EU confronts opponent within, who is backed by Putin’s oil

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(Bloomberg) — The European Union has single-handedly unleashed an unprecedented punishment, signaling that patience with Hungary has been exhausted — and Prime Minister Viktor Orban’s determination to do business with Russian President Vladimir Putin as he eschewing democratic values ​​of the block makes the movement all the more resonant.

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But Hungary claimed it was ready to meet the EU’s demands to release both reconstruction and cohesion funds and strike a deal with the bloc before the end of the year, Justice Minister Judit Varga said in a statement late Monday. Facebook post.

Varga pledged that the cabinet would focus on implementing and enforcing its commitments, and she “submitted to Parliament a legislative package amending legislation on cooperation with the European Anti-Fraud Office and on public interest trusts performing public duties. “

The Hungarian forint, which has fallen 9% against the euro this year amid uncertain prospects for EU funds, rose 1.4% on Monday, bolstered by prospects that Brussels and Budapest could eventually reach an agreement on the payment of the money.

For more than a decade, the EU has tried unsuccessfully to keep Orban in the fold, looking mostly beyond his hostile approach to the bloc, including repeated attempts to thwart sanctions against Russia. On Sunday, the EU turned its head and threatened to freeze 7.5 billion euros ($7.5 billion) destined for Hungary unless it takes steps to curb fraud and corruption.

It is a coincidence that the financial sanctions come in the midst of Russia’s invasion of Ukraine, but the war has cast a new light on Orban’s cozy relationship with Moscow and forced the EU to adopt a more aggressive approach to Hungary’s willingness to flaunt the rule of law. to grab. way.

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Europe is entering a critical phase, with energy shortages that will increase the pressure on the fragile unity that the 27 EU members have managed to maintain since the February invasion. But while most member states are engaged in a desperate battle to secure alternative gas supplies for the winter, Orban has deepened his country’s ties to the Kremlin, taking advantage of the waivers he demanded from EU sanctions to import more gas from Russia. import.

Orban’s popularity is also bolstered by one of the cheapest petrols in Europe thanks to a price cap made possible in large part by cheap Russian imports. The oil pipeline from Hungary to Russia is also exempt from EU sanctions.

“Hungary’s pro-Putin stance after the Russian invasion of Ukraine has made it clear to the EU political class that Orban is a threat not only to Hungarian democracy, but also to the EU’s ability to respond to this war,” he said. said Jacek Kucharczyk, president of the Institute. from the Public Affairs think tank, wrote in Carnegie Europe last week.

The confrontation with Hungary leads to a fundamental weakness in the EU structures: with the 27 sovereign countries each vetoing the most important decisions, the union has in effect a permanent invitation to rival powers such as Russia or China, and sometimes even the US, to drive a wedge between members by offering privileged deals to some.

During years of frustration with the Hungarian government, Orban has been shielded from the EU’s main disciplinary apparatus, known as the Article 7 procedure, by the backing of the nationalist government in Warsaw — because that, too, requires the approval of all other members. . The war in Ukraine has worsened Orban’s relationship with the Polish government, which has been one of the most ardent proponents of strong action against Putin, but for now the Poles are on Orban’s side.

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“Poland will vigorously oppose any action by European institutions that intend to deprive member states of unnecessary money, in this case Hungary,” Prime Minister Mateusz Morawiecki said on Sunday.

But Poland’s support is no longer enough for Hungary. Under the so-called rule of law mechanism, EU governments make the final decision within a month on whether or not to freeze Hungary’s funding, with the option of extending the TNZT by as much as two months. A majority of member states is needed for the commission’s proposal to enter into force.

The appetite for action is mounting across the bloc, with EU lawmakers last week saying inactivity “has exacerbated the setback” and Hungary can no longer be considered a full democracy. Lawmakers called on the commission to take tougher measures “at a time when EU values ​​are especially threatened by Russia’s war against Ukraine and its anti-EU actions.”

Orban dismissed the vote in Parliament as ‘a boring joke’.

Since coming to power in 2010, he has challenged the EU’s democratic foundations in an unprecedented coup, rewriting the Hungarian constitution, overhauling electoral rules and the government’s influence on the courts, media, cultural institutions and the education system. expanded. Under his leadership, Hungary has fallen in Transparency International’s Corruption Perceptions Index and is now the second lowest in the EU, with only Bulgaria worse.

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The EU is concerned about irregularities in the Hungarian public procurement system, conflicts of interest in public interest trusts and the independence of the judiciary, said a person familiar with the procedure. Budapest will update the commission on Nov. 19 on progress in implementing corrective measures, said the person, who asked not to be identified because the process is private.

‘Right direction’

In the past month, Hungary has offered to set up an anti-grafting office and change laws, including on public procurement, to address concerns from the EU administration. EU Budget Commissioner Johannes Hahn told reporters in Brussels that Hungary had made “important and public commitments in the right direction” and that the committee welcomed the constructive development.

“We have made commitments that we can deliver, that we want to deliver and that we will deliver,” Tibor Navracsics, a minister in Hungary who is negotiating with the European Commission, said in a Facebook post on Sunday.

Separately, Hungary is still waiting for the commission’s approval of its pandemic recovery plan, which could allow the country to tap into a separate pot of €5.8 billion in EU money.

(Updates with comments from the Attorney General in the second and third paragraphs. Market reaction moved to fourth paragraph. An earlier version of this story corrected the spelling of Orban’s name in a photo caption.)

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