EU takes rule of law battle with Hungary to next level with budget proposal

Published on
18/07/2025 – 6:35 GMT+2

The European Commission has intensified its rule of law standoff with Hungary by linking future EU funding to adherence to democratic values under its proposed Multiannual Financial Framework (MFF), the seven-year budget proposal announced this week.

Under the new framework, member states must uphold the EU’s core values—including the principles enshrined in the Charter of Fundamental Rights and Article 2 of the EU Treaty—to access funding and secure project approvals. The move introduces a form of “smart conditionality”, Commission President Ursula von der Leyen announced on Wednesday.

“In the National Regional Partnership Plans, we are making the rule of law and fundamental rights a condition for investment and a focus for reform,” von der Leyen said. “EU money will be spent responsibly, with strong safeguards, clear conditionality, and appropriate incentives—because this is in the interest of our citizens.”

The largest funding stream under the new budget, the Regional Partnership Plans (NRPs), will include allocations for agriculture and cohesion policies. Funding eligibility will be determined in part by the European Commission’s annual rule of law reports.

If adopted, the measure could lead to the full suspension of EU funds to Hungary. The country is already facing a freeze on €18 billion in EU funds due to concerns over systemic corruption and democratic backsliding. Under the current budgetary framework, Hungary has access to only €10 billion of those funds.

German Green MEP Daniel Freund, a vocal critic of Hungarian Prime Minister Viktor Orbán, cautiously welcomed the proposal.

“This is a small step in the right direction,” Freund said. “Things could improve if this plan goes through—but let’s not forget it must be ratified both by the European Parliament and unanimously by the member states, including Hungary. There’s still a long battle ahead.”

Freund also expressed concerns over parts of the proposal, particularly the shift toward a performance-based funding model similar to the one used during the COVID-19 Recovery Fund.

“There, oversight and accountability were much weaker,” he warned.

Hungary remains the only EU country currently subject to the Rule of Law Conditionality Mechanism, a tool that allows the suspension of funds in cases of systemic breaches of EU values. Budapest strongly opposed the mechanism’s adoption in 2020.

Hungarian pro-government MEP Csaba Dömötör criticised the Commission’s approach, calling it politically motivated.

“Withholding money only serves leftist, liberal governments,” Dömötör told Euronews. “If they can cause economic damage, it benefits leftist forces during elections. This is all political blackmail.”

Prime Minister Orbán also slammed the proposed budget, calling it a “pro-Ukraine budget” and accusing the Commission of prioritising Ukraine over European citizens. He urged the Commission to withdraw the plan, arguing that it is too weak to be seriously negotiated.