European Union officials met Friday in Budapest with members of Hungarian election winner Péter Magyar's team to discuss unlocking approximately 17 billion euros ($20 billion) in frozen aid, marking a potential turning point for Hungary's struggling economy after years of fiscal penalties under outgoing Prime Minister Viktor Orbán.
Magyar will take power in early May, and the EU is moving quickly to establish cooperation with the new government. European Commission spokesperson Paula Pinho said in Brussels on Thursday that "the clock is ticking for a number of topics," emphasizing that preliminary talks before Magyar takes office aim to "make sure that once the government is in place action can be taken, if appropriate, and that we do not waste any time."
The Financial Stakes
The EU suspended the money to Budapest four years ago over what it said was democratic backsliding by Hungary's right-wing populist government and failures to tackle corruption and ensure judicial independence. The funds are split between 10 billion euros of COVID recovery funds and 6.3 billion euros in cohesion funds designed to lift up struggling economies within the EU. Brussels and Budapest are rushing to first unlock the COVID funds because they are set to expire later this year in August.
Both the EU and Hungary's incoming leaders have prioritized releasing the money as soon as possible to give a much-needed injection of cash into Hungary's ailing economy. European Commission President Ursula von der Leyen wrote on X on Tuesday that "there is swift work to be done to restore, realign and reform" Hungary's policies in order to unblock the funds. She said, "Restore the rule of law. Realign with our shared European values. And reform, to unlock the opportunities offered by European investments."
The Cost of Delay
Zsolt Darvas, a fellow at the Brussels-based think tank Bruegel, said that out of the 16 billion euros, Hungary has already lost about 2 billion euros because the funds were suspended for two years, and Hungary has been paying 1 million euros a day since June 13, 2024, nearly two years, on top of a 200 million-euro fine over Orbán's refusal to align Hungary's asylum processing claims with EU standards. Darvas said Hungary could follow Poland's path by staying mostly closed to migration but still respecting EU law and thus ending those fines.
In his first public press conference after winning in a landslide five days ago on April 12, Magyar said Monday that Hungary "is in a very difficult financial situation," and that his new government's task will be "to bring home the money that is hers." He added that, unlike Orbán, he would stick to a deal struck in December to provide Ukraine with a much-needed 90-billion-euro loan. Orbán had vetoed the bill after initially agreeing to it, enraging EU officials and counterparts across the 27-nation bloc.
Reform Path Forward
Magyar's party Tisza won a super-majority in parliament, which will enable deep and quick reforms, and he has said his government will prioritize policies affecting judicial independence, academic and media freedom and anti-corruption in order to get access to the money. Darvas said Magyar can move almost instantly to reform Hungary enough to unlock the funds. "All the legislative work can be done in a single day if there is a will from the Tisza party to do it," he said. "That's relatively straight forward and not technically difficult."
Darvas said that would involve changing how judges are selected and what power they have. A year after the initial suspension, the Commission found that the government had carried out sufficient reforms to have around 10.2 billion euros ($12.1 billion) released. Darvas said Hungary's economic crisis won't be solved alone by these funds, but by complying with EU regulations, the new government will signal that the country is a stable place for investments.
Additional Opportunities
Hungary could also receive mass sums of money if it joins the EU's 150 billion-euro Security Action for Europe initiative, or SAFE, which is designed to boost Europe's defense readiness at a time when the U.S. has been diminishing its role in the continent's security. So far, 18 of the EU's 27 nations have received low-interest defense loans, and Hungary is eligible for 16 billion euros through the program. With the other two tranches of cash, these funds would roughly equal 15% of Hungary's GDP, according to an analysis by Jeremy Cliffe at the European Council on Foreign Relations.
Hungary, a major net recipient of EU funds, had come under increasing criticism for veering away from democratic norms. The Commission had for more than a decade accused Orbán of dismantling democratic institutions, taking control of the media and infringing on minority rights. Orbán rejected the accusations and denounced them as interference in Hungary's sovereignty.
Why This Matters:
The rapid unlocking of frozen EU funds represents a critical test of whether targeted fiscal penalties can effectively incentivize governance reforms without permanently damaging a member state's economy. Hungary has already forfeited approximately 2 billion euros and continues paying 1 million euros daily in penalties, demonstrating the real cost of regulatory non-compliance. The incoming government's ability to implement straightforward judicial reforms in a single legislative session shows that bureaucratic obstacles were primarily political rather than technical. For investors and markets, compliance with EU standards signals institutional stability and rule of law, making Hungary a more attractive destination for capital. The potential influx of funds equaling 15% of GDP, combined with access to defense financing through SAFE, could rapidly stabilize Hungary's fiscal position while reinforcing the principle that EU membership brings both obligations and substantial economic benefits when standards are met.