Brussels moves to deduct €200 million fine from Hungary's EU funds, as country refuses to pay up

The European Commission has triggered a special procedure to deduct the €200 million fine that the European Court of Justice (ECJ) has imposed on Hungary over the country's long-standing restrictions on the right to asylum.

The fine has to be paid as a lump sum to the European Commission.

Budapest missed the first deadline in late August, prompting the executive to send a second payment request with a deadline of 17 September.

Since this second request was also ignored, the Commission said on Wednesday it would activate the so-called "offsetting procedure" to subtract the €200 million fine from Hungary's allocated share of the EU budget.

The mechanism will look into various financial envelopes expected to be disbursed to Hungary in the coming weeks. Around €21 billion of cohesion and recovery funds earmarked for Hungary remain frozen due to rule-of-law decline.

"We're moving to the 'offsetting' phase as of today," a Commission spokesperson said on Wednesday. "In theory, any payments can be looked at, nothing is excluded, but obviously this will take a bit of time, we need to identify what's coming up and identity payments that can absorb the fine concerned."

In parallel, Hungary is facing a €1 million fine for each day it continues disregarding the ECJ ruling and maintains the restrictions on asylum rights, which the court had described as an "unprecedented and exceptionally serious breach of EU law."

Budapest has to explain what measures, if any, it has introduced to abide by the judgment. As the country did not answer the Commission's questions in time, the executive has sent the first payment request to collect the accumulated fine.

The request covers €93 million and has a 45-day deadline.

Since the ECJ issued its ruling in June, Prime Minister Viktor Orbán has ratcheted up his anti-EU rhetoric, calling the fine "outrageous and acceptable" and arguing that his country should be paid €2 billion for defending its borders since 2015.

The Commission does not recognise this figure as refundable in any way.

"We should not be punished but our achievements should be recognised and money should not be taken away from us but given to us so that we can continue this work," Orbán said in a recent radio interview. "It is a matter of time."

As retaliation, his government has threatened to bus migrants to Belgium "voluntarily" and "free of charge," something that would constitute an unprecedented case of instrumentalised migration by one member state against another.

No transfers of migrants have yet taken place but the scheme has already been met with fierce criticism from Belgian and EU authorities.

The dispute, a new chapter in the decade-long Brussels-Budapest showdown, is being compounded by growing concerns over Hungary's decision to extend its National Card scheme to Russian and Belarusian citizens, which the Commission warns could enable sanctions circumvention and pose a threat to the "entire" Schengen Area.

Budapest has strongly denied any risks to internal security, saying the extension to Russian and Belarusian citizens was needed to palliate labour shortages inside the country and give employers an "easier procedure" to attract foreign workers.

Despite the tension, there was a hint of rapprochement this week after János Bóka, Hungary's minister for European affairs, met with Ylva Johansson, European Commissioner for Home Affairs to discuss both the ECJ ruling and the National Card.

The Commission did not immediately provide a read-out of the meeting.

This article has been updated with more details.