Proceedings against Hungary continue as Schengen deal nears for Bulgaria and Romania – Hungarian EU Presidency Watch

A review of the period between 11 – 24 November (Our previous reports on the Hungarian EU Presidency are available here.)

Key findings and events to watch

• Currently Hungary owes EUR 353 million and the Commission has sent an additional payment notice, this time for EUR 60 million. The basic fine and the daily fines for the first 3 months could be deducted from the payments for Hungary, but reportedly there are no ongoing proceedings.
• The Foreign Affairs Council discussed further EU support for Ukraine in the light of Russia’s ongoing escalation of the war, as well as the potential EU response to third-country support for Russia. Hungarian FM Péter Szijjártó strongly criticized the initiation.
• Under pressure from Member States, the Hungarian Presidency has put the case against Hungary under Article 7 of the Treaties on the agenda of the General Affairs Council.
• The Council and the European Parliament have reached an agreement on the EU’s annual budget for 2025. Next year’s budget focuses strongly on the EU's key policy priorities and takes into account the current challenging geopolitical context.
• The European parties have finally agreed on the new College of Commissioners: No changes have been made to the original proposal, except for the reduction of Oliver Várhelyi's portfolio.
• One of the most significant achievements of the Hungarian presidency could be the full accession of Bulgaria and Romania to the Schengen area. There is a chance that this could happen by 1January 2025.
• During this period, as in the previous one, there were no political advertising campaigns by Hungarian government actors on Meta or Google related to the Presidency or the EU in general.

Key events to watch

• 1 December: New European Commission takes office
• 2-3 December: Employment, Social Policy, Health and Consumer Protection Council (first Council meeting with the new Commission, with Olivér Várhelyi as new Commissioner for Health and Animal Welfare)
• 5-6 December: Transport, Telecommunications and Energy Council
• 12-13 December: Justice and Home Affairs Council

Contents

• 1. The political dimensions: The different shades of new reality
  • 1.1 EU Commission sent a new payment notice to Hungary (again)
  • 1.2 Further EU support to Ukraine is on the horizon
  • 1.3 Article 7 procedure against Hungary is on the agenda
  • 1.4 Small steps on the path back to Erasmus
  • 1.5 Sixteen member states spoke up against Hungary’s law confuses gays with pedophiles
  • 1.6 A new maneuvering strategy in the EP: The Venezuela majority
• 2. The policy dimensions: What is accomplished and what is still pending
  • 2.1 Agreement on EU budget for 2025
  • 2.2 Commissioners' College is full, Várhelyi assigned a narrower portfolio
  • 2.3 Romania and Bulgaria are a step closer to join the Schengen area
  • 2.4 Private equity fund owners remain unclear
  • 2.5 The future of the EU’s trade policy and an unusual interlude
  • 2.6 Deforestation law postponed
• 3. Paid political advertising on the Presidency and other EU issues on Meta and Google (11 – 24 November)
• 4. What to watch

1. The political dimensions: The different shades of a new reality

1.1 EU Commission sent a new payment notice to Hungary (again)

• After the European Court of Justice found Hungary guilty of violating EU asylum rules, it fined Hungary EUR 200 million in June 2024, which is still increasing by EUR 1 million per day. Currently, Hungary owes EUR 353 million and the Commission has sent an additional payment notice, this time for EUR 60 million (= 2 additional monthly fines). The basic fine and the daily fines for the first 3 months (EUR 293 million) could be deducted from Hungary's payments, but reportedly there are no ongoing proceedings.
• To remove the one-million-a-day penalty, Hungary must adopt EU-compatible asylum rules. According to earlier statements by Minister János Bóka and Home Affairs Commissioner Ylva Johansson, a timetable was agreed in September. Sooner or later, these funds will be sorely missed by the Hungarian economy, especially considering that GDP growth figures are far below previous expectations.

1.2 Further EU support to Ukraine is on the horizon

The Foreign Affairs Council (FAC) discussed Russia's aggression against Ukraine, following a videoconference intervention by Ukrainian Foreign Minister Andrii Sybiha, who briefed his EU counterparts on the latest developments on the ground and Ukraine's most pressing needs.

