European Union flags fly outside the European Commission headquarters in Brussels, Belgium, April 10, 2019.
European Union flags fly outside the European Commission headquarters in Brussels, Belgium, April 10, 2019. Reuters / Yves Herman

The European Union executive started a new disciplinary procedure against Hungary on Tuesday in a step that could lead to freezing funding for Prime Minister Viktor Orban for undercutting liberal democratic rights.

Bracing for more tensions with the self-styled "illiberal" crusader, few in the EU offered their congratulations after Orban last weekend scored a fourth landslide win in national elections.

His win came in spite of years of EU criticism that he was undercutting liberal democratic rights and accusations that he was using funds from the bloc to enrich his associates.

"We've been very clear the issue is corruption," European Commission President Ursula von der Leyen told EU lawmakers. "We will now send a letter of formal notification to start the conditionality mechanism."

Orban's chief of staff Gergely Gulyas told state news agency MTI that the ruling Fidesz party got almost 2.9 million votes in elections on Sunday which gave it a very strong mandate.

Gulyas said the Commission "must also accept the basic rules of democracy" and return to common sense and dialogue which the Hungarian government has always been open to.

The Hungarian forint fell as uncertainty grew over Hungary's access to billions of euros of EU funds.

It would take months before the Commission finalises internal work on the matter and puts it forward to the EU's national leaders for a decision, an official told Reuters.

It is the first time that the EU is trying its new tool, designed to prevent the misuse of EU budget funds. It was agreed by all 27 EU leaders in late 2020, despite reluctance from Orban and his nationalist allies ruling in Poland.

Richer EU countries that contribute to the bloc's joint coffers - of which Warsaw and Budapest are net beneficiaries - have refused to keep on paying without stronger safeguards to ensure their money does not benefit those undercutting democracy.

In power since 2010, Orban has tightened the noose around media, academics and NGOs, and restricted the freedoms of migrants and gay people.

Rule of law rows have emerged as an existential threat to the EU, its cohesion rattled from within by Orban, as the bloc faces challenges ranging from COVID recovery and climate change to fraught ties with China and Russia, which is waging war on Ukraine.