Ukraine, aid hanging in the balance on the EU summit table: Hungary blocks the 27-party agreement

Orban does not reveal his cards until tomorrow’s extraordinary European Council

A 27-member agreement on the mid-term review of the EU’s Multiannual Financial Framework 2021-27 (MFF or MFF) “does not yet exist”. Tomorrow’s decision, with aid to Ukraine attacked by Russia at its centre, is a “defining moment”, a true crossroads, in which we will see what type of international entity the Union wants to be. Viktor’s Hungary Orban continues to block the agreement between EU leaders on the revision, whose ‘main dish’ is 50 billion euros of long-term aid to Ukraine (33 billion in loans and 17 in non-repayable grants), the macro financial assistance necessary to ensure the functioning of the State, engaged in an exhausting war defensive against Moscow. A stalemate that causes irritation and frustration among other EU partners.

Everything postponed to the EU Council table

The extraordinary European Council is convened for tomorrow morning in Brussels, to try to find an agreement, after in the December summit the Hungarian prime minister, by leaving the room, had allowed his colleagues to give the green light, to 26, to the accession negotiations with Ukraine and Moldova. Contacts are ongoing, “especially between the Commission and Hungary”, says a diplomatic source, but Orban decided to come to the European Council “without closing anything first”, to address the issues directly at the summit. A solution, therefore, at least “until tomorrow”, will not be found. This time however, explains another European diplomatic source, it will not be enough for Orban, who is the oldest member of the European Council (he has been prime minister since May 2010: he beats the Dutchman Mark Rutte by a few months), to leave the room for a coffee : in December it was “a political decision”, while in this case it is a “legal issue and unanimity of 27 is needed”.

The funds at stake

The negotiating box approved in December provides for an additional financial envelope of 64.6 billion euros, which should be spent on new priorities: in addition to the 50 billion euros for the instrument for Ukraine (17 billion euros in grants and 33 billion euros in loans), 2 billion for migration and border management, 7.6 billion euros for the neighborhood and the world, 1.5 billion euros to the European Defense Fund under the new Step instrument , 2 billion euros for the flexibility instrument, 1.5 billion euros for the solidarity and aid reserve.

The unanimity knot

To be adopted, the revision of the MFF requires unanimity in the Council and the approval of Parliament. There is also a problem of time, because Kiev risks going into default, without financial support, especially since the US Congress has not yet given the green light to aid to Volodymyr Zelensky’s country (who will video link with the 27 tomorrow): “Help for Ukraine cannot wait”, says a source, because if it does not arrive “they will start to find themselves in difficulty from March”.

The Hungarians, says another diplomatic source, say they also want “a 27-party agreement”, but ask for a unanimous decision on aid to Ukraine, every year, and not just on the MFF; they also want not to participate in the coverage of the additional interests of Next Generation Eu, since they have not yet collected a euro from the Pnrr (they accept future reductions on the installments, to cover the interest, once collected), and have asked to postpone the deadline by two years of their Pnrr, to be able to implement it (the deadline expires in 2026). This last request cannot be accepted, because the deadline was set unanimously and ratified by the Parliaments: it would be necessary to reopen everything and the other 26 exclude embarking on a similar process. Faced with these requests, the position of the other countries is the same as in December: an annual discussion on the facility for Ukraine is certainly feasible, but no one wants to grant Hungary a right of veto on the budget on a regular basis.

A senior EU official explains that “naturally” there is “a plan”, and then notes that Orban has already blocked other dossiers in the past, such as sanctions against Russia: “He says no, no, no, then he moves on”. The priority is to seek an agreement at 27, because finding it at 26, outside the MFF, would be “complicated”, although not impossible. The fact is that, if an agreement were found at 26, it would no longer be a question of the European Council, but only of an intergovernmental conference at 26. A 26-party solution is possible, but it would be more complicated and, above all, “it would cost more” , because it would not weigh on the EU budget, but on individual state budgets (with their respective debts).

