Hungary's new Prime Minister Péter Magyar has made the recovery of €17 billion in frozen European Union funding a central pledge of his new government, following his Tisza Party's landslide election victory. A significant portion of this amount, €10 billion from the EU's Recovery and Resilience Facility (RRF), faces a critical August deadline, with the risk of expiring if the new government fails to absorb it.

Magyar announced he would send a detailed letter to European Commission President Ursula von der Leyen, setting out his government's position on the politically difficult conditions tied to EU funding. Speaking after his first cabinet meeting in Ópusztaszer, Magyar pledged to recover all funds blocked under his predecessor Viktor Orbán, which were withheld due to concerns about corruption and the rule of law. He acknowledged that while his government aims to unlock the funds, certain EU conditions are politically sensitive and cannot be fully implemented. For example, phasing out special taxes on banking and energy companies, despite being in Hungary's economic interest, is deemed unfeasible in the current budgetary situation.

The specific disputes surrounding the RRF funds include project-related issues such as the recapitalisation of the Hungarian Development Bank, the creation of a special project company, and how transport, railway, and suburban railway investments can be structured to be acceptable to the EU. Magyar's team is also developing plans for rental housing and energy efficiency programmes. Hungary is currently reviewing a national development programme from the previous government, which is slated for submission to the European Commission before the end of May.

The European Commission is actively working to help Hungary unlock these billions, dispatching a high-level delegation to Budapest for a five-day round of negotiations, expected to be led by Declan Costello, Deputy Director-General for Economic and Financial Affairs. This visit signals Brussels' willingness to move quickly with the newly formed government. Commission officials recognize the extremely tight timeline for securing the funds before the August deadline, particularly for the loan component of the RRF package.

Hungary's RRF Plan includes €6.5 billion in grants and €3.9 billion in loans. While the grant component is considered achievable, securing the loans is viewed as 'considerably more complex'. Brussels is primarily focused on enabling Hungary to use as much of the funding as possible, especially the non-repayable grant portion. The Commission is exploring options to channel financing, including through national financial institutions like Hungary's state-owned Exim Bank, or potentially a Special Purpose Vehicle (SPV) for specific projects, though concerns about reduced Commission oversight with an SPV have been raised.

To facilitate disbursements, Hungary must implement a series of reforms by the end of August, along with demonstrating tangible progress on projects, including infrastructure works. Given its broad parliamentary majority, the new government could quickly adopt necessary legislation. Key reforms include strengthening anti-corruption measures and a widely anticipated move to seek membership in the European Public Prosecutor's Office (EPPO). A Commission source suggests Hungary could receive its first recovery payments in late autumn, following a formal payment request.

Beyond the RRF, Magyar's administration is reviewing Hungary’s €16 billion defence plan under the EU’s Security Action for Europe (SAFE) instrument, examining it for potential corruption risks linked to the previous government. Furthermore, Hungary is also attempting to unlock €6.3 billion in cohesion funding. While these funds do not face an immediate forfeiture risk like the RRF, over €1 billion remains blocked due to disputes related to asylum policy and LGBTQ+ rights. Unlocking these specific cohesion funds would require Hungary to repeal its 'child protection law' and reform its asylum system, reforms that present significant political challenges for Magyar's conservative voter base.

Despite the complexities and tight deadlines, both Hungarian and EU officials are reportedly engaging in constructive dialogue. The Commission has assigned additional staff to its Hungary desk, and high-level talks, including a possible visit by Péter Magyar to Brussels around May 25, are ongoing. The coming months are crucial for Hungary as it navigates these multifaceted negotiations to secure vital EU investments under its new leadership.