Hungary accepts big penalty for mismanaging EU funds

BUDAPEST (Reuters) - Hungary has accepted a penalty for poorly managing funds it receives from the European Union that could cost Budapest more than 500 billion forints ($1.65 billion) in funding.

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Details of the penalty were set out in a document prepared by the European commissioner for neighborhood policy’s team for a meeting of the European Parliament’s Budget Control Committee on Monday.

The document was posted on the committee’s website after the meeting. It showed Hungary had agreed to a 10% reduction in the EU funds deemed by the committee to have been mismanaged in the current 2014-2020 EU budget period.

The penalty would amount to more than 500 billion forints, about 2% of Hungary’s economic output if it were paid in a single year.

Right-wing Prime Minister Viktor Orban has clashed repeatedly with EU institutions and other member states over what they see as the erosion of the rule of law and Hungary’s use of EU funds.

Orban rejects allegations that his government has eroded democratic checks and balances, and scoffed at a proposal to tie funding to upholding democratic principles and the rule of law.

But in 2018, eight of the 30 EU funding programs that had to be “corrected” by the European Commission because of problems in how they were managed were Hungarian, according to the Commission, the EU’s executive.

Citing a public procurement audit, the Commission identified Hungary as the EU member state with the weakest national management and control systems in 2018.

Hungary could have challenged the Commission’s findings project-by-project but instead opted for a “10% flat-rate financial correction.”

The Hungarian government did not respond to requests for comment.

Benedek Javor, a former Green member of the European Parliament who opposes Orban, wrote in a blog post that the penalty showed that “even in regional terms, Hungary’s situation is tragic.”

Reporting by Marton Dunai, Editing by Timothy Heritage