Norway Withdraws Funding For Hungary

    Stockholm (NordSIP) – Since his return to power in 2010, when he won a two-thirds majority in the Hungarian parliament, Prime Minister Viktor Orbán has become the bane of liberals and progressives across the EU. Although he is most famous for antagonising international partners with talk of illiberal democracy, controversial reforms and anti-gay rights policies, Orbán has also presided over a consistent decrease in his countrymen’s confidence in Hungary’s public sector.

    Survey data collected by Transparency International for its Corruption Perception Index leaves no doubt about the dismal loss in public trust experienced in Hungary over the last eight years.

    Now, the international antagonism and the erosion of public trust appear to have cost the country NOK2.3 billion in potential funding from The EEA and Norway Grants scheme, provided by the Scandinavian country, Liechtenstein and Iceland. According to a statement from the Norwegian foreign ministry, “the donor countries and Hungary failed to agree on how the funding for civil society was to be administered.”

    The EEA and Norway Grants

    The EEA and Norway Grants are a voluntary contribution on the part of the donor countries to help achieve the common goals of the European Economic Area (EEA) agreement, including the reduction of social and economic disparities in Europe and strengthening cooperation between European countries.

    The Grants made €2.8 billion (approximately NOK30 billion) available for disbursal among 15 beneficiary states between 2014 and 2021. Norway provides over 95% of this sum. Of this total and NOK2.3 billion had been earmarked for Hungary.

    The Problem

    “I can confirm that after a long and comprehensive process we have been unable to reach an agreement. In our view, funding under the EEA and Norway Grants scheme could have been very beneficial, particularly in providing support for civil society in Hungary, as well as in boosting innovation in the business, energy and climate sectors, and promoting minority rights,” said the Norwegian Minister of Foreign Affairs, Ine Eriksen Søreide.

    The key issue of contention between Hungary and the donor countries appears to have been an inability to agree on how the funding for civil society was to be administered. Specifically, they could not find “an independent fund operator for civil society funding” by July 21st, the deadline the parties agreed on at the end of December 2020 following four years of negotiations.

    “The fund operator for civil society funding is responsible for managing more than NOK100 million in funding, and is to ensure that this funding is used to strengthen civil society, promote active citizenship and support vulnerable groups. The donor countries must make sure that the best candidate for the task is selected. We have not reached an agreement with Hungary on this point,” Eriksen Søreide said.

    Not a New Problem

    Norway’s concerns are not unwarranted. Asides from the normal concerns that procedures and institutions be implemented to ensure good governance, the problem of independent management of public funds has plagued Orbán for some time. Suspicious uncompetitive single-bidder bids for public procurement are a concern in Hungary. While the country does not particularly stand out in EU statistics, distilling the data has uncovered some disturbing insights.

    A 2019 Reuters report found that companies headed by Orbán’s family or by businessmen close to the prime minister won over 10% of all public procurement contracts in Hungary since 2010. At the start of 2021, Reuters also reported that the EU demanded a reform of Hungary’s public procurement laws to tackle “systemic irregularities” ahead of the disbursal of billions of euros in pandemic recovery assistance. Despite these efforts, Transparency International has highlighted examples of this sort of patronage during the COVID-19 crisis, with repercussions for the country’s ability to cope with the pandemic.

    This is also not a new problem for Norway, which was forced to cancel grants to Brazil under its Amazon Fund in 2019. On that occasion, the problem emerged when the Brazilian environment minister, Ricardo Salles, suggested the funds be used to compensate farmers who had illegally taken over land in the Amazon forest.

    Image by Walkerssk from Pixabay

    Filipe Albuquerque
    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

    Latest Posts

    NordSIP Insights Handbook

    What else is new?