Part I — Situation overview

Ursula von der Leyen, President of the European Commission, delivered her annual speech on the State of the Union (SOTEU) at the plenary session of the European Parliament in Strasbourg on Wednesday, 16 September 2026; every September this speech sets out the EU’s political agenda for the following year. The speech mentioned Hungary by name: according to the Commission President, on 12 April 2026 Hungarians “chose Europe and democracy”, and “brought the country back to where it belongs, the heart of the European Union”. She added that the direction of backsliding has been reversed, action against corruption and state capture has accelerated, and several billion euros of EU investment can get under way — but “there is still a lot of work ahead of us”. According to the reports of 24.hu and HVG, the budgetary part of the speech went further: in the next long-term EU budget, respect for the rule of law and fundamental rights must be even more strongly linked to access to EU funds. In the same speech von der Leyen offered Canada “associate membership” — no such status exists in the EU treaties, and only a European state may apply for full membership — to which US President Donald Trump responded the same day by threatening heavy tariffs. Von der Leyen also announced the Commission’s legislative proposal called the EU KIDS Act, which would tie the use of social media to age.

The precedent for the budgetary sentence is directly Hungarian. The EU’s general conditionality regulation (2020/2092), which makes it possible to suspend EU payments because of rule-of-law deficiencies, has been in force since 2021. In its first application, in December 2022 the Council of the European Union suspended some EUR 6.3 billion of Hungarian cohesion commitments, and prohibited new EU commitments with the public-interest asset management foundations (KEKVA) — this is what excluded the universities concerned from the Erasmus+ and Horizon Europe programmes. Since the change of government the funds have been gradually released, while the debate on the 2028–2034 Multiannual Financial Framework (MFF — the EU’s seven-year budgetary framework) is already under way. MIAK’s analysis of 27 August dealt with the demands of the net contributor bloc and the Hungarian negotiating mandate, and its analysis of 18 July with a reform timetable that could be offered in response to the Commission’s Rule of Law Report.

MIAK’s reading: von der Leyen’s message is not that with the change of government conditionality has come to an end for Hungary, but that in the next cycle it will apply more strictly and more automatically to every member state. Hungary has no reason to dispute this strictness — it has neither a moral nor a negotiating basis for doing so. The real stake is the structure of the rule: whether it is known in advance what must be fulfilled to avoid suspension and to obtain release, whether the decision depends on a single composite score or on several verifiable indicators, and whom the penalty hits — the defaulting government, or the university, the municipality and the student. The Hungarian experience of 2022–2026 is instructive on all three questions, and this experience can now be built into the next framework.

Part II — Foundations in the literature

Three sources provide a framework for the structural questions of conditionality. János Kornai (Hungarian-born economist, developer of the theory of the soft budget constraint; Harvard professor between 1986 and 2002) shows in his major work A hiány (Economics of Shortage, 1980) that the hardness of the budget constraint depends not on the rule fixed on paper but on the expectations of the actors. The soft budget constraint — that is, a losing actor can regularly count on being bailed out — emerges where the actor rightly expects a bailout, and according to Kornai the hardness of the constraint cannot be described with a single summary indicator. Daniel Kaufmann, Aart Kraay and Pablo Zoido-Lobatón, researchers at the World Bank, show in their study Governance Matters (1999) that the margin of error of composite governance indicators is large, so small differences between countries cannot be interpreted. This study is the foundational work of today’s Worldwide Governance Indicators (WGI, the World Bank’s system of governance-quality indicators). The EU Economic Survey 2025 of the OECD (Organisation for Economic Co-operation and Development), analysing the country-plan-based structure of the next EU budget, writes that the condition should be addressed to the level of government that receives the support and is able to implement the reform. The detailed treatment of the literature — by author, with quotations — is in section 6.4 Literature in detail.

Part III — MIAK’s concrete proposal

MIAK proposes three measurable measures. The first steers the Hungarian negotiating position towards the structure of conditionality, the second protects the final beneficiaries from the consequences of government default, and the third makes visible at home how much EU money depends on which condition.

