The European Union’s standoff with Hungary deepened as a dispute over the fate of $14 billion of funding for Budapest scuppered attempts to push through crucial aid for Ukraine and a global minimum corporate tax.
Hungarian Finance Minister Mihaly Varga said at a meeting with EU counterparts in Brussels that his country would veto the €18 billion ($18.9 billion) support package for Kyiv.
Ministers dropped the adoption of Hungary’s €5.8 billion Covid-recovery plan from their agenda in response. Budapest stands to lose €4.1 billion of that pot for good if it isn’t approved by the end of the year. EU ministers may reconvene as soon as next week, according to a diplomat.
In addition to his opposition to Ukraine aid and the global tax, Hungarian Prime Minister Viktor Orban has dragged his feet over Nato’s enlargement to include Finland and Sweden, triggering criticism that he’s attempting to blackmail peers in exchange for EU funds, a charge he’s denied.
The EU is attempting to bring an end to suspected widespread graft in Hungary and the erosion of the rule of law under more than a decade of uninterrupted rule by Orban without letting the five-term Hungarian premier hijack the bloc’s agenda.
The European Commission said that member states should freeze €7.5 billion of regular budget funds until Hungary enacts a set of reforms. It also suggested conditionally approving the Covid-recovery plan but delaying disbursements until further rule of-law-targets are met.
The recommendation was a blow to Orban after he undertook to meet a range of EU demands to reduce graft, passing more than a dozen pieces of legislation in the past two months.
In a potential way out, member states pushed back a final decision on the funding freeze. They called for the EU’s executive arm to provide an “updated assessment on Hungarian reforms related to the rule of law in the coming days,” the Austrian Finance Ministry said.
A European Commission official declined to comment while the meeting of EU finance ministers was ongoing.
EU ambassadors are due to discuss the new assessment by December 12, an EU diplomat said. If there’s agreement among member states, it could be signed off formally by a previously planned gathering of foreign ministers or any other council of ministers who happen to be meeting. If there’s no consensus, the bloc could call another extraordinary meeting of finance ministers, the diplomat said.
Countries led by Germany and including France said they needed more time to assess Hungary’s Covid recovery plan and its progress on meeting rule-of-law demands, according to people familiar with the matter.
All sides are now working against the clock, with Ukraine badly in need of the EU funds as it tries to keep its economy going as it defends itself against invading Russian forces.
For Hungary too, time is of the essence as it’s the only country of the 27 EU member states whose Covid-recovery plan is yet to be signed off. The final deadline for a decision on Hungary’s €7.5 billion of funds is December 19.