The European Commission intends to recommend that Hungary be cut off from EU money – writes Bloomberg, citing high-level EU officials. The Budapest daily “Nepszava” also wrote about it. The decision is to be announced next Sunday.
The final decision on the cut-off will be made by the Council of the European Union by a majority of votes. From the moment of the recommendation, it will have three months to do so, so the funds may be blocked later this year. There is also a possibility that during this time Hungary will fulfill its promises, especially in the matter of passing a new anti-corruption law, and then perhaps the EU will decide that Budapest has met the conditions for access to funds. Hungary is to receive around EUR 36 billion from the EU budget by 2027, plus EUR 5.8 billion from the Reconstruction Fund. To get to the latter part of the money, you need an approved reconstruction plan (KPO), which the Hungarians have not yet achieved.
The upcoming Commission recommendation is the result of the proceedings under the conditionality mechanism adopted two years ago, which started in April, which allowed to block the payment of EU funds to countries where they would not be safe due to, for example, corruption or problems with the rule of law. According to Brussels, Hungary has a problem with both of these topics.
The EU has similar objections to the rule of law towards Poland. In our case, however, there is no question of corruption, which makes our problem less serious, so so far Brussels has not activated the conditionality mechanism against us. In addition, our KPO has already been adopted by the Commission and the EU Council. However, Poland still does not meet – and according to politicians’ declarations it does not want to meet – all the “milestones” set out in the KPO necessary to launch payments from the Reconstruction Fund, so in our case EU money is also currently blocked, but at a different stage. However, this does not apply to funds from the EU budget.
2. Wholesale gasoline is the cheapest since the beginning of March
Fuel at gas stations cheaper more and more clearly, recently it is visible especially in the case of diesel, which has been pricey for the better part of August. Now the trend has finally reversed and, according to the e-petrol.pl website, only in the last week the price of diesel in Poland dropped by 0.16 PLN per liter to the level of 7.47 PLN. This means that diesel fuel at the stations is now the cheapest in a month.
In turn, the price of EU95 petrol fell by PLN 0.08 last week and reached the level of PLN 6.44 per liter. This is the least since April and 87 groszy more than in the last week before the war. In the case of diesel, this difference is much greater and amounts to PLN 1.85 per liter. It is possible, however, that prices at the stations will continue to decline in the wake of what is happening in the wholesale market. There, the price of EU95 petrol fell on Wednesday the lowest since March 2 and is only 0.66 PLN higher than just before the war. Wholesale diesel is cheapest since August 13.
Fuels have been cheaper around the world recently, mainly due to market concerns about the state of demand for them in the global economy, which is moving towards recession. For example, recently there has been information that due to the economic slowdown, large surpluses of unused oil and fuels have appeared in China, and the Chinese authorities may allow their export to other markets. Thus, the prospect of an increase in supply lowers the price. A barrel of Brent crude oil now costs $ 94, up from less than $ 90 a few days ago. In June, its price was $ 125.
3. The European Union will set up a hydrogen bank
The European Union presented its ideas on how to overcome the energy crisis during the coming winter. Many short-term ideas to implement almost immediately were accompanied by one more long-term concept that seems intriguing. Well, the head of the Commission, Ursula von der Leyen, announced that the development of the hydrogen market would be financed with EUR 3 billion. To this end, a European Hydrogen Bank is to be established. By 2030, the production of hydrogen used in the energy sector is to reach 10 million tonnes.
According to von der Leyen, the said bank is to act as a guarantor, i.e. its function will be to reduce the risk, so that it is easier for companies investing in hydrogen to obtain investment loans from ordinary banks. In a normal situation, due to the fact that the idea is innovative and the business model is therefore risky, banks could be afraid and refuse to finance. With the support of a guarantee from an EU bank, loan financing should become more accessible.
For now, of course, we are at the announcement stage in the EU. We do not know how much capital the European Hydrogen Bank will have at its disposal, where this capital will come from and when it will happen. However, the political declaration of von der Leyen itself marks a breakthrough in this matter.
4. The European Commission proposes limits on electricity consumption and new taxes
President of the European Commission next to the hydrogen bank presented at the conference a series of ideas to implement to avoid energy and gas shortages in winter. However, there are also some ideas that were discussed earlier that she did not present – for example, she did not announce a price cap for gas imported into the EU. Apparently, there is still opposition on the part of the EU countries (Hungary was recently mentioned in this context).
Ursula von der Leyen announced the introduction of taxation of energy companies above a certain level of revenues. In her opinion, this is to give EU countries over EUR 140 billion to distribute as part of helping companies and households most affected by high electricity prices. Interestingly, the Czech finance minister, after von der Leyen’s speech, mentioned to the press that the new tax is to apply not only to energy companies, but also to banks. The Czechs now have the EU presidency, so they are preparing draft documents for the next EU summits, so the information on their part can be considered credible.
The EU is also proposing a voluntary reduction of electricity consumption by 10%. compared to the level of consumption in previous years. In turn, during the hours of the day when electricity is the most expensive (in the so-called peak hours), the reduction of consumption is to be obligatory and reach 5%.
The EC is also proposing a temporary solidarity levy on surplus profits from activities in the oil, gas, coal and refineries sectors. This time-limited fee would help maintain the investment incentives for the green transition. It would be charged by member states on those profits from 2022, which increased by more than 20%. compared to the average profits of the previous three years.
Unfortunately, it is not certain that these ideas will actually come into effect, as it will also require the political will on the part of governments and parliaments in individual Member States, and time is short.
5. Over PLN 6 billion in retail bonds in August
The interest of Poles in retail bonds remains high, although in August it decreased significantly compared to July and June. The sale of these bonds in the last month amounted to PLN 6.06 billion. Before June and the introduction of new bonds with an interest rate of the National Bank of Poland, this would be a record result, but in June this sale amounted to approximately PLN 14 billion, and in July over PLN 10 billion. So looking at it, the demand for sovereign debt is slowly calming down.
Retail bonds are issued by the Minister of Finance in several different varieties. Some of them bear an interest rate of inflation increased by a fixed margin, so in practice they protect against inflation (unfortunately only from the second year of saving, in the first year the interest rate is fixed and relatively low). There are also those where the interest rate depends on the NBP interest rate. Retail bonds do not guarantee a rate of return above inflation, but in most cases give higher interest than saving on bank deposits. In addition, you do not need to meet additional conditions often found in banks, such as the need to have a current account or some other products in a given bank.
Since the beginning of the year, the government has already sold bonds worth over PLN 42 billion, which means that all investors in them are slowly becoming for the Ministry of Finance as important as banks and foreign funds a source of financing the budget deficit.