3.1 Negotiating proposal: fulfilment and release criteria fixed in advance and based on several indicators (in the Council negotiating phase of the MFF regulation, by the end of 2026)

MIAK proposes that in the negotiations on the 2028–2034 framework the Government should represent not the weakening of the rule-of-law condition but the fixing of three structural elements. First: every condition should come, already at adoption, with a public list of fulfilment and release criteria, with concrete, verifiable legal and institutional steps, rather than an ex-post, ad hoc assessment. Second: suspension and release should be gradual — in bands adjusted to the gravity of the default, and with a mandatory Commission assessment within a deadline fixed in advance, counted from the notification of fulfilment. Third: no single composite index (for example an aggregated governance-quality score) should on its own be able to serve as the basis for a payment decision. The debate around the Hungarian release decision of December 2023 and the Polish one of 2024 showed precisely that without transparent criteria both tightening and easing look like political bargaining. This position is worth representing according to the logic of issue-based coalition-building in KP17: net contributors and beneficiary countries alike have an interest in a predictable rule. According to Kornai’s thesis (see 6.4.1), the constraint is hard because the actor knows in advance what to expect — a vague condition feeds precisely the expectation built on a bailout or on arbitrary punishment.

3.2 Beneficiary-continuity guarantee: the price of government default should not be borne by the university and the municipality (to be enshrined in law at the same time as the 2027 budget act)

The conditionality regulation already stipulates today that suspension does not relieve state bodies of their payment obligations towards final beneficiaries. The KEKVA case showed where this protection breaks down: if the measure excludes a type of institution from new commitments, the student and the researcher lose directly. MIAK makes a twofold proposal. At home: on the basis of a Government bill, Parliament should enshrine in law that in the event of an EU suspension the central budget pre-finances the grants already awarded, charged to the government level, and that new calls for proposals cannot come to a halt for the final beneficiaries either. The cost should therefore appear at the defaulting level, not in the municipality or at the university. In Brussels: the Hungarian position should support that, in the new framework, in the case of a government-level default the Commission may also reach beneficiaries through a directly managed channel, for example in education and research programmes. According to the OECD’s argument (see 6.4.3), the condition must be addressed to the level that is able to act. This is also consistent with the territorial allocation logic of programme point TE2, because the municipalities of the most disadvantaged areas are the most vulnerable to a suspension.

3.3 A public condition–funding exposure map (first edition by 31 March 2027, half-yearly thereafter)

MIAK proposes that the Government publish every six months a machine-readable statement of how much of the EU funds, by programme and by type of beneficiary, depends on each condition — the rule-of-law condition, the horizontal enabling conditions and the reform milestones. The statement should also show which of these has been fulfilled, which is in progress, and what the deadline is. The statement should be discussed by the competent committee of Parliament, and the data should be included in the A1 public-money dashboard and the A8 cohesion accountability system. MIAK’s earlier proposals concerned the reform timetable and the negotiating mandate; this map links the two in money terms, so that the public and the Commission see the same figure. For each condition the map should assign several mutually independent indicators, together with their margin of error: according to Kaufmann and his co-authors (see 6.4.2), a composite governance indicator is not suitable for fine distinctions. This is the extension of the G1 data-driven budget principle to EU funds.

The three proposals are bound together by a single principle: conditionality disciplines if it is predictable, and it is fair if it hits whoever is responsible for the default. In Kornai’s language, the goal is a hard but not arbitrary constraint — with a rule known in advance, measured with several indicators, addressed to the government level.

Part IV — Expected effects and risks

Dimension Expected effect Risk
Economy and budget A predictable release criterion reduces the duration of funding freezes and investment uncertainty; the exposure map makes the amounts at risk foreseeable in budget planning In the event of an EU suspension, the pre-financing guarantee may place a significant domestic burden on the central budget in a year that already has a high deficit
Foreign policy and EU negotiations A position that does not dispute strictness but focuses on the quality of the rule is credible, and also allows coalitions with net contributors In partners’ eyes, the demand for a “measurable criterion” may look like an attempt to soften the condition if it is not accompanied by a clear commitment to strictness
Society and institutions Universities, municipalities and small businesses have predictable access to funds already awarded, even at the time of a possible future conflict Beneficiary protection may weaken the deterrent force of the condition if the government level feels no cost at all

The main question for deliberation lies between protecting beneficiaries and the disciplining force of the condition. If the domestic budget automatically and invisibly replaces every suspended amount, that recreates precisely the soft constraint that conditionality seeks to abolish: the government does not feel the price of its default. That is why the essence of proposal 3.2 is not replacement, but that the cost should appear at the government level — publicly, in the lines of the central budget, where voters and Parliament can see it. The proposal tips into risk if the list of measurable criteria becomes too narrow and formal: the adoption of a law fulfils the criterion, but its application does not. Only the multi-indicator monitoring under 3.3 and comparison with the Commission’s annual Rule of Law Report can guard against this.

