EU ties €35bn fund release to Hungary's break with Orbán era

The European Commission has begun "immediate engagement" with Péter Magyar after his landslide win in the Hungarian election, pushing for him to mend ties with Ukraine and start long-demanded reforms to unlock €35bn in frozen EU funds. Sunday's ousting of Prime Minister Viktor Orbán's Russia-friendly, Eurosceptic regime sparked a surge of hope in Brussels and other capitals about Budapest's role in the EU and Nato after years of "illiberal democracy" that eroded democratic values and stymied common policies. EU officials briefed on initial discussions between Brussels and Budapest said Magyar securing a supermajority with the power to change the constitution had exceeded their expectations. But it also raised the bar on what the Commission expects from the conservative politician. "He has a full-fledged mandate to change things . . . and we are engaging with him from day one," said a senior EU official. "The mindset is: let's double down on him. If they deliver, we deliver." Two EU diplomats from other member states said capitals were looking to Magyar unblocking a €90bn loan to Ukraine and lifting Budapest's veto on the next round of Russia sanctions as key signposts of the incoming prime minister's desire to repair deeply damaged relations with the EU. Reforming the country's court system and security services, and replacing the leadership of its biggest public institutions and state-controlled enterprises were also crucial, a third diplomat said. Close to €35bn in EU funds earmarked for Hungary are frozen due to a range of disputes with Brussels and Orbán's refusal to enact demanded reforms, according to a Commission spokesperson. That includes almost €18bn from the EU budget immobilised due to what Brussels deems as rule of law violations, increased corruption risks and the undermining of judicial independence. More than €17bn in cheap defence loans have also been delayed. To unlock the funds, Hungary would need to meet 27 conditions, including anti-corruption checks and a rollback of Orbán-era decisions deemed in breach of EU rules, from the treatment of asylum seekers to ensuring academic freedom. Commission officials also expect rapid talks with Magyar and his team on resolving a stand-off over Hungary's refusal to observe a European Court of Justice ruling that deemed Budapest's asylum legislation in breach of EU rules. That dispute is costing Hungary a daily fine of €1mn that has built up to almost €900mn which Brussels is deducting from the country's share of the EU budget. "There's a lot of leverage on our side," said the EU official. "The pressure is on him and I think he wants to deliver quickly." Magyar has said his first foreign trip will be to Warsaw and Vienna -- both led by conservative pro-EU governments -- before heading to Brussels. But he has indicated he may visit Brussels before being sworn in as prime minister in order to discuss the frozen EU funds, said people briefed on the discussions. Magyar on Sunday pledged he would restore democratic checks and balances -- something Orbán openly derided. Hungary will join the European Public Prosecutor's Office -- which so far has not had jurisdiction over Hungarian cases of graft and fraud with EU funds -- and also set up a domestic anti-corruption agency. "Once again, Hungary will be a strong ally in the EU and Nato," Magyar told the crowd after his victory, to which his supporters replied with "Europe! Europe!" chants. Magyar has also said public media, whose news service was turned into an Orbán propaganda machine, would be suspended until neutral operation could be ensured again. Brussels is wary of repeating its actions following the re-election of Polish Prime Minister Donald Tusk in 2023, when the Commission rapidly released funds frozen under the previous rightwing government. Brussels trusted Tusk to restore the independence of judges, but his policies have been stymied by the country's president, Karol Nawrocki, who was elected last year. "There's no immediate action planned . . . [and] a long list of things that the new government will need to do to access these funds," said a person briefed on the initial Commission discussions with Budapest. "It's a different situation to Tusk, who was well known and had been prime minister before." Under Hungary's constitution, the country's president has 30 days to swear in the new parliament, and EU officials are concerned that Orbán could use that window to make legal or personnel changes that could have an impact on Magyar's ability to enact necessary reforms. Additional reporting by Martin Dunai in Budapest and Laura Dubois and Paola Tamma in Brussels