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EU’s Non-Payment of Recovery Fund Money Puts Gov’t in Serious Financial Bind

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The government is having serious financial issues, writes Népszava. It is not disbursing previously-approved EU subsidies or recovery loans to entrepreneurs, although the Cabinet is apparently advancing them through domestic funds.

The 100% state-owned Hungarian Development Bank (MFB) has stopped paying out previously-approved fast recovery loans to companies, the managing director of a well-known SME informed the Hungarian daily. The disbursing bank cited savings ordered by the government at the end of the year as the reason why.

Business-focused site also recently wrote that the state has not been paying for work already done on residential solar panels for the same reason. The banks, and companies managing the EU aid, have informed beneficiaries in a standard letter that the aid cannot be disbursed because of a December 9 governmental decree.

What these two types of transactions have in common is that both programs would have been provided EU funds, but the European Commission has suspended funding for the recovery program indefinitely due to the presence of what it says is systemic government corruption in Hungary.

The government has generously provided investment subsidies over the past year, expecting Hungary to receive an advance payment of at least a 326 billion Ft. (US $998 million) from the EU Recovery Fund this year. However, the European Commission was not even willing to hold talks on the Hungarian relaunch plan, partly because the government did not make an agreement with anyone in Hungary, but also because the Commission is increasingly concerned about the trampling of the rule of law and systemic corruption.

According to the official justification, until the Hungarian government takes reassuring steps against corruption around the distribution of EU funds, Hungary cannot expect to receive any rehabilitation aid. The government was still confident in the summer that an agreement would be reached by the end of 2021, so it promised to finance programs from domestic funds so entrepreneurs would not be affected by its ongoing debate with Brussels.

But now that EU money is barely coming in, the government has run out of money, writes Népszava. The budget deficit is already close to 4 trillion Ft. (US $12.2 billion), and as a result the government is forced to cut spending in the final weeks of the year.

Népszava contacted the Hungarian Development Bank for comment on the information it had received, but did not get a response from the bank before publication.

However, MFB published a press release on its website on Saturday refuting the story. As the press release read:

Contrary to what has been reported in the press, the disbursement of EU-funded loans remains ongoing without interruption… MFB would like to reassure all of its customers under an EU-funded loan program that there are no interruptions in the disbursement of loans.


Posted in European Union

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