Hungary set to lose EU funding

Having failed to deliver on earlier plans, Hungary is almost certain to have to take on upwards of 300,000 euros of water management and quality improvement projects that were to be financed by the European Union. For a variety of reasons, numerous significant projects are not going to be completed by the deadlines. This means that timeframes for the development of these key infrastructure projects will be extended, and the state has the legal obligation to bear the costs.   

Hungarian governments dread the prospect of being unable to draw down the full amount of development funding allocated for the country within the EU’s normal budgetary periods. These funds, which are essentially “free money”, are especially important as almost all developments are financed through Brussels, and being unable to make use of the available funding for any reason is a major political blow. The worst that could happen is missing the end of the designated accounting period, at that point all the costs for approved projects that have not been completed fall on the Hungarian treasury.

This seems to be the most likely outcome for significant amounts of EU funding earmarked for water management projects:’s inside source says there is no chance of reaching completion by June 30, 2015, the deadline for finalising the books for the 2007-2013 EU budgetary period.

The most important funding framework involved was KEOP, which was to distribute 1.5 trillion forints (€4.8 billion) for environmental, waste management, water treatment and other related purposes. This is a huge amount of money, approximately 5% of Hungary’s gross domestic product.

Water management, especially flood prevention measures were marked a priority. Since 2009, 336 billion forints (more than 1 billion euros) have been allocated for this purpose, meaning this is the amount that has to be spent by the time the books are closed. So far, however, only 40% of the earmarked sum has been called on. To avoid losing the remaining funds, Hungary has less than a year to spend the other 60%.

Unfortunately, based on the progress achieved in the past five years and the state of affairs now, this is completely unrealistic.

Taking into account the projects underway and the rate of completion, it almost guarantees that at least 101 billion forints (€322,000) worth of approved projects will not be completed in time. The sluggish progress of these projects is all the more surprising given that around 60% of the soon-to-be-lost funding was dedicated to flood prevention projects, where recent years have seen intense and regular flooding cause extensive damage in areas around Hungary’s rivers.  The government should have had a strong interest in making a bigger effort to advance these ventures.