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EU Targets Hungary’s Funding Amid Russia Sanctions Fight

The European Union’s executive body laid down a sharp new challenge to Hungarian Prime Minister Viktor Orban on Wednesday, activating a tool for the first time that could see Brussels withhold large-scale EU budget payments to the country.

The new EU mechanism was created in 2020 alongside approval of the 750-billion-euro coronavirus recovery fundequivalent to $790.97 billion, when Hungary and Poland, who both have conservative, nationalist governments, were clashing with Brussels and some EU governments over judicial overhauls, rule-of-law standards and social issues.

The conditionality mechanism, as it is formally known, allows the EU to block countries from receiving budget money if Brussels can show that their lack of independent courts or their weak anticorruption agencies present a risk that the EU’s money—meant for the building of roads, trains, bridges and other social programs—could be missed.

The decision is the latest twist in a yearslong struggle between the EU and Hungary, which has tried to create a new model of European democracy, in which ruling parties are able to cement power over institutions such as courts and state media.

The Commission decided not to trigger the mechanism against Poland but will keep monitoring the situation.

Any decision to block funds will likely take months and will depend on the backing of a super majority of member states—meaning support from at least 55% of EU countries representing at least 65% of the EU population.

At a press conference on Wednesday, Vera Jourova, the European commissioner for values ​​and transparency, said the Commission had sufficient evidence of breaches of financial management rules that Brussels was confident it would win any Hungarian court challenge against a block on funds.

Ms. Jourova said the EU concerns focused on how the government awards EU-funded government contracts and the lack of an anticorruption strategy in Hungary, which receives several billion euros a year from Brussels.

“We are sure that in the case of Hungary, we have sufficient evidence that there are such breaches of the rules,” Ms. Jourova said.

The consequences of harsh economic sanctions against Russia are already being felt across the globe. WSJ’s Greg Ip joins other experts to explain the significance of what has happened so far and how the conflict might transform the global economy. Photo Illustration: Alexander Hotz

In what he said was a response to the EU decision, Zoltan Kovacs, Mr. Orban’s international spokesman, said on

Twitter

: “HUN voters have spoken clearly on April 3. We must keep HU out of the war, make sure that HUN families don’t pay the price of war.”

Along with Poland, Mr. Orban fought strongly against the rule-of-law instrument, at first threatening to block approval of the recovery and then launching an EU court challenge against its legality. The European Court of Justice rejected that case in February.

Mr. Orban and his top officials have long attacked what they say is a power grab by Brussels and EU courts against elected national governments. They have called the instrument a blackmail tool to force them to follow issues such as immigration and social values.

The EU has already put on hold more than €7 billion in coronavirus fund recovery money for Hungary, representing around 5% of the country’s gross domestic product. However, until now, the EU hasn’t ever tried to preemptively block regular annual budget funds from being paid out.

The decision—following months of pressure on the European Commission to act from EU lawmakers and some EU governments—comes as divisions have opened up over further sanctions measures against Russia over Ukraine.

Hungary has been among the most vocal opponents of a push by more member states to block EU purchases of Russian energy, a position that has hardened, according to diplomats, since Mr. Orban’s election win in early April. The vote saw his Fidesz party win a supermajority in parliament, giving Mr. Orban a fourth successive term in power.

Write to Laurence Norman at laurence.norman@wsj.com

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