Orbán allies could use EU as cash register, MEPs say

Jennifer Rankin in Brussels


Hungarian PM’s supporters are winning EU-funded contracts while facing little competition

Hungary’s prime minister, Viktor Orbán. Photograph: Lisi Niesner/EPA

A European parliamentary watchdog has called for tougher scrutiny of EU spending in Hungary, as concern grows among MEPs and transparency campaigners that a class of oligarchs with ties to the prime minister, Viktor Orbán, could use the EU “as a cash register”.

Hungary is on course to receive €25bn (£22.2bn) from the EU in the seven years to 2021, making it one of the largest per-capita recipients of the bloc’s economic development funds.

MEPs are increasingly worried that funds are going to Orbán’s family, friends and supporters, who are winning EU-funded infrastructure contracts with little competition – a red flag for anti-corruption campaigners.

Ingeborg Grässle, a German centre-right MEP who leads the European parliament’s budgetary control committee, said Hungary had “some specific problems which need to be tackled”.

Following a recent visit to Hungary, Grässle and her committee found that 36% of tenders for public projects had only one bidder.

Poland and Croatia had an even higher proportion of single-bids for public money at 45%, which the MEPs considered unusually high, she said. “Rules seem to be respected, but at the same time they … avoid competition,” she said in emailed comments.

Grässle said the problems were not isolated to Hungary, and a new kind of “semi-legal” irregularity was emerging. “We see oligarchs in some member states becoming politicians and benefiting at the same time from EU and national money for their companies,” she said.

She is urging the EU to step up control by using a recently agreed regulation to stop conflicts of interest. Without such action “we accept as legal a grab into the cash register by acting politicians or their friends”, she said.

The Czech prime minister, Andrej Babiš, the second richest man in the country, came under renewed pressure last month after a leaked EU report concluded numerous laws had been broken to obtain EU subsidies for a hotel and conference centre he owns. Babiš denies any wrongdoing and has said the allegations are a plot by his opponents.

Following an investigation in Hungary, the EU’s anti-fraud office, Olaf, said it had found serious irregularities related to street-lighting contracts awarded to a company that had been owned by Orbán’s son-in-law, István Tiborcz. Olaf has called on the European commission to claw back more than €40m (£35.5m) of EU funds spent on lighting projects.

Tiborcz had limited business experience when his company, Elios Innovativ, won contracts to supply EU-funded street lighting for Hungarian towns. Some of the lamps Elios supplied were more than 50% more expensive than market prices, according to analysis by Direkt36, an investigative journalism website that is part of the Global Investigative Journalism Network. Tiborcz sold his stake in Elios shortly before the EU’s anti-fraud office began investigating.

Elios did not respond to requests for comment, and Tiborcz is yet to respond to Olaf’s allegations.

Olaf had already recommended that European institutions claw back €283m that Hungary has received to build a new metro line in Budapest, after finding evidence of “fraud and possibly corruption”. The project was planned under previous governments and completed in 2014, shortly before Orbán won a second term. Olaf’s inquiry touched on unnamed UK companies, according to its annual report.

“The European Union structural funds have an eminent role in the questionable enrichment of government cronies and business oligarchs,” said Miklós Ligeti, the head of legal affairs at Transparency International Hungary. “We would expect the EU to be much more anxious about the dismantling of democratic checks.”

Concern about the misspending of EU money is likely to ricochet into a tense debate about the bloc’s future budget, set to fall by €13bn a year because of Brexit.

Frank Engel, a centre-right Luxembourg MEP, said Hungary should be obliged to join a newly created EU prosecution service if it wanted to continue to receive EU funds. Twenty EU countries agreed last year to create a European public prosecutor’s office to investigate the misuse of EU funds, but Hungary was among those that declined to take part.

“Getting public contracts now in Hungary is a matter of friendship and not a matter of merit,” Engel said. While “not technically materially illegal, where else in the European Union would you have a system where public contracts of significant size go to family members of the head of government?”he said. “I don’t think that happens anywhere else.”

The European commission said it had zero tolerance of the fraudulent use of EU funds. “Member states are primarily responsible for the sound management of EU funds, according to the shared management principle,” it said.

A spokesperson for Hungary’s international communications office responded to Olaf’s investigation into Elios by noting that the anti-fraud body had investigated street-lighting contracts under the former Socialist government. “Similarly to the previous investigation, we also fully support this latest investigation.”

Further questions were directed to the Hungarian prime minister’s office, which said Hungary had an extensive system of controls for monitoring EU funds.

Orbán’s office also said Grässle’s figures were out of date. Citing data from Hungary’s public procurement office, it said EU contracts with only one bidder had fallen to 26.3% of the total in 2017 – similar, it said, to other countries in the region.

Orbán insisted in December that the Hungarian economy could manage without EU funds. “Hungary has nothing to fear as it is not dependent on any outsiders’ money,” he said.


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