• In the ensuing discussion, the FAC discussed further EU support for Ukraine in light of Russia's continued escalation of the war, and the possible EU response to third country support for Russia. Sanctions evasion and further restrictive measures against Russia were also raised by ministers.
• At his press conference, Hungary’s Minister of Foreign Affairs and Trade Péter Szijjártó said that in Brussels "the pro-war political elites are launching a last desperate scramble against the new reality", referring to the geopolitical consequences of Donald Trump’s re-election. He called the deployment of NATO member states' weapons in Russia's hinterland "an incredibly dangerous idea". He also rejected the Ukrainian initiative to invite Ukraine into NATO and the possibility of countries neighboring Ukraine shooting down Russian drones over Ukrainian territory. Szijjártó is hopeful about Kaja Kallas, the next High Representative of the Union for Foreign Affairs and Security Policy, following Joseph Borrell, who, according to Szijjártó, "is responsible for dismantling the EU's reputation in the last five years".
  • Meanwhile, leading Fidesz MEP and Vice-President of Patriots for Europe Kinga Gál condemned Russia's military aggression against Ukraine and expressed the government’s sympathy for the country. Fidesz is trying to keep the door open to pro-Ukrainian parties.

1.3 Article 7 procedure against Hungary on the agenda

• Under pressure from member states, including Germany, the Hungarian Presidency has put the case against Hungary under Article 7 of the Treaties on the agenda of the General Affairs Council. This was a state of play, no decision was taken.
• Commenting on the issue, Swedish EU Affairs Minister Jessica Rosencrantz said: "There are a lot of things going wrong, we have several instruments to deal with this, Article 7 proceedings, going to court or withholding money. These are both hurtful to the Hungarian government and very concrete examples of what the EU can do. But I would like to see more action." Justice Commissioner Didier Reynders said that a total of EUR 19.2 billion from the seven-year budget and recovery funds had been frozen. Of this, EUR 1 billion will be lost forever at the end of the year if Hungary fails to meet the so-called super milestones. The EUR 1 billion is the pro-rata (one year) portion of the EUR 6.3 billion frozen from the cohesion funds. "There could be a solution before the end of the year, but we need to have all our concerns answered," Reynders said.
• Background: the Article 7 procedure against Hungary started in September 2018, initiated by the European Parliament due to systemic problems with the rule of law. Six years later, the procedure stalled at the first stage. In order to proceed (or to terminate the procedure), the Council would have to vote (with a qualified majority of four-fifths) or issue recommendations to the Hungarian government beforehand. However, there seems to be no willingness to do so, so the future of the procedure remains uncertain.

1.4 Small steps on the path back to Erasmus

• The Hungarian government appears intent on moving forward with the conditionality mechanism to potentially unfreeze EU funds. The Hungarian parliament has passed amendments to the law on public interest trusts, which could restore access to the Erasmus+ and Horizon Europe programs. Meanwhile, the government is actively lobbying in Brussels.
• EuroAtlantic Consulting organized a conference at which Ministerial Commissioner Rodrigo Ballester, head of the MCC's Centre for European Studies, criticized the European Commission. "Culpability was presumed on hypothetical behaviors, freedom of movement was violated, no prior investigation and proper legal assessment was carried out, collective punishment was applied without judicial review. And all in the name of the rule of law," said Ballester. Balázs Hankó, Minister for Innovation and Research, also criticized the European Commission at a hearing of the European Parliament's Committee on Industry, Research and Energy, claiming that “the European Commission has nothing to do with higher education because it is a national competence”.
• The assessment of the legislation will only start after the Hungarian government submits the adopted text to the European Commission. This matter falls under the conditionality procedure, which has led to the blocking of EUR 19.2 billion, mainly due to insufficient anti-corruption measures. A political decision is needed to remove the Erasmus+ and Horizon cases from this procedure. In general, however, comprehensive anti-corruption reforms are needed to release the funds. This issue will be addressed by the new European Commission, further delaying the process.

1.5 Sixteen member states spoke out against Hungary's law that confuses gays with pedophiles

• The European Court of Justice has heard a case brought by the European Commission against Hungary over amendments to the so-called “Child Protection Law” that conflate gays with pedophiles. Observers say that based on the judges’ questions, Hungary is likely to lose the case. Notably, 16 member states have intervened in support of the Commission – a remarkably high number.
• Member States have also highlighted that the European Commission also invokes Article 2 of the EU Treaties, which sets out the Union's fundamental values. Member State governments are keen to avoid setting a precedent whereby cases could be brought and won in the Court of Justice solely on the basis of fundamental values. They have stressed the need to anchor arguments in specific legislation, as the Commission has done in this case. The key question is how the Court will approach this – whether it will invoke Article 2 in its judgment. A decision is expected in the first half of next year.