Part V — Measurability and summary

5.1 What is worth following? (suggested KPIs)

MIAK proposes four performance indicators (KPIs, in English: Key Performance Indicator) from which it will be visible in 12 and 24 months whether the proposals have been put into effect:

  • A criteria list in the MFF rule: it is worth following whether the text of the agreement on the 2028–2034 framework contains, for each condition, public fulfilment and release criteria and a mandatory Commission assessment deadline (yes/no, per condition).
  • Final beneficiaries dropping out: the suggested target is that in the next cycle not a single Hungarian university, municipality or research institute should drop out of an EU programme solely because of a default at government level; the indicator is the number of institutions that dropped out and the amount of payments forgone.
  • Coverage of the exposure map: the suggested target is that by the end of 2027, 100 per cent of conditional EU funds should be listed by programme and by type of beneficiary in a public, machine-readable form.
  • Turnaround time of suspension and release: it is worth following how many months pass between the notification of fulfilment of a condition and the Commission’s assessment — the goal is for this to decrease and to be tied to a deadline fixed in advance.

5.2 Summary

MIAK’s request to the Government is that in the negotiations on the post-2028 EU budget it should open a debate not on the degree of rule-of-law strictness but on the quality of the rule. It should stand up for fulfilment and release criteria fixed in advance and measured on several indicators, and for a guarantee that shifts the price of default onto the defaulting government level, not onto universities and municipalities. And at home it should publish which EU forint depends on which condition. Von der Leyen’s praise does not close the task, but creates a favourable moment: now, when Hungary has gone from being the subject of conditionality to being a credible negotiating partner, it can represent with the greatest weight that the rule should apply predictably to every member state — including a future Hungarian government.

Two MIAK foundational values are at stake. Data-drivenness, because a significant part of the disputes of the 2022–2026 period arose from the fact that neither the yardstick for suspension nor that for release was fixed numerically in advance — measurement based on several indicators and also reporting the margin of error turns political bargaining into a verifiable question of fact. Accountability, because conditionality is fair if it burdens whoever is responsible for the decision; a rule that punishes the student for the government’s default does not hold anyone to account, it shifts the burden.

Part VI — Reasoning and further sources

6.1 Press framing by spectrum

In the liberal-left band the framing was built on the praise for Hungary and the Canadian diplomatic complication. 444.hu quoted the part of the speech about Hungary at length and verbatim, and the paper’s analytical summary highlighted, among the eight main announcements, the Canadian proposal and the Hungarian angle, calling the latter an “unusually open” comment (the full text of the article was not publicly downloadable). HVG worked on two levels: its Eurologus summary went through all the main announcements and recorded the tightening of budgetary conditionality in one sentence, while the other article reported, following Politico, that the expression “associate membership” had not appeared even in the text of the speech sent to the member states in advance. Telex focused on Trump’s tariff threat, and clearly indicated that associate membership is a status that does not exist in EU law.

In the general-interest band 24.hu published a short MTI-based news item, but it perhaps highlighted the budgetary sentence most clearly on the whole spectrum: the rule of law remains the condition for EU funds, and in the next framework this must be strengthened. ATV put the emphasis on transatlantic tension, with a dramatic headline. In the economic band Portfolio published two articles: one presented the details of the KIDS Act (age bands, the reversal of the burden of proof to the detriment of platforms), the other, a long analysis, went through the security-policy, trade and migration blocks of the speech, highlighting from a Hungarian perspective the expected revision of Hungary’s request under the SAFE EU defence loan programme and the prospects for migration funding. It did not, however, discuss the rule-of-law budgetary condition separately.

In the conservative band Magyar Nemzet framed the praise as political proof: according to Bertalan Havasi’s assessment, the Commission President publicly confirmed the “Brussels–Tisza pact” — this is a political characterisation, not a statement of fact. The paper’s other article, following Politico, stressed the American risks of the Canadian proposal. Common to the whole spectrum is that none of the bands dealt substantively with the element of the speech that will affect Hungary most in the longer term — what kind of structure the rule-of-law condition attached to post-2028 EU funds will have.

