BUDAPEST (Reuters) - The European Union has suspended most development programmes in Hungary due to shortcomings with the schemes and the country could end up losing 600 billion forints (1.7 billion pounds) in EU funds this year, the government said.
Janos Lazar, the prime minister's chief of staff, said on Monday that the government was in talks with Brussels on regaining access to funds which financed important projects such as road building and social cohesion programmes.
Hungary is the latest former communist state in central Europe to have funding from the EU suspended. The European Commission froze all Czech payments last year after an investigation into allegations of graft.
The suspension also marks a fresh area of dispute between Hungary and the EU, which has been a longstanding critic of Prime Minister Viktor Orban's government over its unpredictable policies.
"At the moment, the EU is not financing 13 out of the 15 programmes managed by the National Development Agency (NFU)... as it has problems with 13 programmes," Lazar told a news conference.
"In addition to the fact that Brussels has serious problems with the ongoing programmes ... in 2013 we could lose 500-600 billion forints if the government does not take serious action."
Lazar said the government hoped to achieve a compromise with Brussels by mid-September about the release of EU funds, indicating Hungary would be ready to accept a sanction of between 50 and 100 billion forints to restart the projects.
Lazar highlighted only one issue raised by the EU: that for road building projects, Hungary demanded technical inspectors be members of the Hungarian chamber of engineers, which Brussels said violated European competition rules.
"We are conducting talks about the size of the sanction, even though our legal stance is unchanged: we believe the reasons (cited by Brussels) are unjust and unlawful," he said.
Lazar said that in the period between 2007 and 2013, Hungary was entitled to receive 8.2 trillion forints worth of EU subsidies to finance various development programmes and 95 percent of these funds had been allocated.
Lazar said he had asked Prime Minister Orban to schedule a government meeting for Wednesday to take measures to avoid the loss of funds this year and tackle Brussels' concerns.
(Reporting by Krisztina Than/Gergely Szakacs; Editing by Toby Chopra)
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