1.6 A new maneuvering strategy in the EP: The Venezuela majority

• Fidesz has cooperated with the European People's Party at least three times, becoming part of the parliamentary majority formed by all the right-wing groups, the EPP, ECR, Patriots for Europe (PfE) and Europe of Sovereign Nations. One was when the EP recognized Edmundo González as president of Venezuela in a non-binding resolution, with the unanimous vote of the right-wing groups. The same was repeated when González was awarded the Sakharov Prize for Freedom of Thought. The third occasion was the watering down of the deforestation regulation.
• In addition, there were amendments adopted by the four groups in opposition to the S&D-Renew-Greens trio. Several such amendments were adopted in this way on the 2025 budget and employment guidelines.

 

2. The policy dimensions: What has been achieved and what is still pending?

2.1 Agreement on the EU budget for 2025

• The Council and the European Parliament have reached an agreement on the EU’s annual budget for 2025. Next year's budget focuses strongly on the EU's key policy priorities and takes into account the current difficult geopolitical context, with a total of EUR 192,768.6 million in commitments and EUR 149,615.7 million in payments, excluding appropriations for special instruments outside the Multiannual Financial Framework (MFF). This is the fifth annual budget under the EU's long-term budget (2021-2027).
• 5 million has been kept available this year under the spending ceilings of the current multiannual financial framework for 2021-2027, allowing the EU to respond to unforeseen needs.
• The European Parliament and the Council have 14 days to formally approve the agreement.

2.2 College of Commissioners is full, Várhelyi assigned narrower portfolio

• The European parties have finally agreed on the new College of Commissioners on 20 November. In fact, no changes were made to the original proposal, except for the trimming of Oliver Várhelyi's portfolio. The European People's Party let through the Spanish social democrat Terese Ribera, and the left-wing parties let through the Italian Raffaele Fitto as vice-president.
• However, Várhelyi had no support from any of the major political blocs, so in a move to set an example, women's reproductive health rights (which includes abortion and is a member state competence) and oversight of Health Emergency Preparedness and Response (HERA) were taken away from him and given to Belgian Hadja Lahbib.

2.3 Romania and Bulgaria are one step closer to joining the Schengen area

• The interior ministers of Austria, Bulgaria and Romania signed a joint agreement in Budapest on the accession of Bulgaria and Romania to the Schengen area. Sándor Pintér and the outgoing Commissioner for Migration and Home Affairs also took part in the negotiations. According to Pintér, it is very ambitious, but there is a chance that the two states could join the Schengen area by 1 January 2025.The decision should be taken unanimously in the EU Council of Ministers. One of the most significant achievements of the Hungarian presidency could be the full accession of Bulgaria and Romania to the Schengen area.
• Background: The European Commission declared 13 years ago that the two countries were eligible to join the area without internal border controls, but the governments of Austria and the Netherlands blocked the decision. Last year, it was finally agreed that from the end of March this year, controls would be partially lifted at the air and sea borders to the Schengen area, but not at the land borders.

2.4 Ownership of private equity funds remains unclear

• The EU launched an infringement procedure against Hungary in June 2024 because the ultimate owners of private equity funds are not disclosed, creating a potential risk of money laundering. The Hungarian government now intends to take action and amend the anti-money laundering law to make it mandatory to identify the ultimate owners. However, according to the draft, the data in the actual ownership register, which is maintained by the National Tax Administration, would not have to be made available to the media or NGOs, even though this is required by an EU directive. Only institutions such as the Hungarian Competition Authority and the Integrity Authority would have access to the necessary data. It is highly unlikely that the changes will be sufficient to meet EU criteria. In addition, through a recent amendment, Fidesz MPs want to postpone the reporting requirement for private equity funds until July 2026, after the next general election.

