Hungary seeks to settle Erasmus dispute as ECJ fines on asylum soar to €360 million

Hungary has made an overture to settle a long-running dispute with the European Commission over access to the Erasmus+ and Horizon Europe funds while, in parallel, refusing to pay the fines imposed by the European Court of Justice over serious breaches of asylum law, which have ballooned to €360 million.

The first dispute dates back to December 2022, when the Commission excluded more than 30 Hungarian institutions, including 21 universities, from receiving Erasmus and Horizon funds due to the involvement of government-linked figures in their management boards and concerns about academic freedom, transparency and conflicts of interest.

Hungary's National Assembly recently approved an amendment to the law that regulates public interest asset management foundations (known as "kekva" in Hungarian), a particular type of trust fund that can perform public functions, such as supervising universities. This is the case for the affected institutions.

The amendment seeks to reassure the Commission that high-level politicians will be precluded from joining management boards and declarations of interests will be duly assessed. Budapest intends to notify Brussels about the tweaked law "in the coming days", János Bóka, Hungary's EU affairs minister, said on Tuesday evening.

The notification will kick start the Commission's assessment to see if the tweaked legislation is enough to address the concerns and resume the flow of funds.

"Of course, it is possible to have a solution before the end of the year," said Didier Reynders, the Commissioner for Justice, who spoke beside Bóka following a ministerial meeting, adding: "We need to be sure there is a correct answer to all our concerns."

Reynders noted that previous drafts submitted by Hungary had failed to tackle the risk of conflicts of interest in the management boards of the public trust funds.

The exclusion from the Erasmus and Horizon programmes is part of the conditionality mechanism that has frozen €6.3 billion in EU funds for Hungary over systematic irregularities in public procurement and the fight against corruption.

The €6.3 billion is included in a broader package of €11.7 billion of cohesion funds that the Commission has immobilised due to persistent rule-of-law deficiencies. Hungary is unable to access most of its €10.4 billion recovery fund for similar reasons.

The last time the executive unblocked money for Hungary (€10.2 billion in December last year), it faced a furious backlash and a lawsuit by the European Parliament.

A ballooning bill

In the meantime, Hungary is staring down a ballooning bill of at least €360 million as a result of the ruling by the European Court of Justice (ECJ) that found the country's restrictions on asylum rights amounted to an "unprecedented" legal breach.

The ECJ imposed a €200 million fine to be paid as a lump sum and a €1 million fine for every day the country continues to ignore the ruling.

Budapest has refused to pay either sanction, ignoring periodical requests by the European Commission, the latest of which was sent out this week.

The executive has triggered a special budget procedure to automatically deduct the €200 million amount from Hungary's allocated share of EU funds and could soon do the same if the daily fines are not reimbursed in time.

As the ruling was issued on 13 June, the accumulated sum is about €160 million and keeps growing with each passing day.

Talks are ongoing between Brussels and Budapest regarding the implementation of the ECJ ruling, which, if eventually respected, would stop the count on the daily fines.

"It is now for Hungary to pay and take the necessary measures to comply with the judgments," a Commission spokesperson said this week.

Prime Minister Viktor Orbán has previously described the ECJ ruling as "outrageous and unacceptable", claiming it is the product of "judicial activism".