More than €12 billion of EU funds for Hungary were frozen last month, including €5.8 billion in post-COVID recovery funding and €6.3 billion under the rule of law mechanism.

The latter envelope represents a 55% cut in EU funds the country was scheduled to receive for three operational programmes under the cohesion policy and will impact the Erasmus student exchange programme at many Hungarian universities.

Gergely Gulyas, chief of staff to Prime Minister Viktor Orban, told reporters this was “unacceptable and unbearable.”

He added during his news conference that it will take the case to the European Court of Justice if a compromise isn’t reached and that the government would provide financing for the programme if EU funds do not arrive.

Hungary's higher education system has undergone sweeping changes since 2019 that have seen the control of universities transferred to publicly funded foundations often led by serving politicians from the ruling conservative Fidesz party, and which according to the EU, do not protect academic freedom from political interference.

Hungary had until 19 November to pass a slew of reforms to address democratic backsliding concerns after the European Commission triggered its new rule of law conditionality mechanism in late April.

These reforms aimed to strengthen judiciary independence, introduce new rules on auditing and reporting on EU funds, create new independent anti-corruption bodies, and stronger rules to crack down on conflicts of interest.

The Commission ruled in late November that although Budapest had undertaken a number of reforms, it had "failed to adequately implement central aspects of the necessary 17 remedial measures".

The European Council validated the Commission's analysis in mid-December and blocked the cohesion funds, as well as the disbursement of the post-COVID recovery money, until Budapest implements 27 so-called "super-milestones" that include the 17 initial reforms.

Gulyas insisted that Hungary had done everything requested of it by the Commission to prevent conflicts of interest in the leadership of higher education institutions.

Still, he said, if the Commission requests that senior Hungarian politicians not be permitted to serve on universities' boards of trustees, Hungary is willing to further modify its rules.

A spokesperson for the Commission meanwhile said on Monday that under the Eu fund freeze, Hungary is "forbidden for the time being to enter into legal commitments with so-called public interest trusts involving EU funding".

Legal commitments entered into until December 15 are not impacted.

Balazs Ukvari also told reporters that the rule of law mechanism provides for the final beneficiaries of EU funds to be protected even in case of a freeze with the government of the country expected to hand out the funds themselves.

"With regard to projects for which a legal commitment exists, the member state in question would have to essentially make up for that and would have to basically account for the contribution that is being held by the commission," he said.