2.5 The future of EU trade policy and an unusual interlude

• On 21 November, the Foreign Affairs Council discussed the future of the EU’s trade policy, a priority of the Hungarian presidency, in order to set out the Council’s expectations and guide the Commission’s work for the future. Ministers paid particular attention to the ongoing negotiations, including with Australia, Indonesia, Thailand, India, Mexico, the Philippines, and the Southern Common Market (Mercosur), and underlined that trade is a key pillar of the EU’s growth and competitiveness and can increase the resilience of supply chains. The Commission, represented by Valdis Dombrovskis, Vice President and Commissioner for Trade, briefed ministers on the state of play of key trade and investment negotiations.
• After the Council meeting, Valdis Dombrovskis and Péter Szijjártó held a press conference. The Hungarian foreign minister spoke on behalf of the rotating presidency, but in a rather unusual way he did not represent the common position of the Council but presented the position of the Hungarian government on each issue, which was often completely contrary to the common position. At one point there was even a debate on the podium, when Péter Szijjártó criticized the sanctions against Russia, Vice-President Dombrovskis refuted the Hungarian minister with data.

2.6 Deforestation law delayed

• On 20 November, the Council firmly reiterated its support for the proposed targeted amendment to the EU Deforestation Regulation, postponing its date of application by 12 months, which the Council considers to be the best way to ensure legal certainty for all stakeholders. The Commission proposal must be adopted, signed and published in the Official Journal before 30 December 2024. The purpose of the delay is to allow third countries, Member States, operators and traders to fully prepare for their due diligence obligations to ensure that certain goods and products sold in or exported from the EU are deforestation-free. These include products from cattle, timber, cocoa, soy, palm oil, coffee, rubber and some of their derivatives.

3. Paid political advertising on the Presidency and other EU issues on Meta and Google (11 – 24 November)

• During this period, as in the previous one, there were no political advertising campaigns by government actors on Meta or Google related to the Presidency or the EU in general.
• A few pro-government politicians promoted events of the Hungarian presidency in a paid political advertisement with the #HU24EU logo. However, the total amount spent was very insignificant.
• On 13 November, Megafon, a key Fidesz proxy organization that trains, coordinates, finances and promotes pro-government social media "influencers", launched a major campaign to discredit new opposition hopeful Péter Magyar, spending EUR 120,000 on Meta and Google ads (data last updated 26 November). The campaign consists mainly of leaked audio recordings about Magyar, with occasional references to EU issues. The most notable of these – and the only video ad promoted on Google – criticized MEPs from his party for applauding Volodymyr Zelenskyy's speech in the European Parliament while wearing pro-Ukraine t-shirts, with EUR 16,600 spent on the ad.

Social media plays a very important role in government communication, and the bigger picture helps to understand all the above data. During the election campaign (between 1 January and 15 June 2024), the pro-Fidesz camp spent EUR 5.4 million on advertising on Meta and Google (while all 15 opposition parties and their associated media spent a quarter of this amount).

4. What to watch

• 1 December: New European Commission takes office
  • First Council meeting with the new Commission: Olivér Várhelyi will make his debut as Commissioner at the Employment, Social Policy, Health and Consumer Protection Council meeting on 2-3 December with the following topics: Smoke and aerosol free environments, Pharmaceutical package, Cardiovascular health in the EU, Organ donation and transplantation, The European Health Union in the light of the Draghi report.
• 5-6 December: Transport, Telecommunications and Energy Council
  • Transport ministers will be asked to agree on the Council’s position (‘general approach’) on several legislative files: the directive on driving disqualifications, which is part of the ‘road safety’ package, the regulation on passengers’ rights in the context of multimodal journeys and the regulation on the enforcement of passengers’ rights in the EU. Ministers for telecommunications will adopt conclusions on the EU cybersecurity agency (ENISA) and on the Commission’s White Paper ‘How to master Europe’s digital infrastructure needs?’. They will also hold a policy debate on the objectives and targets of the Digital Decade 2030 in the light of recent technological changes.
• 12-13 December: Justice and Home Affairs Council
  • Member States may take a formal decision on full Schengen membership for Romania and Bulgaria.

 

Our previous reports on the Hungarian EU Presidency can be found here:

• A Volatile Unity: Hungary’s Leadership Amid Geopolitical Shifts and EU Challenges (28 October – 10 November)
• Gearing up for the big show amid a "peace mission" 2.0 and new levels of anti-EU rhetoric – Hungarian EU Presidency Watch (14 – 27 October)
• In the shadow of the “Strasbourg Battle” – Hungarian EU Presidency Watch (30 September – 13 October)
• Prioritizing politics over policy? – Hungarian EU Presidency Watch (July – September)
• Trolling to weaken the EU while winking at Trump: the first week of Hungary's rotating EU presidency (July 2024)