The cabinet chiefs of the 27 EU Commissioners discussed on Monday afternoon whether to put on the agenda the possible suspension of cohesion fund commitments for the country at their Wednesday meeting, said sources in Brussels, who spoke on condition of anonymity. Bruxinfo said that if the issue gets discussed the Commission will probably recommend the suspension to EU finance ministers meeting in March.

Hungarian daily Népszabadság has released a similar report, saying "in all probability, the European Commission on Wednesday will recommend a partial or full suspension of cohesion fund commitments due to Hungary's excessive budget deficit."

Citing EC sources, it added that the EU executive "feels authorised to take a step".

For the 2007-2013 budget period, a sum of EUR 25.3 billion has been allocated to Hungary under the EU's Regional, Cohesion and Social Funds (EUR 3.7 bn in 2011 and EUR 4 bn in 2012), of which EUR 8.6 bn over a period of seven years will come from the Cohesion Fund alone.

Under the rules of cohesion fund freezing, Hungary cohesion fund commitments starting from 1 January 2013 would be affected. These amount to around EUR 1.7 billion.

Experts, however, believe that it is impossible that the entire sum would be suspended. Ongoing projects, for instance, would not be affected, only those funds or some of them would be frozen that would be earmarked for investments in the coming years, bruxinfo reports.

This would be the first time Brussels sanctions a member state this way.

The Ecofin Council said on 24 January that "Hungary has failed to comply with the Council's recommendations [...] Now, whilst it would appear that Hungary formally met that target in 2011, it is clear that this was largely thanks to one-off revenues amounting to over 10% of GDP, mainly linked to the transfer of pension assets to the state. Consequently, the Council considered this not to be a structural and sustainable correction of the deficit, and therefore found Hungary's response to its recommendation to be insufficient".

According to the latest EC projection, Hungary's budget shortfall will reach 3.25% of GDP in 2013.

EC spokeswoman Karolina Kottova confirmed at a press conference today that the EC college will soon discuss the block of cohesion funds to Hungary for the country's breach of EU budget rules.

Source: Portfolio.hu, Népszabadság, Bruxinfo