EU Strikes a Deal with Hungary Freeing Up Funds for Ukraine

EU Strikes a Deal with Hungary Freeing Up Funds for Ukraine

Hungarian Prime Minister Viktor Orbān uses tactical vetoes to get the EU to release partial payouts and pandemic relief funds.

Hungary has been out of the EU’s good books owing to its democratic backsliding over the last decade. The situation kept getting worse to the point where the European Commission proposed a funding freeze worth €7.5 billion in September 2022. Hungary was about to lose that entire amount along with €5.8 billion that the country was about to receive by 2026.

Prime Minister Viktor Orbān who has been at the center of this struggle between the Hungarian nation and the European Union gambled his vetoes to change the situation somewhat in their favor.

The European Commission has allocated funds worth €18 billion for Ukraine but it could not release the funds without Hungary’s approval. It was getting a bit embarrassing for the commission since they had pledged the money weeks ago. The EU had started crafting a plan B to release the funds but it involved bypassing Hungary. That meant Ukraine would receive the funds with approval from 26 individual nations and not the EU as a whole. While this would have aided Ukraine, it would also weaken the EU’s united front against Russian aggression.

So, it was in everyone’s best interest that Hungary and the EU reached an agreement and they did it on Monday night. In the deal, Hungary got the EU to lower the funding freeze by €1.2 billion. The EU also agreed to release the funds allotted for pandemic relief upon Hungary’s fulfillment of certain requirements.

The deal was struck at a meeting of EU ambassadors on Monday evening and it will be written down and formalized by Wednesday. This deal definitely brings some economic relief to the war stricken Ukrainians but only time will tell if it will do any real good for Hungary. The country is still losing €6.3 billion and the pandemic relief fund will be released only if Hungary manages to implement 27 anti-corruption and judicial independence reforms. The progress in that regard so far hasn’t been promising.

The deal that was struck on Monday was pushed by two deadlines. On one hand, the EU had until 19th December to decide whether to go forward with the funding freeze and on the other hand, Hungary needed to get their pandemic-recovery plans by a majority of EU countries by the end of the year or lose 70% of that €5.8 billion. 

The decision wasn’t unanimous and compromises were made. Netherlands and Sweden were in favor of freezing the entirety of 7 billion euros, whereas Germany and France wanted to ensure that the released funds are proportionate with the amount of progress made towards irradicating political corruption and the humanitarian crises. 

The other issue that pushed the deal forward was the European Commission’s desire to instate minimum corporate tax rates across Europe. The establishment of the reformed tax policies needed Hungary’s approval and not being able to push this forward would have resulted in a loss of face for the EU. 

A lot of things came together to make this deal possible. It will be interesting to observe how the relationship between Hungary and the EU moves forward from this point.