Budget Conditionality as a Response of the EU to Democratic Backsliding in Hungary

Abstract

The Rule of Law Conditionality Regulation (2020/2092) used by the EU in response to Hungarian democratic backsliding is the main field of analysis of this paper. Hungary has weakened independent institutions through constitutional and media reforms, including electoral reforms. These reforms raised concerns about compliance with Article 2 TEU values. Also these developments created risks for the EU budget, as public procurement, anti-corruption safeguards, and the prosecution system lacked transparency. This paper analyses the political and institutional background that motivated the European Commission to identify four major risk areas: public procurement, conflicts of interest, weak anti-corruption frameworks, and limitations on investigation and prosecution. It then studies the legal structure of the conditionality mechanism and its application in Hungary. The research also assesses remedial measures and the decision to suspend €6.3 billion in the framework of Cohesion Policy funds. The findings show that the mechanism introduced meaningful pressure and caused certain institutional reforms. However, many structural weaknesses remain unresolved. On the one hand the Hungarian case demonstrates the potential of budget conditionality as a tool for protecting EU financial interests. On the other hand it reveals the limits in reversing domestic democratic decline.