Hungary closes on €10.4 billion payout

Péter Magyar goes to Brussels this week looking for the kind of agreement that changes a government’s room for manoeuvre overnight: a political deal to unlock up to €10.4 billion in EU money frozen over Hungary’s rule-of-law record. The Commission is presenting it as the dividend of democratic renewal after 16 years of Viktor Orbán. The legal difficulty is that promises are not reforms, and a case now before the EU’s highest court may say as much.

The precedent is already there. In February 2024, after Donald Tusk’s election in Poland, the Commission released funds on the basis of reform commitments before those reforms had taken effect. Poland has since drawn down 62.4% of its recovery plan, while none of the promised judicial reforms have entered into force. Hungary is now being brought into the same argument.

The Court Case That Could Break the Cycle

In Case C-225/24, the European Parliament is taking the Commission to court over its December 2023 decision to release €10.2 billion in cohesion funds to Hungary. Cohesion money is the EU’s infrastructure and development cash, designed to narrow gaps between richer and poorer regions. In February 2026, Advocate General Tamara Ćapeta recommended annulling the decision, pointing to four specific assessment failures: reforms that had not entered into force, legislation that cut across their stated purpose, and a failure to check whether implementation was actually happening.

Ćapeta’s most consequential argument was about who gets to mark the Commission’s homework. She said EU judges should carry out a full review of these decisions, rather than merely checking for obvious errors. If the Court of Justice of the European Union follows that logic, future fund releases can be tested on their substance. The Commission would have to show reforms are "in place and being applied," not merely enacted.

The Court has not ruled yet. The Commission is therefore negotiating a fresh release while the last one is still at risk of being struck down.

A Fiscal Trap With a Hard Deadline

Magyar does not have the luxury of time. Hungary’s budget deficit reached 3,850 billion forints by the end of April, using up 91% of the annual target in four months. The missing piece is largely about 1,450 billion forints in EU revenue that has not arrived. The deadline for the RRF, the EU’s post-Covid Recovery and Resilience Facility, falls on 31 August 2026. After that, the money lapses.

Magyar has also rejected two of Brussels’ central demands: winding down windfall taxes on banks and energy companies, and restructuring the pension system. His argument is straightforward enough. Hungary’s fiscal position, he says, makes both politically and financially impossible.

The device now being explored is a capital injection into Hungary’s state development bank, MFB. Budapest would send EU money through the bank, count it as disbursed before the August deadline, and allow the bank to pay it out over several years. The Commission sent a senior team to Budapest in mid-May to examine the plan (Euronews, Portfolio). Its concern is equally plain: once the money sits inside a national development bank, Brussels may struggle to keep meaningful oversight of how it is spent.

The Guardians Who Stepped Aside

The group of governments expected to hold the line on strict conditions has thinned out in practice. Germany’s foreign minister is now arguing for the abolition of unanimity voting, rather than a tougher conditionality regime. Austria’s chancellor received Magyar with military honours on 21 May, a signal of partnership more than enforcement. Finland’s prime minister said the rule of law "is not a bargaining chip", but no Finnish move to block Hungary in the Council has followed.

The so-called strict six, Sweden, Austria, Germany, Finland, the Netherlands and Estonia, do not have enough population weight to form a blocking minority under qualified majority voting, the system in which larger member states carry more weight and no single country can stop a decision alone. For the RRF, the balance is even sharper: the Commission decides by itself, without a Council vote. The would-be guardians can apply pressure, but they do not have a veto.

The 85% Salvage Job

Hungary has disbursed just 9% of its RRF allocation, the lowest rate in the EU. Even on optimistic Commission assumptions, only 80-85% of the total can be rescued before the deadline.

The ruling in C-225/24 will decide whether the Commission can continue treating a change of government as enough evidence that the rule-of-law problem is being fixed. If the Court follows Ćapeta, the withholding of EU money moves from a political tool into a legal duty, with every future decision to release or freeze funds tied to proof that reforms are not just promised, but working.