Budapest Southern Circle project suspended after EU auditors’ investigation

HUNGARY: The government has suspended work on Budapest’s Southern Circle orbital capacity enhancement project after the European Commission warned that it could withdraw European Union co-financing due to a potential conflict of interest in the procurement. Works on the current phase of the Southern Circle programme started in January 2024. This covers the construction of additional tracks over the 5.4 km of route between Kelenföld and Ferencváros through the south of the city, as well as the construction of two new stations.

According to national Transport & Investment Minister Dávid Vitézy, an investigation by the European Court of Auditors has uncovered a potential conflict of interest, specifically alleged collusion between lead contractor V-Híd Zrt, and design company Kontúr Csoport Kft. This could have led to V-Híd having prior knowledge of cost estimates, which should have led to V-Híd’s disqualification from the procurement process undertaken in 2021, the minister said.

Based on ECA’s findings, the European Commission has informed the Hungarian government that it could withdraw EU funding. This led the government to apply the brakes on the project in October.

The European Union has been providing a co-financing of HF108.4bn (€290m) through the CEF2 instrument, along with an additional HF210.4bn (€550.8m) as part of the 2021-27 EU Cohesion Programme, together covering 95% of the overall cost.

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