent Loss? The €1.04 billion from 2022, frozen due to concerns over corruption, had to be used within two years. Hungary’s failure to progress has led these funds to automatically revert to the EU budget—this irreversible process is known as decommitment.

What’s a Decommitment? EU funds operate on a strict "use it or lose it" basis, meaning they must be spent within a designated timeframe, or they're returned to the EU budget. With more decommitments looming for Hungary, the stakes couldn't be higher. Curious about how this works? We’ve broken down the decommitment rules here: https://lnkd.in/dqns_RRw

The money bleed is just getting started. The financial risks for Hungary will escalate sharply in 2025. Hungary must start making progress towards its milestones before June 2025 or it will risk losing €10.4bn in recovery funds.

But There's More on the Line: By the end of 2025, it will also start losing parts of the 2023 allocations from three Cohesion Programmes affected by the Conditionality Regulation – i.e. another €1 billion. Plus, millions more from the 2022 allocations of ERDF, ESF, and AMIF affected by the CPR.

Economic Trouble. The bleeding of EU funds isn't a minor accounting issue. It is risking wreaking havoc on Hungary's economy. The loss of EU funds has already negatively impacted Hungary’s economic forecast and borrowing costs, with Moody’s shifting Hungary’s outlook to negative:

What’s Next? Orbán is threatening to veto the next MFF unless the EU lifts the fund suspension. But that’s not all—last week, he tightened his grip on the judiciary (again). This isn’t a coincidence; controlling the courts is key to keeping corruption unpunished.

The EU’s Dilemma: Cave to Orbán’s blackmail and risk undermining the rule of law or hold firm until real reforms are delivered. The consequences are critical—for the EU’s credibility and for Hungarians, who are losing critical funds and facing a crumbling economy as corruption runs unchecked.

What’s Next for Us? At RECLAIM, we’re not letting this slide. We’ll keep the pressure on Orbán and the EU—demanding real reforms, transparency, and accountability. This fight isn’t over. Stick with us as we keep pushing for a Hungary that works for its people, not its cronies. ??????????