EU funds

Viktor Orbán’s childhood friend’s company would benefit from the EU Recovery Funds

An energy company owned by Lőrinc Mészáros has been awarded a grant of HUF 13.33 billion by the Hungarian government from the EU’s expected recovery aid scheme. The Recovery and Resilience Fund aims to kick-start the economy after the COVID epidemic and create a more resilient, green, digital Europe. But Hungary has not yet received this money because the Hungarian Recovery Plan, submitted a year ago, has not yet been approved by the European Commission.

All EU Member States (except the Netherlands and Hungary) have been enjoying the benefits of grants and loans from the EU Recovery and Resilience Fund (RRF). RRF is the largest part of NextGeneration EU, a €806 billion package designed to help repair the direct economic and social damage caused by the coronavirus epidemic.
The Recovery and Resilience Fund (€672.5 billion) aims to mitigate the social and economic impact of the coronavirus pandemic by making European economies and societies more sustainable and resilient, and preparing for the green and digital transition. Mostly referred to as “the recovery funds”, it offered €312.5 billion to Member States as grants and €360 billion as loans.

The European Parliament and the Council agreed on 18 December 2020 on the Recovery Funds. EU member states were then required to submit a so-called “Recovery and Resilience Plan” (RRP), originally by 30 April 2021. These were was assessed by the Commission against a set of criteria, and then the Member States were granted this support. The Netherlands submitted its plan only recently, while negotiations on the Hungarian plan have been ongoing since last year. If there is no agreement on the Hungarian RRP by the end of the year, the country could lose a significant part of this funding.

The government plans, the Commission decides

Hungary submitted its “Recovery and Resilience Plan” (RRP) to the European Commission in May 2021. This document set out the reforms and projects for which the Hungarian government plans to use the EU’s Recovery and Resilience Fund (RRF). In Hungary’s RRP submitted last year, the Hungarian government requested only non-reimbursable aid (without a loan), but in March this year the Prime Minister also asked the European Commission for the full amount of the RRF loan as well.

Since last year, the amount of recovery funds available to Hungary has been reduced from €7.2 billion to €5.8 billion , as the European Commission adjusted the amount to better-than-expected Hungarian growth figures (2020-2022), as required by the European HET rules. Of the €5.8 billion for Hungary, 43% is non-reimbursable aid, the rest will be available in the form of loans if the European Commission adopts the Hungarian plan.The reasons for the delay have been explained in different ways by the Hungarian government and the Brussels administration.

The government claimed that the child protection law (by critics referred to as “anti-LGBT law) and the left were the reasons for the lack of agreement. In January this year, the Hungarian government stated that “Brussels is delaying the recovery funds due to our country for political reasons” and that “Brussels is withholding funds to attack the Child Protection Act”. The latter argument was also made last December by Fidesz MEP Tamás Deutsch in an article entitled “The European Commission is lying about the approval of the Hungarian recovery plan” published by the government mouthpiece Even a few days ago, Gergely Gulyás blamed the “left-wing lobby” for the failure to reach an agreement. Tibor Navracsics, Minister of Regional Development and Utilization of EU Funds made similar arguments in an interview with the other day:

“The fact that the negotiations have slowed down is also due to the fact that the European Parliament – especially the left wing – has increased the pressure to not only not reach an agreement, but not even to negotiate with the Hungarian government in any meaningful way.”

The minister stressed, however, that an agreement is very close and that the Hungarian government is now waiting for Brussels to confirm their proposals on the issues that have been criticised. He probably meant, among others, the 4 “concessions” listed by the Hungarian government at the request of the Brussels in order to get the country’s RRP accepted.

Despite the government’s concessions, the obstacles have not magically disappeared

Although news of a close agreement between Budapest and Brussels on the recovery plan is coming in almost daily, no one dares to estimate when it will be actually reached. Commission explanations made public in recent weeks suggest that the lack of agreement is due, among other things, to the Hungarian government’s insufficient efforts to fight corruption and to the changes it expects Hungary to make in the field of education. This was also confirmed by a Commission spokesperson in Brussels asked by Átlátszó about the Commission’s objections to the Hungarian Recovery Plan since it was submitted, and about what exactly are the issues under discussion in the current negotiations

“In our discussions with the Hungarian authorities on the recovery and resilience plan, we have made progress on a number of issues over the past months. However, there are a number of points that remain open, including on anti-corruption and adequate audit and control arrangements, as well as education measures. As with all Member States, and in line with the Recovery and Resilience Facility (RRF) Regulation, we looked at addressing the challenges identified in the country-specific recommendations and in the case of Hungary, this includes issues related to the framework on anti-corruption and education. In light of the final RRF grant allocation foreseen under the RRF Regulation, the grants for Hungary are reduced from €7.2 to €5.8 billion. The Hungarian authorities are reworking their recovery and resilience plan to fit this reduced size with the 11 RRF assessment criteria. Discussions with Hungary continue and we are working to conclude our assessment as fast as possible. We keep working constructively as we have done with all Member States, to make sure that the Hungarian plan complies with the objectives and requirements of the RRF Regulation.”

As on the government’s dedicated website only last year’s version of Hungary’s Recovery Plan is available, we asked the Prime Minister’s office to see the version of the document that is currently the basis for negotiations with the European Commission. To date, we have not received a reply to our information request.

13 billion for Mészáros’ electricity company

However, the Prime Minister’s Office has replied to another question we sent earlier on where the list of beneficiaries will be published when Hungary receives the recovery funds. According to the reply, the government will publish the RRF funds on the “usual” website where beneficiaries of other EU-funds are listed.

According to the information published on this website the government has already started distributing the funds that have not yet been received.

From these data it can be seen that one of Lőrinc Mészáros’ companies,  OPUS Titász Zrt., has received the 5th largest grant from the recovery funds so far. Half of the company’s total project budget of HUF 26.66 billion, HUF 13.33 billion, is financed by the EU recovery fund. The project’s title is “Ensuring a resilient and secure electricity network for the integration of weather-dependent renewable energy sources in the OPUS TITÁSZ Transmission Grid” and is expected to be completed in 2026.

The fact that the Restoration Grants were awarded in advance, and in some cases  already paid out of Hungarian budget funds, does not violate EU law. According to one of our expert sources unlike most of the traditional EU grants, the RRF is designed in such a way that costs do not need to be justified by invoices.

Member states with an agreed national plan receive funding to implement certain reforms, not to cover the certified costs. That is, in return for a reform implemented, you get the negotiated money, and this is not necessarily based on the demonstrable or even estimated cost of the reform. The Commission is not examining from which source and how much money the Member State is spending, and in this respect the fact that the Hungarian national plan has not yet been approved is of no relevance.

If Hungary does not receive the RRF money later on, the government will have to cover the development of Mészáros’s electricity company not from EU funds, but from Hungarian budget funds

Written and translated by Gabriella Horn.The original article is available here in Hungarian.