Deal has been reached on EU funds, at last

HUNGARY - In Brief 13 Dec 2022 by Istvan Racz

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Pretty much in the last minute before the EU Summit of December 15, EU member states managed to agree last night on a compromise package of measures with Hungary. As part of this: - Hungary agreed to step back from its intended veto on a common borrowing action to back EU financial assistance to Ukraine;- Hungary agreed to support the EU's decision to introduce a 15% global minimum for the corporate income tax;- EU members agreed to approve Hungary's utilisation plan for €5.8bn of grants over the next two years, under the RRF instrument; and- EU members agreed to reduce the amount for which Hungary's access would be temporarily blocked under the 2021-2027 EU budget from €7.5bn to €6.3bn, by reducing the suspension ratio of the country's quota for three major programs from 65% to 55%. This agreement does not imply immediate money transfers to Hungary. The country will undergo a kind of enhanced surveillance process (not their phrase, we have borrowed this term from IMF language to make the thing easy to understand) with quarterly progress reports. Budget funds will not be available for Hungary until it completes the implementation of the 17-point list of anti-corruption measures, as agreed with the EU Commission (the latter has presented an 11-point list of remaining problems with implementation in recent days), and RRF funds will not be available until 10 additional measures, including important reforms in the judicial system, in addition to the formerly mentioned 17-point list, are delivered.  The logical conclusion seems to be that transfers out of the affected sources can get to Hungary around mid-2023 the earliest. This has always been our expectation, and by now, ...