By Gergely Szakacs and Anita Komuves
BUDAPEST (Reuters) – Hungary is looking to sign funding agreements with the European Union within days to unlock billions of euros worth of recovery money and development funds, its EU negotiator Tibor Navracsics told a news conference on Tuesday.
This follows a deal between Hungary and EU governments on Monday that sorted out financial aid for Ukraine and Budapest’s approval for a global minimum corporate tax in exchange for EU flexibility on funds, which Hungary needs to reassure investors and shore up its forint currency.
It was the first time ever that the EU has decided to freeze cohesion funds to a member state over damaging democracy. While the amount frozen was lowered, the move against nationalist Prime Minister Viktor Orban itself was unprecedented.
Monday’s complex deal, which came after months of wrangling between EU institutions, means Hungary has avoided a worst-case scenario of irrevocably losing 70% of 5.8 billion euros ($6.11 billion) of EU recovery funds, even though no money will flow until Budapest meets many conditions.
Poland, which has also had access to COVID-19 recovery funds withheld due to rule-of-law concerns, is still trying to reach an agreement with Brussels that would unblock the cash.
Polish media has reported that the ruling nationalists Law and Justice (PiS) are willing to implement more changes to laws on the judiciary to comply with the ‘milestones’ set by the European Commission.
The forint, central Europe’s worst-performing currency this year, rallied over 1% in morning trade versus the euro, while Hungarian bond yields fell up to 40 basis points in a relief rally.
“We have a performance timetable that was agreed in September. So far we have met all conditions, the last stage of this process will come at the end of March,” Navracsics said.
He said parliament would pass another tranche of legislation to access the funds by the end of March, with the money likely to be released next month, allowing Hungary to launch EU funded investments.
“We consider the Council’s approval as a formal step. The disbursement of money will depend, however, on the fulfilment of 27 ‘super milestones’ regarding institutional reforms to strengthen the rule of law,” economists at Erste Group said.
($1 = 0.9489 euros)
(Reporting by Gergely Szakacs and Anita Komuves, additional reporting by Alan Charlish in Warsaw; Editing by Arun Koyyur)
