EC opens “in-depth investigation” into restricted state support for Paks 2

November 24, 2015


The European Commission has opened an “in-depth investigation” into the Hungarian government’s investment support for the Paks 2 nuclear power plant. The Commission’s announcement of an investigation taking place into restricted state support for the project comes just one week after it opened an infringement proceeding regarding the compatibility of the project with EU public procurement rules. In short, it is safe to say that the European Commission has really taken issue with the controversial agreement between Budapest and Moscow.

Hungary entered into a deal last year with Russia’s state-owned Rosatom to build two new reactors at Paks. Hungary didn’t have the money to finance the project, so Russia (through a state-owned bank) agreed to do so. The Hungarian government, therefore, is investing in the project by taking on the loan offered by Russia.

What is restricted state aid?

The European Commission will assess whether a private investor would have financed the project on similar terms or whether Hungary’s investment constitutes state aid.

The Commission says its role is “to ensure that when public funds are used to support companies, this is done in line with EU state aid rules, which aim to preserve competition in the Single Market”.

If the European Commission finds that the Paks 2 expansion could not have taken place without restricted state support, “the investment by Hungary must be adequately remunerated”.

So what’s next?

Now that the European Commission has officially opened its investigation, we’ll have to wait and see what its finding will uncover. If the Commission determines that the project involves restricted state support, Hungary will either have to stop the project altogether or try and stand its ground in a European Commission infringement proceeding.