Look for:

Research Detail

2022/11/29 / Erste Group Research

Hungary: EC to block some Cohesion funds


In the dispute between Hungary and the European Commission, it should be made clear at the start that there are two parallel processes underway. The first is about cohesion funds, which are subject to being frozen. Cohesion funds are part of regular EU funds within the 2021-2027 budgeting period and have been assigned to every country. Secondly, there is a Recovery and Resilience Facility (RRF funds) that comes on top of regular EU funds within the budgeting period and are granted independently of regular EU funds. RRF funds are divided into grants and loans. Both Hungary and Poland have had the Cohesion funds allocated. Furthermore, Poland has had its Recovery Plan accepted, but needs to meet milestones to receive payments. Hungary is still waiting for its Recovery Plan to be accepted in order to have access to RRF. If it is not approved by the end of this year, 70% of RRF allocations would disappear forever for Hungary.

Part of the Cohesion funds can be frozen until the situation is solved. This dispute could go far beyond the year-end, but if progress is reached, the funds can be unfrozen later. In the dispute over having the Cohesion funds frozen, EUR 7.5bn is at risk. It should be kept in mind that not all funds will be blocked. This EUR 7.5bn is approx. 30% of the EUR 22.5bn in Cohesion funds granted to HU in the 2021-2027 budgeting period.

Hungary should be able to access the remaining EUR 14-15bn part of the Cohesion funds. The Commission has to approve the so-called Partnership Agreement at first, but in principle, it would not be blocked by the Commission and Council's suspension decision. In addition, a significant amount of agricultural funds were approved by the EC in November. Therefore, more than half of the available funds (graph below) are secured for the country. Furthermore, at this point, Hungary is still smoothly receiving payments from the previous 2014-2020 budget. Hungary is still waiting for approx. EUR 5bn altogether from the previous budgeting period, of which EUR 3.5bn is expected for 2023.


PDF Download Download PDF (252kB)

General information

AuthorErste Group Research
Date2022/11/29
Languageen
Product nameCEE Economies Special Report
Topic in focusFX, Macro/ Fixed income
Economy in focusHungary
Currency in focusHungarian Forint
Sector in focus-
Download



Decline
Accept

We use cookies and web analysis software to give you the best possible experience on our website. If you consent, these tools will be used. For more details please read our Data protection policy.

INFORMATION FOR CORPORATE AND INSTITUTIONAL CLIENTS

Any information, material and services regarding financial instruments and securities provided by Erste Group Bank AG or any of its affiliates (collectively “Erste Group“) on this and any linked website hereafter (jointly the “Websites”) shall be exclusively to investors who are not subject to any legal sale or purchase restrictions (the “Interested Party“).

The publication and distribution of information as well as offering and selling of products and services described on the Websites is prohibited by law in some jurisdictions. For this reason, persons in countries in which the publication as well as the offering and selling of products and services described on the Websites are not permitted by law, must not enter the Websites and/or acquire the products displayed on the Websites.

Neither Erste Group nor any third party shall offer access to the Websites or offer the products to especially, but not limited to citizen/residents of the United States and “U.S. person” (as defined in Regulation S under the US Securities Act 1933 as amended). For this reason, the distribution or redistribution of the information, materials and products into United States or into any other jurisdiction where it is not permitted under the applicable law, as well as to the citizens/residents of these countries shall be prohibited. The securities displayed on the Websites have not been and will not be registered under the US Securities Act of 1933 and trading in the securities has not been approved for purposes of the US Commodities Exchange Act of 1936. For this reason the securities may, inter alia, not be offered, sold or delivered within the United States or, for the account and benefit of U.S. persons.

The Interested Party is solely responsible to examine, whether he may enter the Websites under the law applicable to it. Erste Group shall not be responsible for the distribution of content of any of the Websites to individuals or entities which provide false information about their right to enter the Websites. For this reason Erste Group shall not be liable for any legal claims or damages which may result from the unauthorized entering or reading of the Websites.

By agreeing to this hereto, the Interested Party confirms that
(i) It has read, understood and accepted this Information and the Disclaimer;
(ii) It informed itself about any possible legal restriction and warrants that it is not restricted or prohibited to enter the Websites according to any law applicable; and
(iii) It does not make available the contents of the Websites to any person who is not qualified by law to enter the Websites.
(iV) It is no consumer.