Reaching an agreement with the European Commission is often presented as if the viability of the Hungarian economy hinged on it. Although the payments to other member states have long been authorised, those funds are not coming through. The distribution of Covid-related economic impact payments are lagging so far behind that the original settlement deadline of 2026 will almost certainly have to be extended.

Although the Hungarian public has for a long time been faced with the question of when the European Commission will finally lift its veto on EU payments due to the country, when looking at the overall picture regarding the EU, the arrival of these funds to the member states appears uncertain at best. Even despite the fact that Brussels has already approved the funds in the vast majority of the 27 member states. However, completed transfers are at a very low level, writes the Hungarian Vilaggazdasag.

This aspect was brought to the attention of the economic news portal by sources closely familiar with the operation of the European Commission. This finding is important because it is generally believed that the arrival of EU funds has a direct and significant impacts on the Hungarian economy. While certain programs – for instance the substantial increase of teachers’ salaries – are directly tied to receiving the funds, it is also clear that, based on the practice so far,

All this, of course, raises the question of how much of an effect the unlocking of EU funds would actually have on the domestic economy, and whether the related economic expectations are not excessive, even with regard to the forint/euro exchange rate.

The above thought process did not come out of thin air, and appears to be bolstered by the most recent concrete statements on the payment of recovery funds (Recovery and Resilience Facility, RRF – a priority initiative of the EU, which aims to mitigate the economic and social effects of the Covid epidemic). The Hungarian newspaper has recently obtained a summary of these, from 5 April, and these are the main claims:

• So far this year, in more than three months, six payments have been made (to Greece, Portugual, Malta, Czech Republic, Slovakis and Spain), in the total value of 13.1 billion euros
• In 2023, not a single member state has submitted a payment request, even though seven (Belgium, Estonia, Greece, France, Cyprus, Poland and Slovenia) were to submit them in 2022 in the amount of around 27.5 billion euros.
• And, at least nine member states (Bulgaria, the Czech Republic, Ireland, Spain, Croatia, Lithuania, Portugal, Romania and Slovakia) were expected to submit payment claims by the end of March, a total of 11 claims worth 21.2 billion euros.

 

Payment claims being late is one thing, but the fact that payments are also being delayed, and not only in isolated cases, is even more surprising, Vilaggazdasag notes. Fourteen member states have received no money at all, although they have submitted their payment claims to the European Commission. However, ten of them have at least received the pre-financing, while five member states (Ireland, Hungary, the Netherlands, Poland, Sweden) have not received a single euro of funding,

even though the Covid-induced crisis reached its climax a long time ago, in 2020-2021.

In this context, it is also worth noting that five member states have not yet signed an operational agreement and therefore cannot submit payment claims. Eight member states have yet to submit any payment claims. These statistics can be used to calculate summary figures that illustrate the low efficiency of administrating the RRF instrument:

• By the indicative deadline of Q1 in 2023, the 22 member states that had signed operational agreements should have submitted 60 payment claims. Out of those, 36 have been made so far with 10 of them being late. The fact that 24 are missing indicates that 40 per cent of the claims were not completed at all.
• In terms of sums, Brussels has paid out 151.8 billion euros so far (56.6 billion euros in pre-financing, 95.2 billion euros for claims). 23.5 billion euros are still under assessment, and 43.6 billion euros (20 per cent) of payment claims have not yet been submitted

 

This means that 40 per cent of the payment claims due so far (24 out of 60) and 20 per cent in terms of amount (44 billion euros out of a total budget of 219 billion euros) are simply missing.

Further delays are expected in the future, writes the Hungarian daily. In recent weeks, the European Commission has announced that if a member state fails to implement the non-completed measures within 6 months for applications that have been partially granted, it will lose the total funding concerned. As all member states have an interest in avoiding a loss of funding, they are likely to only submit a payment request once all the measures they have committed to have been implemented.

This could be considered good news from a Hungarian perspective, because – as Brussels is currently blocking the Hungarian funds – it would seem completely unrealistic that Hungary, in the event of a possible unblocking, could spend and account for all the monies in less than three years.