The European Commission is preparing to send a high-level delegation to Budapest next week as it explores ways to unlock billions of euros in frozen recovery funding for Hungary. The mission, led by Declan Costello, Deputy Director-General for Economic and Financial Affairs, signals a willingness to move quickly with the newly installed government of Prime Minister Péter Magyar, who won a landslide election last month ending 16 years of Viktor Orbán's rule.
At the heart of the discussions is a proposal to channel EU funds through Hungary's state-owned export-import bank, Exim Bank. The mechanism, previously used by Poland and Spain, would allow the Commission to transfer money to the institution before all conditions are formally met, with the bank then releasing financing as reforms are implemented. However, officials in Brussels have expressed concern that this approach would significantly reduce the Commission's oversight of spending and could delay project implementation by several years.
Tight timeline for recovery funds
Hungary's Recovery and Resilience Plan includes €6.5 billion in grants and €3.9 billion in loans, for a total of €10.4 billion. Under EU rules, the funds must be committed by the end of August or they will be forfeited. Commission officials with direct knowledge of the talks told Euronews that while the grant component appears achievable, securing the loan tranche is considered "considerably more complex."
“We do not exclude that Hungary successfully unlocks 100% of the recovery funds — €10.4 billion,” one Commission official said on condition of anonymity. “We want Hungary to use as much of the funding as possible.” A second official was more cautious: “It seems very unlikely that Hungary will manage to secure all the funding in such a short period.”
Budapest must implement a series of anti-corruption and rule-of-law reforms by the end of August, alongside demonstrating tangible progress on projects, including infrastructure works. While reforms could be adopted quickly given the government's broad parliamentary majority, proving project implementation within the deadline may be considerably more challenging. One possible solution involves persuading the Commission to accept existing initiatives under the recovery programme.
The same source suggested that attempts to secure the loan tranche may be driven as much by political considerations as by financial necessity. Failure to secure the €3.9 billion loan component would represent a political setback for Magyar, who pledged to recover the full package during his campaign. He is expected in Brussels on 25 May for high-level talks.
Exim Bank as a vehicle for funds
Hungary's original recovery plan included railway and energy infrastructure projects, though it remains unclear what changes the incoming government intends to make. The Commission has urged Budapest to prioritise projects that are both feasible and capable of absorbing funds quickly. Under the Exim Bank model, the EU could transfer funds to the bank before all conditions are formally met, with the institution then releasing financing once reforms are implemented. Another option would involve creating a Special Purpose Vehicle (SPV) to manage specific projects.
However, officials noted that this approach would significantly reduce the Commission's oversight of spending and could delay project implementation by several years. The root cause for the blocked funding remains rule-of-law concerns, making oversight imperative. Recovering EU cash frozen over rule-of-law and anti-corruption concerns under Orbán was a central campaign pledge of Magyar's Tisza Party.
Magyar's economic team, led by finance minister András Kármán, is expected to move quickly to pass the necessary reforms. The Commission has also assigned additional staff to its Hungary desk to assist with preparatory work. The visit by Costello's delegation signals Brussels' willingness to support the new government, and one Commission source dismissed reports of growing tensions, saying Hungarian officials were working constructively on the files.
The broader context includes ongoing debates about EU enlargement and the rule of law. As Ireland Eyes Budapest Shift to Unblock Ukraine EU Accession Talks, the outcome of Hungary's recovery fund negotiations could have implications for the bloc's credibility on enforcing democratic standards. Meanwhile, Budapest Marks 22 Years in EU Amid Government Change and Renewed European Optimism, highlighting the symbolic importance of this transition.
If Hungary fails to secure the funds by August, the money will be forfeited, a scenario that would be a major blow to Magyar's government and to EU-Hungary relations. The Commission's delegation will work to ensure that Budapest meets the criteria, but the clock is ticking.
