Hungary’s new leadership has pledged to reverse years of democratic backsliding and restore its relationship with the EU, but the real lever of power remains the money: €7.6 billion in EU development funds are still blocked over disputes with EU law, including anti-LGBTQ+ legislation, even as there is no imminent risk of Hungary losing that cash.
Who Holds the Money
The country’s new government, described as an experienced technocratic team, signalled a new direction after Péter Magyar was sworn in as Hungary’s prime minister on Saturday. Magyar said Hungarians had given his party a mandate to launch “a new chapter” in the country’s history and change the system. That language sounds grand, but the system he is stepping into is still pinned to Brussels’ financial gatekeeping and the conditions attached to it.
Foreign minister designate Anita Orbán said, “Hungary’s place is in Europe; naturally, firmly and without question.” Soon after, Hungary dropped its long-standing veto over sanctions against violent Israeli settlers. The timing shows how quickly a new government can start adjusting its posture when the larger institutional machinery demands it.
Before taking the oath of office, justice minister Márta Görög pledged to revise Hungary’s anti-LGBTQ+ law after the European court of justice ruled it was discriminatory and in breach of basic democratic values. “Hungary is a member of the European Union, which means that there are responsibilities,” she said. The line is tidy enough, but it also captures the hierarchy at work: membership comes with obligations, and those obligations are enforced from above.
The Price of Access
Finance minister András Kármán outlined an economic transformation plan aimed at meeting the criteria for adopting the euro by 2030. One of the first major tests is Magyar’s pledge to “bring home” Hungary’s frozen EU billions. Most critical is €10.4bn in grants and cheap loans allocated under the EU’s post-pandemic recovery fund that were never paid out over concerns about the rule of law and financial probity under Viktor Orbán.
Later this month, Hungary is expected to produce a new plan showing how it can meet the recovery fund’s goals of making the country greener and more digital, while completing 27 “super milestones” to tackle corruption and ensure the independence of the judiciary. Hungary has until 31 August to show that it has completed these milestones if it wants the funds to be paid out by the end of the year. Economist László Andor, formerly Hungary’s EU commissioner from 2010-2014, said the new government would have to “move mountains” to meet that deadline.
He said Hungary’s economy has stagnated over the last four years and that the government deficit is spiralling. “In order to avoid at least a temporary recession and start a new cycle of public investment, [gaining the frozen funds] is absolutely vital,” he said. “It’s also very important that the new government avoids starting with an experience of a recession, which would obviously be to the detriment of its reputation and competence.”
That is the trap laid by the system: public investment, economic stability and political credibility are all tied to whether the funds are released. The people at the bottom are left to live with the consequences while the institutions at the top negotiate deadlines, milestones and compliance.
Brussels, Budapest and the Same Old Game
A further €7.6bn in EU development funds remains blocked over the previous government’s conflicts with EU law, including the anti-LGBTQ+ legislation, but there is no imminent risk of losing that cash. Budapest’s access to €16.2bn in cheap loans for defence projects under the EU’s Security Action for Europe programme is also at stake.
Zselyke Csaky at the Centre for European Reform thinktank said both Brussels and Budapest would have to tread carefully over hitting deadlines. She said that while Magyar has a parliamentary majority to rewrite the constitution, rushing major changes would feel too much like the previous administration: “It is just not a good look if a constitutional amendment is pushed through without much consultation, so that’s basically the limiting factor in Hungary’s case.”
The European Commission has shown flexibility in its reading of the EU’s financial rules, but it has also faced criticism from the ECJ for lack of transparency and for “incorrectly” making an earlier decision to release €10bn to Hungary. Beyond EU funds, it remains to be seen how Magyar will govern, including whether he will be a prime minister for his core conservative voters or create a big tent for left-liberals who voted for him to get rid of Orbán.
For the first time since 1990, left of centre and liberal parties are absent from the Hungarian parliament after major opposition parties chose not to run in order to ensure Orbán’s defeat. In his first speech as prime minister, Magyar apologised to everyone who had been maligned by the state during Orbán’s 16-year rule. Richárd Barabás, co-leader of Párbeszéd-Greens, said there had been great unity among Hungarians to say “no to this kind of authoritarianism, no to this kind of Russian alliance, no to this kind of infringement of human rights” that Orbán’s 16-year reign embodied.
He said there was a need to debate issues such as European federalism, the integration of Ukraine into the EU and the phase out of Russian oil and gas from Hungary’s energy mix. Barabás wants to phase out Russian fossil fuels as soon as possible, favouring the EU’s end of 2027 target, while Magyar has proposed a 2035 deadline. Speaking the day before Magyar was sworn in, Barabás congratulated him for his “really great job” in winning the elections and triumphing over the “severe” and “disgusting” smear campaign from the previous government.
“We really wish him luck as prime minister to be able to fulfil all the expectations and requirements proposed by the commission for him, because Hungary really needs the EU funds to come back,” he said.