30-07-2025
Commission preparing new rules on EU funds distribution based on ‘Lex Hungary'
Read the original in Hungarian .
The EU's 2028-2034 spending plan, scheduled to be published next Wednesday and marking the start of at least a couple of years of laborious negotiations, will extend the link between payments and democratic backsliding, according to a document seen by Politico. Previously, only parts of the €1.2 trillion budget have been linked.
According to the leaked document, the EU executive intends to ensure that all EU funds are subject to conditionality, thereby preventing member states from circumventing EU standards by reallocating funds. While the EU has taken action against Hungary and already withheld some funding the next budget will provide for a streamlined and harmonized conditionality system for all EU funds allocated to member states, according to the document.
The Commission wants to move away from the current system where member states with particular issues could be tempted to shift some investments between programs to avoid being subject to a particular condition, it states.
This would mark a significant departure from the current approach, whereby conditions are only applied to certain elements of the budget. After the publication of the budget proposal, governments will begin negotiations with each other on a final text ― but this is a lengthy process that is not expected to conclude until 2027, the portal said.
'The Conditionality Regulation must be applied to all EU funding,' Finland wrote in its position paper on the new budget, seen by Politico.
But Hungary retorted in its own document that these rules 'allowed for exerting arbitrary political pressure in policy areas unrelated to the protection of the Union's budget.' Slovakia, which has also been criticized over rule-of-law issues, echoed these arguments in its own submission.
Hungary, which has already lost €18 billion in EU funds (€10.5 billion in reconstruction funds and €7.5 billion in cohesion transfers) due to breaches of the rule of law, is set to be hit hardest.
Under the direct link between a breach of the rule of law and the related payment while farmers' subsidies will be untouched by a government's authoritarian drift, a student exchange program might suffer if there have been breaches of academic freedom.
The overall idea is that civil society shouldn't bear the brunt of a leader's misdoings. The Commission wants to keep the money flowing to the recipients of EU funding ― such as NGOs or universities ― regardless of whether a government complies with the rule of law.
The current reform plan is essentially a 'Lex Hungary', given the particularly sharp tensions between Viktor Orbán and the European Commission. The Hungarian Prime Minister has been in conflict with Brussels for years and is facing elections in 2026.
According to an EU diplomat, the Commission is exploiting Orbán's domestic weaknesses ― he is trailing behind his conservative pro-EU rival Péter Magyar and his Tisza Party in the polls ― to propose stricter rules.
With national capitals not expected to vote on the new rules until 2027, there's a chance Orbán might be out of office before the budget is approved.
Commission officials are confident that a Magyar-led government would mend ties with Brussels and implement the EU-required reforms to access blocked funds. They are also preparing for a different scenario, though.
Renew, the European Parliament's liberal group, wants to take this a step further. It supports directly handing the frozen EU funds to civil society, effectively bypassing the central government.
This new system, known as 'smart conditionality,' would mark a change from the current rules, where frozen funds are handed back to the EU's 27 countries collectively after an expiration date.
"We set clear conditions: No EU money for autocrats, but continued support for civil society," Valérie Hayer, the chair of Renew, said on Thursday. 'She [Commission President Ursula von der Leyen] made a commitment. Now it's up to her to keep her word.' However, 'smart conditionality' has been criticised on the grounds that it reduces national governments' incentives to carry out the required reforms. Commissioners are expected to address this issue during emergency budget talks scheduled for the weekend.
