Hungary must make real changes to unlock EU funds

Significance

The first triggering of the EU’s rule-of-law mechanism and the possibility of losing billions of euros as Hungary teeters on the brink of recession have put the government under extreme pressure. It has committed itself to a reform package that may unlock as much as EUR28bn (USD27.7bn) in cohesion and reconstruction funds.

Impacts

• Starting a prosecution against former senior state official Pal Volner is a gesture to the EU, which has noted the lack of such cases.
• State default is unlikely as much of Hungary’s debt has been converted into forints over the last decade.
• Hungary’s disputes with the EU could speed foreign investors’ withdrawal from its assets as a surging dollar depresses emerging markets.