Viktor Orban, Prime Minister of Hungary, speaks to the media at a meeting of the CSU Bavarian Christian Democrats parliamentary faction at Kloster Banz on September 23, 2015 in Bad Staffelstein, Germany. | Getty Orbán backs down in battle with NGOs Hungarian prime minister agrees to end dispute with Norway over development aid.

Hungarian Prime Minister Viktor Orbán backed down Thursday in a long-running dispute between his government and Norway over development aid.

Norwegian and Hungarian officials told POLITICO that Orbán had agreed to end to all investigations into work being done in Hungary by non-governmental organizations supported by Norway.

Norwegian aid to Hungary, part of a €1.8 billion package delivered by the European Economic Area (Norway, Iceland and Liechtenstein) to support social and economic cohesion in Europe, had been suspended in 2014 over concerns that the Hungarian government was cracking down on NGO activity.

In return for Orbán's decision, Norway has agreed to release development funds earmarked for Hungary, Norway's minister of European affairs, Vidar Helgesen, announced to the Norwegian parliament Thursday.

In an interview with POLITICO, Helgesen said that “Hungary accepted all the conditions” Norway had requested during months of intense diplomatic negotiations.

Helgesen said there are direct lessons for the EU from the spat. “It pays-off to stand up for fundamental values," he said. "We are under so much pressure externally that it's even more important to ensure internally that we hold each other to account in Europe. The EU should take learning from that.”

A senior Norwegian official said of the agreement, “Budapest has given in. This new development is a total victory for the Norwegian view and our work to strengthen civil society and NGO rights in Hungary.”

The Hungarian government disputed that description of the new agreement.

“We have agreed on a good compromise after a constructive discussion,” said Zoltan Kovacs, a spokesperson for Orbán. “We maintain our opinion that not everything was in order [with the activities of the Norway-funded NGOs].”

Norway has argued that Hungary began illegal investigations into the NGOs it funds in Hungary to “demonstrate their dissatisfaction with the choice of projects,” according to a spokesperson for Norway's foreign ministry.

Norway also claimed that Hungary transferred management of development aid funds away from the central government, and closer to organizations controlled by Hungary's ruling Fidesz party, in order to make Norwegian monitoring of how the funds were spent more difficult.

In response to Hungary's investigations and financial maneuvers, which included police raids of NGO offices in September 2014, Norway, which is not a member of the European Union, called on the EU to do more to defend its values in the face of Orbán's calls for an “illiberal state” and his administration's treatment of critics and opponents.

The European Commission declined to suspend funding or invoke the Article 7 clause of the EU treaty, which suspends a country's voting rights at the European Council as punishment for violating the EU's fundamental values.

The dispute is seen as the second significant marker of Orbán's backtrack from liberal democracy following earlier efforts by Hungarian authorities to muzzle critical media outlets.

The turning point in the rapprochment between Norway and Hungary took place at a meeting in Brussels on November 24, when the EEA and Hungary agreed “to respect the agreed legal framework for the implementation of the NGO Program in Hungary, as stated in the Memorandum of Understanding,” signed when the aid program was established.

The minutes of that meeting, obtained by POLITICO, show the results of several months of intense diplomatic negotiations, according to Norwegian officials.

One of the NGOs investigated by the Hungarian government and courts, the Ökotárs Foundation, said on its website that “Although the moves of the government did endanger the supporting mechanism, Ökotárs and its partners stood their ground with success,” pointing out that it has continued to support 430 civil projects.

Hungary was allocated €153.3 million in EEA grants during the period 2009-2014.

This article was updated to include a comment from the Hungarian government, and to correct the amount of EEA grants allocated to Hungary from 2009-2014.