6.2 Facts and data

Datum Value Source
Date and venue of the State of the Union speech 16 September 2026, European Parliament, Strasbourg 24.hu, HVG, 16 September 2026
The budgetary message in the next long-term EU budget, respect for the rule of law and fundamental rights must be even more strongly linked to access to funds HVG Eurologus, 24.hu (MTI), 16 September 2026
Date of the Hungarian election 12 April 2026 National Election Office
The conditionality regulation Regulation (EU, Euratom) 2020/2092, applicable since 1 January 2021 Official Journal of the European Union
The Council suspension of December 2022 some EUR 6.3 billion of cohesion commitments; a ban on new EU commitments with KEKVAs Council of the European Union, December 2022
The Commission’s proposal for the 2028–2034 framework nearly EUR 2,000 billion Politico Europe, 26 August 2026
Share of RRF payments at the time of the survey 47 per cent of the total envelope OECD: EU Economic Survey 2025
Hungary’s WGI indicators, 2024 rule of law: +0.35; control of corruption: −0.17 World Bank, Worldwide Governance Indicators
Hungary’s request under the SAFE defence loan programme some EUR 16 billion (the new government is expected to revise it) Portfolio, 17 September 2026
Proposed age bands of the KIDS Act ban under 13; parent-supervised account between 13 and 15; mandatory safe design between 15 and 18 HVG, Portfolio, 16 September 2026
Status of “associate membership” a status that does not exist in the EU treaties; under Article 49 TEU only a European state may apply for full membership 444.hu, Telex, 17 September 2026

Two data points need a separate note. One: the WGI values are not in themselves suitable for a payment decision — the indicators are point estimates with wide margins of error, which is why proposals 3.1 and 3.3 expressly call for several mutually independent indicators. The other: the KIDS Act is currently a Commission legislative proposal, and its entry into force requires adoption by the European Parliament and the Council; MIAK therefore considers an assessment of domestic implementation capacity (age verification, digital identification) timely, but does not yet regard the concrete age rules as final.

6.3 Policy dimensions

  • Foreign policy (programme points) — the position for the negotiations on the 2028–2034 EU framework: KP17 (issue-based coalition-building in the EU) provides the coalition strategy, KP4 (principled pragmatism) the joint handling of accepting strictness and the structural demands, and KP3 (transparent foreign policy) the public justification of the Hungarian Council position;
  • Economy (programme points) — budget planning for funding exposure: G1 (data-driven budget) is the model for the machine-readable exposure map, and G24 (institutional quality index) the domestic counterpart of multi-indicator institutional measurement;
  • Transparency and anti-corruption policy (programme points) — A8 (cohesion policy accountability) and A1 (public-money dashboard) are the data infrastructure of the exposure map;
  • Territorial inequality and rural policy (programme points) — TE2 (data-based allocation of EU cohesion funds) explains why the municipalities of the most disadvantaged areas are the most vulnerable to a suspension;
  • Digitalisation and AI regulation (programme points) — the KIDS Act announcement in the speech raises the question of domestic age-verification capacity, to which the digital identification infrastructure of D3 (digital citizenship) is linked.

6.4 Literature in detail

6.4.1 János Kornai: A hiány

In A hiány (Economics of Shortage) Kornai describes the hardness of the enterprise budget constraint not as a legal but as a behavioural category. The constraint is hard because the decision-maker takes it seriously, and this depends on his expectations:

“The hardness or softness of the budget constraint reflects what the enterprise manager expects for the future.”

Two further observations by Kornai are directly applicable to EU conditionality. One is that if cases pointing to a bailout occur often enough, a general mood develops that judges the constraint to be soft — that is, a suspension released through a single political bargain damages the credibility of the whole system. The other is that the hardness of the constraint is measurable, but not with a single indicator: “Being a highly complex group of phenomena, it cannot be described by a single summary cardinal indicator.” Translated to EU conditionality: the rule disciplines if the member-state government knows in advance what triggers suspension and what triggers release, and if this depends not on an aggregate score but on several separately verifiable elements. In the Hungarian period of 2022–2026 expectations were uncertain in both directions — which is why MIAK proposes the criteria list fixed in advance under 3.1.

📖 Source: János Kornai: A hiány (Economics of Shortage)

6.4.2 Daniel Kaufmann and co-authors: Governance Matters

The study by Kaufmann, Kraay and Zoido-Lobatón condenses more than three hundred governance indicators into six composite indicators, among them the cluster measuring the rule of law and the control of corruption. The authors themselves, however, warn that these estimates are imprecise, and that the imprecision also has consequences for their use:

“It is clear that small differences in point estimates of governance across countries are not likely to be statistically significant.”

According to the study, users of the indicators should pay attention to the possible range of values for each country, not to the point estimate; at the same time, the composite indicator still gives a more precise signal than any of its individual components. From the point of view of conditionality two conclusions follow. A composite index is suitable for signalling a serious, persistent problem, but unsuitable for automatically releasing or withholding money above or below a threshold. That is why, in proposals 3.1 and 3.3, MIAK asks that the payment decision depend on concrete, verifiable institutional steps, and that composite indicators be used as a supplementary signal, together with their margin of error.

