- Hungary has been under investigation since 2018 for a potential "serious breach" of the European Union's values.
- The Hungarian government has dismissed such concerns and the issue has sparked division among the 27 EU leaders.
- The 27 leaders will have their first negotiation on the new EU budget and recovery fund Friday morning.
Hungary is against the idea of making upcoming EU-wide stimulus conditional on respecting the Union's democratic values — an opinion that's likely to spark further tension with its European partners.
Some European governments, mainly French officials, have argued that countries that challenge European democratic values should not receive funding from the EU budget, a common basket that backs projects across the region. This issue is now at the forefront of EU discussions as the 27 capitals negotiate the distribution of the next budget.
"The rule of law procedure is way too general and I am afraid over politicized. So we wouldn't like to have that element included in there because that, I am afraid, will end up in endless political debates," Gábor Gion, state secretary for financial policy affairs in Hungary, told CNBC's "Street Signs Europe" Wednesday.
Hungary has been under investigation since 2018 for a potential "serious breach" of the European Union's values. According to European law, these are: respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. The Hungarian government has dismissed such concerns and the issue has sparked division among the 27 EU leaders.
A spokesperson for the European Commission, the institution in charge of overseeing compliance with the EU treaties, said: "The Commission has already shown that it is determined to use all the instruments at its disposal to address the concerns raised by certain measures adopted by the Hungarian authorities."
"In particular, the Commission has launched a number of infringement proceedings against Hungary. These relate to the rights of civil society organisations, academic freedom and the rights of migrants and asylum seekers," the spokesperson said in an email Wednesday.
Regarding the next EU budget, Gion argued that time is of the essence as it will mitigate the shock from the coronavirus pandemic.
"We agreed with the (European) Commission the funds should be distributed swiftly and fast and if we are bringing in subject conditionality then that will kill the original intention of this," he added.
However, this is only one of the many hurdles that member states need to overcome before fresh funds are distributed.
Apart from conditionality, European leaders haven't agreed on what form the disbursements should take, how long they should be made available, and, more importantly, who will get the biggest share.
"We have some concerns about the method of allocation. We have some concerns that the keys, allocation keys, include certain measures and criteria that are unrelated to the pandemic itself," Gion told CNBC.
The current proposal suggests a formula that considers population, GDP (gross domestic product) per capita and unemployment. However, different nations, argue that the data is backward looking and doesn't reflect the real impact from Covid-19.
The 27 leaders will have their first negotiation on the new EU budget and recovery fund Friday morning.
In a letter to member states, European Council President Charles Michel, who will chair the meeting, said this will be a "crucial stepping stone" toward a deal.