Hungary has asked to be able to approve the annual budget as well, not just the MFF, unanimously (the annual one requires a qualified majority, while the MFF, which sets the spending ceiling, requires a unanimous vote), in so you can block it every year. The other countries said no, because “certainty is needed” to plan expenses. A possible solution, explains a European diplomatic source, could be to commit to discussing the EU’s annual budget every year in the European Council: it would be a clause similar to the ’emergency brake’ that was foreseen in 2020 in a recital of the regulation on the Rrf (Next Generation Eu), at the request of the Netherlands, which gave the right to ask for specific situations to be discussed “exhaustively” in the European Council.

Negotiations with Budapest “are intensifying – explains a senior EU official – but we are not there yet. I don’t know if we will succeed”. Even for a European diplomat “a result at 27 is not guaranteed”, so it is not certain that the summit will not fail, as happened in February 2020, when a European Council convened to agree on the Mff 2021-27 failed, just as in Lodigiano was identified as the presumed ‘patient zero’ from Covid-19. For another source, a failure of the summit would be “politically very serious”, because it would highlight the “plastic isolation” of Budapest compared to the other 26. And such a strong isolation could create for the first time a situation whereby it could “coagulate ” a majority to carry forward the procedure pursuant to article 7, which has been in place since 2018.

In this case, the countries that have a lot to lose from a lack of medium-term review of the MFF are not few: certainly Italy (there are also funds for migration in the package), but also Spain, Romania, Slovakia and Latvia, for different reasons. All countries that could also decide to vote in favor of suspending the voting rights of a member who has effectively self-isolated. And now it can no longer even count on the sure help of Poland, where the Pis, also at loggerheads with the Commission on respect for the rule of law, is in the opposition.

Besides Ukraine, there is the problem of Ngeu’s higher interest costs: if they are covered in 2024 by the annual budget, they will no longer be covered from 2025, which could create problems in the financial markets. According to a diplomatic source, among the 26 there is “great irritation and frustration” towards Hungary. It is true that, between now and the end of the legislature, this is “the last moment” in which Orban can use the veto weapon as leverage, but “if he pulls too hard, he risks finding himself with a handful of flies in the hand and in a worse situation than the starting one”. The publication in the Financial Times of a document from the Council secretariat predicting trouble for the Hungarian economy in the event of no agreement does not seem to have helped. “It wasn’t a very good idea”, according to a European diplomat, because it would have allowed Orban to corroborate his thesis about “blackmail” by Brussels towards Hungary.

It certainly “didn’t help”, confirms another diplomat. It is not even a given that Prime Minister Giorgia Meloni, who is often seen as a ‘bridge’ towards Orban, will decide to act as mediator, given that it is not excluded that the mediation will fail. In addition to the mid-term review of the MFF, which is the ‘main course’ of tomorrow’s Council, two other discussions are planned, one on military aid to Ukraine and the other on the Middle East. The latter also includes the Aspides naval mission between the Suez Canal and the Strait of Hormuz, which was on the table of Defense ministers today in the informal Council at the Palais d’Egmont: “I expect the issue to be addressed “, says a senior EU official. However, no conclusions are foreseen on the Middle East, because they would require a long negotiation, and this is not the opportunity.

Military aid to Ukraine will be discussed, as well as the use of exceptional proceeds related to the freezing of Russian Central Bank assets in the accounts of clearing companies. The Commission is pushing to take action, but several countries ask to proceed with caution (including Italy, France and Belgium), given that the ECB has repeatedly expressed doubts about the risks of the operation, also for the reputation of the euro as an international reserve currency. It is likely that we will proceed to ask the clearing companies to separate those proceeds in their accounts, so that they can be seized, if necessary, later. The extraordinary European Council is preceded this evening by an informal dinner among the leaders in the Council headquarters, in which the heads of state and government (those present, not very many) will have the opportunity to speak to each other bilaterally. Finally, it seems excluded that there will be any talk of the renewal of the EU summits: Charles Michel’s withdrawal from the candidacy for the European elections “has brought everything down”.