Debate: Commission proposal for measures under the Rule of Law Conditionality Regulation in the case of Hungary
Date: TUESDAY, 4 OCTOBER 2022
Speaker: Johannes Hahn
Language: EN

As you all know, we have a whole toolbox of instruments with different methodologies to protect the Union budget. Within this toolbox, the Conditionality Regulation aims at protecting the Union budget when breaches of the principles of rule of law affect or risk affecting the Union’s financial interests. Other instruments in the rule-of-law toolbox are dedicated to breaches of the rule of law per se. As President von der Leyen also confirmed in the State of the Union address, the Commission will use the conditionality mechanism whenever the conditions are fulfilled. As you are aware, at the moment there is one ongoing case. On 18 September, the Commission adopted the very first proposal for a Council implementing decision under the Conditionality Regulation. It proposed measures to the Council for the protection of the Union budget against breaches of the principles of the rule of law in Hungary. This procedure started when the Commission notified Hungary on 27 April about its concerns relating to breaches of the principles of the rule of law that create a serious risk for the Union budget. To recall, these concerns are systemic irregularities and deficiencies and weaknesses in public procurement. Second, insufficiencies in addressing conflicts of interest and concerns regarding public interest funds. Further, weaknesses in the effective pursuit of investigations and prosecutions in cases involving Union funds. And finally, shortcomings in the anti-corruption framework. Following several intermediate steps at the end of August, Hungary committed to 17 remedial measures to address the risks to the Union budget specified in the notification. This I explained and assessed in the recent Commission proposal for a Council implementing decision available to the Parliament. With these measures, Hungary has made important commitments in the right direction. I explicitly welcome this constructive engagement, I have to say, even if it arrived at a late stage in the procedure. So some examples of the remedial measures: a new and independent integrity authority with extensive powers as regards the prevention, detection and correction of fraud, conflicts of interest, corruption and other irregularities affecting the Union’s financial interests; an anti-corruption task force with strong involvement of specialised NGOs and the modification of the criminal procedure code to allow for an effective judicial review of prosecutorial decisions; further, the systematic use of the Commission’s data—mining and risk—scoring tool ARACHNE, which is a comprehensive database of projects combined with public information to help identify risks related to beneficiaries, contracts or contractors; further changes to the Public Procurement Act to clarify rules applying to public interest funds; further reform of the asset—declaration system for high-profile public officials, which means members of government but also MPs. Our conclusion is that, taken together, the proposed remedial measures could in principle be capable of addressing the issues described in the notification. If – and I stress if – they are correctly specified in the relevant laws and rules and implemented accordingly. Another conclusion I draw from this is that without the conditionality mechanism none of these reform measures would be in place, and without the European Parliament, the conditionality mechanism would not exist in its current form. Of course, pending Hungary’s fulfilment of these criteria at this stage, the Commission considers that the risk for the budget remains – a reason for which the Commission proposed measures to the Council. Hence the Commission proposed the suspension of 65% of the commitments for three operational programmes under cohesion policy. This amounts to an estimated amount of EUR 7.5 billion, which means over a third of Hungary’s cohesion envelope. Why those three programmes? Because they will be mainly implemented through public procurement and the Commission considers that they are likely to be affected again by the breaches of the principles of the rule of law. A second measure is the prohibition to enter into legal commitments with the so-called public interest trusts. The Council has now one month from 18 September to decide on the measures, and we have heard that probably there will be a decision tomorrow, if I was right. But they have to take the decision by qualified majority. So this period may be extended by a maximum of two additional months. A number of key remedial measures should be implemented by 19 November 2022. And of course we will monitor these key elements very closely in the coming weeks. Hungary has committed to fully inform the Commission about the implementation of the remedial measures, but 19 November is also outlined in the timeline published in our proposal. At that point we will assess the situation again. So rest assured that, as has been the case since the adoption of the regulation, the Commission will continue to provide you with updates on relevant developments. Our objective is again that the Union budget is no longer at risk and we hope to achieve this as soon as possible through the adequate reforms in Hungary – and not only the reforms but also, of course, more importantly, the proper implementation of these measures.