The European Commission recommended on Wednesday that a total of roughly €13 billion (roughly $13.5 billion) in funds for Hungary be withheld, at least in the short term.

The EU executive said that Budapest was still falling short of its commitments with regards to upholding the rule of law.

However, the Commission also approved Hungary's application for COVID pandemic recovery funds from the EU, saying they could only be dispersed once promised reforms were complete. The deadline to approve this was fast approaching, and Hungary stood to lose much of the financing otherwise.

What did the European Commission say?

"We are today giving our positive assessment to Hungary's comprehensive ... recovery plan. Regarding the rule of law, Hungary has committed to significant reforms. Only once these reforms are implemented in full will access to the EU's recovery fund be unlocked," European Commission Vice President Valdis Dombrovskis said.

The plan covers EU financial aid for member states to recover from the coronavirus pandemic, with €5.8 billion going to Hungary. The commission said that Hungary will have to deliver "fully and correctly" on a set of 27 "super milestones" in order to access funds.

The European Commission also upheld an earlier warning that it would suspend 65% of EU budget funding earmarked for Budapest, or roughly €7.5 billion. Hungary had agreed on 17 anti-corruption measures, including creating an anti-corruption taskforce and making changes to its public procurement rules.

"The Commission finds that, notwithstanding steps taken, there is still a continued risk to the EU budget," the bloc's executive said.

Hungary's negotiator with the EU, Tibor Navracsics, told reporters that Budapest would seek to "convince" the Commission to fully unfreeze the funding in 2023. 

"We trust that we will implement the remaining requirements, and in 2023 we can convince the Commission... that continued suspension of funds won't be needed and that we can access 100% of the funds in 2023," Navracsics said. 

For the funds to be suspended, a "qualified majority" of about 55% of the 27 member states must vote in favor. Member states have until December 19 to decide on the Commission's proposal.

The European Parliament had earlier pressured the Commission and member states to keep the money on ice, voting in favor of a non-binding resolution to this effect.

"This is an historic moment for the protection of the rule of law in Europe," said Petri Sarvamaa, a member of the European Parliament's committee on budgetary control. "If EU citizens' money cannot be protected against irregularities, then it cannot be disbursed." 

Tensions between Brussels and Budapest

Hungary has come under increasing criticism from Brussels. The European Commission has for a decade accused Hungarian Prime Minister Viktor Orban of undermining judicial independence and press freedom.

Orban has also butted heads with bloc officials over his criticism of sanctions on Moscow amid Russia's invasion of Ukraine. Hungary continues to block an EU decision over the disbursement of €18 billion of financial aid to Ukraine, which requires a unanimous majority to pass, netting it criticism of blackmailing the EU.

The Hungarian parliament has also postponed its vote on allowing Sweden and Finland's NATO accession to next year.

sdi/msh (AFP, Reuters, dpa, AP)