European Parliament will take the EU Commission to court on funds to Hungary

HUNGARY - In Brief 12 Mar 2024 by Istvan Racz

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The forint is going through a difficult period indeed. This morning, it once again went to a new one-year low, reaching EURHUF 396-397 during the day. This time around, the immediate cause appears to be a new decision by the European Parliament's legal committee to sue the European Commission on the latter's release of €10.2bn of cohesion funds to Hungary in December 2023.  This decision was not at all unexpected. Previously, Parliament issued a resolution that called on the Commission to reverse their unblocking decision and not to pay out any cohesion funds to Hungary. This resolution actually threatened to take the case to court if the Commission did not comply. Parliament's view was that the situation of the rule of law had not improved any little bit in Hungary, it had even deteriorated since the earlier EU decision to block the funds, and so there was no legitimate basis for any payment to Hungary. In contrast, the EU Commission remains of the view that for the specific part of the 2021-2027 cohesion policy quota, no blocking decision was in place, except that Hungary was required to reform its judicial system in a way the Commission found as appropriate. As Hungary met the latter condition, the Commission was in fact legally bound to release the funds in question. It is unlikely on this basis that Parliament's move would have any immediate impact on Hungary's cash flow, as the Commission will be free to continue payouts for the, probably lengthy, court procedure. In principle, the European Court of Justice could order the suspension of payouts for the time of the procedure, but there is no evidence whatsoever that this would be a likely outcome. For sure the pro...