European Commission sends delegation to Budapest to unlock EU funds

The European Commission is looking for ways to help Hungary unlock billions in EU funding, dispatching a delegation to Budapest next week as the clock ticks.

While Brussels has warned Budapest the receiving the full envelop €10 billion in recovery funds before an August deadline, suggesting that it may receive the full cashout of grants, but not the loans. Still, the Commission will send a team of senior officials to make a more detailed assessment with the now-in-office government.

One of the options the Commission is exploring is using the country’s investment bank Exim Bank to channel the funding, but Brussels also worries that it will lose oversight of the process, which is seen as imperative, as the root cause for the blocked funding is the rule of law.

As it stands, Hungary will only receive cash in upfront payments if it manages to meet the criteria set out by the Commission, but time is tight. Nonetheless, employing the Hungarian investment bank as a catalyser for future projects would allow disbursements to proceed even if not all conditions have been met upfront.

According to a source within the Commission familiar with the file, Hungary could receive its first recovery payments in late autumn, following the submission of a formal payment request to Brussels.

Recovering EU cash frozen over rule of law and anti-corruption concerns under former prime minister Viktor Orbán was a central campaign pledge of Magyar’s Tisza Party, which won a landslide election last month, ending Orbán’s 16 years in power. Should the new government fail to secure the funds by August, the money will be forfeited.

Péter Magyar is expected in Brussels on 25 May for high-level talks.

Tight timeline for unlocking recovery funds

European Commission officials with direct knowledge of the talks told EU News that Hungary could still unlock its frozen EU recovery funds before the deadline, though the timeline is considered extremely tight.

Brussels is focusing primarily on the grant component of the package, viewing the loan tranche as significantly more difficult to secure.

“We do not exclude that Hungary successfully unlocks 100% of the recovery funds — €10.4 billion,” one Commission official said on condition of anonymity. “We want Hungary to use as much of the funding as possible.”

A second official was more cautious.

“It seems very unlikely that Hungary will manage to secure all the funding in such a short period.”

Budapest must implement a series of reforms by the end of August, alongside demonstrating tangible progress on projects, including infrastructure works.

While reforms could potentially be adopted quickly, given the government’s broad parliamentary majority, proving project implementation within the deadline may be considerably more challenging.

One possible solution could involve persuading the Commission to accept existing initiatives under the recovery programme.

The same source suggested that while absorbing the grant component — which does not need to be repaid — already poses a challenge, attempts to also secure the loan tranche may be driven as much by political considerations as by financial necessity.

High-level Commission delegation heading to Budapest

Negotiations are continuing at both political and technical levels, with the Commission set to send a high-level delegation to Budapest next week to assist with the process.

The mission is expected to be led by Declan Costello, Deputy Director-General for Economic and Financial Affairs, the department responsible for recovery fund disbursements. It remains unclear whether Céline Gauer, who heads the Recovery and Resilience Facility task force, will also attend.

The visit signals Brussels’ willingness to move quickly with a government that has only recently taken office. A key immediate challenge will be Hungary’s obligation to submit a revised spending plan by the end of May detailing projects eligible for EU financing. The Commission is expected to push for simplified procedures.

Budapest must also meet a series of conditions linked to anti-corruption measures and rule-of-law reforms.

Hungary’s Recovery and Resilience Plan includes €6.5 billion in grants and €3.9 billion in loans. One Commission source said the grant component appears achievable, while securing the loans would be “considerably more complex”.

The same official dismissed reports of growing tensions between Budapest and Brussels, saying the Commission was actively supporting Hungary’s efforts and that Hungarian officials were working constructively on the files.

Additional staff have also been assigned to the Commission’s Hungary desk to assist with preparatory work.

Failure to secure the €3.9 billion loan tranche would represent a political setback for Magyar, who pledged to recover the full package.

Exim Bank as vehicle for funds

Hungary’s original recovery plan included railway and energy infrastructure projects, though it remains unclear what changes the incoming government intends to make. The Commission has urged Budapest to prioritise projects that are both feasible and capable of absorbing funds quickly.

One option under discussion would involve channelling financing through a national financial institution, following models previously used by Poland and Spain. In Hungary’s case, the state-owned Exim Bank has emerged as a possible candidate.

Under such a system, the EU could transfer funds to the bank before all conditions are formally met, with the institution then releasing financing once reforms are implemented. Another option would involve creating a Special Purpose Vehicle (SPV) to manage specific projects.

However, officials noted that this approach would significantly reduce the Commission’s oversight of spending and could delay project implementation by several years.

Magyar’s economic team, led by finance minister András Kármán, is expected to move quickly to pass legislation needed to satisfy EU conditions. Hungary is also expected to seek membership of the European Public Prosecutor’s Office; a step widely viewed as a major anti-corruption measure.

Magyar is also expected to sign a political agreement on the release of funds within weeks, with a possible visit to Brussels pencilled in for around 25 May.

Extension for cash considered unlikely

Hungary could theoretically request an extension beyond August, but officials consider this unlikely because of both legal and political obstacles.

Several member states, including Portugal and Greece, have previously raised concerns about meeting payment deadlines, though the Commission has warned that extensions would increase uncertainty around the programme.

Any amendment to the recovery fund regulation would require approval from EU member states, many of which oppose reopening the legislation. However, the Commission has indicated it could consider delaying actual disbursements beyond the end of 2026 in Hungary’s case.

Defence funds under review

Magyar’s incoming administration is also reviewing Hungary’s €16 billion defence plan submitted under the EU’s Security Action for Europe (SAFE) instrument, a joint borrowing scheme offering €150 billion in low-cost loans to member states.

Officials are examining the plan for potential corruption risks and may remove certain industrial players linked to allies of former prime minister Viktor Orbán.

SAFE funding is not currently seen as an immediate priority for the incoming government, which faces more urgent financial pressures. However, the plan could still be among the first to receive Commission approval.

Hungary is nevertheless expected to miss a late-May deadline tied to solo defence procurement, meaning Budapest would instead need to participate in joint procurement with another member state.

Cohesion funds: political hurdles remain

The government is also attempting to unlock €6.3 billion in cohesion funding. Unlike the recovery package, there is no immediate risk of losing the money, as most of it can be accessed by meeting the same milestones attached to the recovery plan.

However, more than €1 billion remains blocked over disputes linked to asylum policy and LGBTQ+ rights.

Unlocking those funds would require Hungary to repeal its so-called “child protection law”, legislation introduced under Orbán that critics say conflates homosexuality with paedophilia.

Budapest would also need to reform its asylum system after the European Court of Justice ruled that parts of it breached EU law.

Magyar has not publicly addressed either issue. Pursuing reforms in both areas could alienate more conservative voters within his support base.

The European Commission didn’t reply to EU News’ request for comment.