Orban Drops $4 Billion Plan for Covid Cash That Alarmed EU

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Hungary unexpectedly dropped a request to channel billions of euros from the European Union’s pandemic recovery fund to finance controversial university foundations led by Prime Minister Viktor Orban’s allies.

The reversal came after Bloomberg reported Wednesday that the EU’s executive would scrutinize Hungary’s request to channel $4 billion of the bloc’s stimulus money into the “renewal of universities.” A dozen European Parliament members urged the EU on Monday to block the funding, saying the outlays would be shielded from public scrutiny and vulnerable to graft.

“The government decided that the development of universities will be done mostly without EU funds,” Cabinet Minister Gergely Gulyas told a weekly briefing on Thursday. He said the move would “nip in the bud” a looming row with the EU over the issue.

Despite the controversy, the government is still trying to salvage some of the EU funding it had destined for the foundations. Orban dispatched a delegation to Brussels, including former EU Commissioner Tibor Navracsics, who held talks with EU officials on Thursday, 444.hu news website reported, without saying where it got the information.

Orban’s lawmakers this week transferred a vast array of state assets to new, quasi-private foundations, a majority of which will run state universities. Their boards will be controlled by the prime minister’s allies, including members of his government, who can have lifelong terms and have the power to name their successors.

Some opposition party members decried the move as the misappropriation of public funds, while others said it would create a deep state that will entrench Orban’s influence regardless of whether he continues to win elections.

The endowments are likely to be closely watched, especially as Gulyas made clear that the government would press ahead with the university foundations without the EU aid.

While the decision to withdraw the request for the EU funds may speed the eventual payout of Hungary’s share of the recovery package, it’s unlikely to allay concerns about suspected widespread graft under Orban.

Since he took power in 2010, Hungary has plunged in Transparency International’s annual corruption perceptions index and is currently in last place among EU member states, tied with Bulgaria and Romania. The watchdog has said cronyism was a “key feature” of the regime.

The EU’s executive is currently crafting guidelines for how to implement its new rule-of-law powers to penalize countries that misuse financing from the bloc, including new rules that will let it withhold disbursements. Hungary and Poland are the only member states currently facing formal EU probes over the erosion the rule of law.

©2021 Bloomberg L.P.

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