Brussels withholding EUR 2.5 billion worth of structural funds due to “irregularities”

March 17, 2016

EU

The government claims it has called down and received every last penny of EU structural funds related to the 2007-2013 funding cycle. In reality, a significant portion of these funds has yet to make its way from Brussels to Budapest due to various irregularities in the use of said funds. An unnamed source tells Hungarian news site 444.hu that, due to these irregularities, Brussels has withheld the payment of HUF 775 billion (EUR 2.5 billion), or nearly 10 percent of the total funding available to Hungary for the 2007-2013 cycle. This means the government must cover the costs of these projects with loans, trusting (for the time being) that Brussels will release the funds in the future.

Minister Overseeing the Office of the Prime Minister János Lázár has in recent months boasted that “Hungary has called down 100 percent of the [EU] funds at its disposal. This is a significant accomplishment even by international comparisons.”

György Barcza, CEO of the State Debt Management Agency, said that in 2015 alone Hungary had to take out HUF 560 billion (USD 2 billion) in loans to compensate for lack of funds.

According to 444.hu, there are a number of irregularities that have triggered the Commission to consider “corrections” (EU jargon for “we’re not paying”) in the amount of funding it will release to Hungary.

These irregularities include issues related to

  • LED lighting installations performed by a company that belonged to István Tiborcz (Prime Minister Viktor Orbán’s son-in-law). In this particular case, Tiborcz’s miraculous rise to become owner of the most successful LED streetlight installing company in Hungary may have caught the attention of European Commission investigators. Even OLAF, the European Commission’s anti-fraud agency, opened an investigation into Tiborcz’s huge successes;
  • Fake studies paid for with EU funding. This issue seems to fall in line with statements by opposition Politics Can Be Different (LMP) politician Ákos Hadházy who on a weekly basis unveils more and more evidence of fake studies being commissioned for no particular purposes. According to 444.hu, these fake studies may amount to some HUF 40.6 billion (EUR 131 million) in corrections;
  • Overcharging for projects. According to Transparency International Hungary, the majority of EU-funded projects in Hungary just happen to be overpriced by between 20 and 25 percent;
  • Discriminatory practices involving infrastructure development policies. In Hungary’s case, discriminative legislation restricting competition in the public procurements related to road construction has thus far cost Hungary HUF 436 billion (EUR 1.406 billion);
  • Fraudulent use of EU funds designated for classroom improvement. In just one such case, the government stands to have corrections totaling some HUF 241 billion (EUR 780 million).