Hungary vetoes Ukraine aid in attempt to secure EU recovery funds

(Photo: Nicolas Economou/NurPhoto via Getty Images

Hungarian Prime Minister Viktor Orbán has chosen to take advantage of the need for his approval for Ukraine aid as leverage to secure his country’s share of EU recovery funds.

On Tuesday the Hungarian government Tuesday blocked an agreement on an EUR 18 billion aid package for Ukraine. The EU has sought to hold back some funds destined for Budapest because of rule-of-law breaches.

The European Commission will now have to find an alternative method to ensure Kyiv receives funds in January.

EU Budget Commissioner Johannes Hahn, speaking at a meeting of finance ministers, said that the Commission will look at how to “provide the necessary solution to Ukraine as of January”. This would entail enacting the so-called enhanced cooperation, which provides a legal pathway to avoid vetoes, EU officials said.

This approach would require EU countries to provide national budgetary guarantees which, in some cases, need parliamentary approval, something that would likely be time consuming.

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The upshot of the veto by Hungary is that decisions on all other files on the finance ministers' agenda - a minimum corporate tax rate, which Budapest is also blocking, the Hungarian recovery plan and connected EUR 5.8 bn in grants, and the decision to freeze EUR 7.5 bn of EU funds for Hungary over corruption issues - were postponed.

“We were not able to adopt the package as a whole but we will not be discouraged,” Czech finance minister Zbyněk Stanjura said in his function as chair of the gathering of finance ministers. “Our ambition remains that we will start disbursements to Ukraine in January”.

He did not address the issue of Hungary’s recovery funds but tasked the Council to work on “a solution supported by 26 member states,” which would get around Hungary's veto.

EU governments have until December 19 to take a position on freezing EU funds for Hungary. Orbán needs to have his recovery plan adopted by the end of the year or risks losing 70 percent of the EUR 5.8 bn grants.