Hungary passes new anti-corruption law aimed for avoiding loss of EU funds

Hungary's parliament passed the first in a series of new anti-corruption laws as Budapest seeks to ease an ongoing conflict with Brussels and avoid a loss of European Union funds. Such a move is also the result of a poor economic situation and a decline in the domestic currency.

Prime Minister Viktor Orban's ruling Fidesz party decided to amend the criminal code setting up a procedure concerning criminal offences related to managing public property, allowing a judicial review in case an investigation is closed without indictment or a crime report is dismissed.

Parliament passed the bill with 136 deputies voting yes, seven against and 14 abstaining.

The legislation is one of 17 commitments Orban's government had made to the European Commission in order to avoid a painful suspension of billions of euros of the EU funds. The funds would be a much-needed help in a difficult economic situation.

Facing skyrocketing energy costs and inflation, a record weak forint and a slowing economy, Hungary’s leader Viktor Orban is willing to fulfil EU demands to create institutions that would cut possible corruption in EU-funded projects.

A favourable decision on the fund's transfer later this year could ease pressure on the forint and Hungarian assets, which have sold off in past weeks as emerging markets were hammered due to the US dollar's surge, with Hungary's vulnerabilities making its assets especially exposed to risk aversion.

“We expect that by mid- to end-November Hungary will make progress towards resolving the EU's conditionality mechanism, which should also unlock a deal for the recovery funds,” the Bank of America said in a special comment note.

“From Hungary's side, the cash-strapped administration has no choice but to compromise with the EU in our view.” the BoA said.