📖 Source: Daniel Kaufmann – Aart Kraay – Pablo Zoido-Lobatón: Governance Matters (World Bank Policy Research Working Paper 2196)

6.4.3 OECD: EU Economic Survey 2025

The OECD’s 2025 survey of the EU analyses the planned structure of the next budget, which would be built on national plans, linking reforms to investments, on the model of the Recovery and Resilience Facility (RRF). According to the survey, transferring this model to regional development policy calls for caution, and it formulates a clear thesis on the addressee of the conditions:

“In addition, there is the issue of conditionality, which should in principle be addressed to the same level of government as the policy support.”

The survey also points out that the milestones of the recovery facility measure the progress of reform, which is not the same as achieving a measurable result, and that the regulation did not settle the recovery of amounts paid out if the committed measure is ultimately not implemented. Translated to the Hungarian experience: in the KEKVA case the condition was addressed not to the level that committed the error and could have corrected it, but to the universities, which were not in a position to do so. Proposal 3.2 addresses this addressing error, and the exposure map under 3.3 also makes visible the difference between milestone and result.

📖 Source: OECD: OECD Economic Surveys: European Union and Euro Area 2025

6.5 International comparison

The structural weaknesses of conditionality are shown by the two best-known cases, the Hungarian and the Polish. In Hungary’s case, in December 2023, following a reform concerning judicial independence, the Commission made some EUR 10.2 billion of cohesion funds accessible, which the European Parliament contested so strongly that in 2024 it brought an action against the Commission before the Court of Justice of the European Union. In Poland, after the 2023 change of government, in early 2024 — before the full legislative changes, on the basis of the government’s action plan and first steps — the Commission announced the release of funds in the order of more than a hundred billion euros, which critics called a political advance. The two cases point in opposite directions, but the lesson is shared: as long as the yardstick for release is not fixed numerically in advance, every decision is contestable, and expectations — in Kornai’s sense — soften.

The counter-example is provided by EU practice itself: in the milestone system of the recovery facility, payment is tied to public steps fixed in advance, so member states know exactly what they have to fulfil — although, according to the OECD’s criticism, these steps often measure only the process, not the result. MIAK’s proposal combines the virtues of the two models: the predictability of the recovery facility for the rule-of-law condition, and multi-indicator monitoring that also measures results for predictability. For the protection of final beneficiaries, the complaints channel of the conditionality regulation already exists; the Hungarian university experience shows that this protection is not sufficient in the case of a ban affecting a type of institution.

Foreign policy

  • KP3 — Transparent foreign policy
  • KP4 — Principled pragmatism doctrine
  • KP17 — Issue-based coalition-building in the EU

Economy

  • G1 — Data-driven budget
  • G24 — Institutional quality index

Transparency and anti-corruption policy

  • A1 — Public-money dashboard
  • A8 — Cohesion policy accountability

Territorial inequality and rural policy

  • TE2 — Data-based allocation of EU cohesion funds

Digitalisation and AI regulation

  • D3 — Digital citizenship

Proposed new programme point: A beneficiary-continuity guarantee and a public condition–funding exposure map for EU funds — for the Foreign policy policy area.

6.7 List of sources

Press sources (MIAK press monitor, 17 September 2026 — topic 2):

Knowledge-base references (books):

  • 📖 János Kornai: A hiány (Economics of Shortage)
  • 📖 Daniel Kaufmann – Aart Kraay – Pablo Zoido-Lobatón: Governance Matters
  • 📖 OECD: OECD Economic Surveys: European Union and Euro Area 2025

MIAK internal materials:

  • MIAK policy area: Foreign policy (programme points; programme point ID: KP3, KP4, KP17)
  • MIAK policy area: Foreign policy (background material)
  • MIAK policy area: Economy (programme points; programme point ID: G1, G24)
  • MIAK policy area: Transparency and anti-corruption policy (programme points; programme point ID: A1, A8)
  • MIAK policy area: Territorial inequality and rural policy (programme points; programme point ID: TE2)
  • MIAK policy area: Digitalisation and AI regulation (programme points; programme point ID: D3)
  • MIAK press monitor, 17 September 2026 — topic 2, score: 87/100

Supplementary public data sources:

  • Regulation (EU, Euratom) 2020/2092 on a general regime of conditionality for the protection of the Union budget — Official Journal of the European Union
  • European Commission — annual Rule of Law Report
  • World Bank — Worldwide Governance Indicators
  • European Commission — Cohesion Open Data Platform

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