The European Union is facing a major standoff with Hungary this week as leaders meet to decide on providing billions in financial aid to Ukraine. Hungary is the lone holdout, threatening to veto the aid package and spark wider ramifications.
Background on EU Financial Aid to Ukraine
The EU has provided extensive financial, humanitarian and military aid to Ukraine since Russia’s invasion began in February 2022. This support has been critical in helping Ukraine defend itself and maintain basic functioning of its government and infrastructure during the war.
In 2022, the EU allocated €19 billion in financial assistance to Ukraine, consisting of loans, grants and budget support. The aid is intended to keep Ukraine’s government operating, pay wages and pensions, maintain public services like healthcare and education, repair damaged infrastructure and more.
For 2023, the European Commission proposed an additional €18 billion package for Ukraine. However, this requires unanimous approval from all 27 EU member states.
Here is a breakdown of the proposed €18 billion 2023 Ukraine aid package:
|Type of Aid
|Up to €15 billion
|Help cover Ukraine’s budget needs and macro-financial stability
|Help rebuild critical infrastructure like energy, hospitals, housing, schools
Hungary Threatens to Veto Ukraine Aid
The 2023 financial aid package was expected to gain easy approval. However, Hungary has emerged as an obstacle, threatening to veto the deal.
Hungary is led by Prime Minister Viktor Orban, a right-wing populist leader who has had a tense relationship with the EU in recent years over rule-of-law violations. Orban also has closer ties to Russia than most European leaders.
Orban argues that the EU’s Ukraine aid plans are oversized and will indebt the bloc for decades. Hungary proposed capping Ukraine grants at €8 billion for 2023.
The Hungarian stance has sparked outrage among other EU countries who accuse Orban of holding Ukraine’s finances “hostage” to make political points. Over 20 member states co-signed a letter denouncing Hungary’s obstruction.
“There is no rational argument which could possibly justify blocking or watering down EU assistance to Ukraine,” the letter stated.
High Stakes EU Summit to Break Aid Impasse
With the standoff escalating, the issue will come to a head this week at a high stakes summit of EU leaders on February 2-3.
The summit faces immense pressure to find a solution that will allow billions in aid to flow to Ukraine while also addressing Hungary’s objections.
However, there is deep frustration with Orban’s tactics across EU capitals. Some leaders have suggested bypassing Hungary or finding ways to financially punish it for obstruction.
“If Hungary does not show willingness to allow common solutions under article seven, we need to look at all possible options to increase pressure on Hungary,” said one EU diplomat.
Article 7 is a process to suspend certain EU rights of a member state found in breach of the bloc’s core values. Invoking it against Hungary would be an unprecedented escalation.
Meanwhile, Ukraine urged the EU for unity and rapid approval of financial aid it desperately needs. President Zelensky said 15-20% of Ukraine’s energy infrastructure remains damaged and cold winter weather is putting additional strain on the system.
Scenarios for Summit Outcomes
As the high-stakes summit kicks off, here are the potential scenarios:
Hungary Backs Down
Facing heavy pressure, Hungary could agree to approve, or at least not veto, the €18 billion assistance package. This would defuse tensions and allow aid to quickly flow to Ukraine.
However, Orban would likely demand concessions in return – such as rules allowing the EU to review use of funds or restricting ongoing aid after 2023.
If unanimity remains elusive, one option is for the EU to provide Ukraine funding outside typical processes requiring Hungarian approval.
The EU could invoke “enhanced cooperation” rules that allow a group of at least 9 member states to collaborate in areas outside the EU’s exclusive powers. Or funding could flow through multinational entities like the European Bank for Reconstruction and Development.
However, bypassing Hungary sets a dramatic precedent and risks encouraging similar disruptive tactics by other members in the future.
In the most extreme scenario, the EU could retaliate against Hungary for obstruction by triggering sanctions under Article 7. This could involve suspending Hungary’s voting rights on EU decisions or freezing access to budget funds.
However, this “nuclear option” would provoke a volcanic reaction from Orban and deepen divides in the bloc. It would require high levels of consensus to pursue and faces opposition from some members wary of an escalating crisis.
As the summit opens, the EU is walking a tightrope seeking consensus on Ukraine funding while preventing divisions from unraveling the bloc at a critical juncture. All eyes are on whether a breakthrough can be found with Hungary.
If not, the EU may be forced into unprecedented territory financially isolating one of its own members in order to support an aspiring member under attack. The political, economic and geopolitical stakes could not be higher.
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