EU leaders brace for showdown with Hungary over Ukraine aid

While EU leaders will on Thursday (1 February) seek to seal a deal with Hungary’s Prime Minister Viktor Orbán to offer predictable long-term financing to Ukraine, they are also ready to go it alone.

EU officials have been trying to thrash out a compromise with Hungary and get an agreement on the four-year €50 billion financial aid package for Ukraine as part of a broader overhaul of the bloc’s budget.

The make-or-break summit in Brussels follows weeks of uncertainty after Orbán prevented a decision at a summit in December.

The plan is to help cover Ukraine’s 2024-2027 needs with €33 billion in loans and €17 billion in grants, money from the EU budget to give Kyiv more predictable funding as it fights off Russia’s invasion.

Ukraine is expected to run out of cash to run normal government functions in March.

But to use the EU budget, all EU27 member states must agree.

Hungary has voiced demands to be able to veto the disbursements every year – a step that the remaining EU26 have rejected.

In an olive branch towards Orbán, EU leaders are now willing to suggest holding an annual debate on how Ukraine spends EU aid without giving Hungary the right to veto the money.

“The European Council will hold a debate each year on the implementation of the facility to guide the EU approach towards the situation stemming from Russia’s war of aggression against Ukraine,” the draft summit conclusions, seen by Euractiv, said.

EU floats Hungary compromise before decisive Ukraine aid summit

EU leaders meeting in Brussels on Thursday (1 February) are likely to propose holding an annual debate on a planned €50 billion Ukraine aid package, but without the possibility of a yearly veto, in a bid to overcome opposition from Hungary, according to draft summit conclusions.

With EU leaders descending on Brussels on Wednesday night, whether Orbán would agree to such a deal remained unclear.

Hungary’s ambassador to the EU told his counterparts at a preparatory meeting on Wednesday that Budapest still wanted veto power and an extension of the bloc’s recovery fund scheme, EU diplomats confirmed.

The Hungarian leader struck a combative note as he arrived in Brussels on Wednesday evening, posting a photo of himself with the caption “We Saddle Up!”

Last ditch efforts

Some EU leaders had met informally for dinner on the eve of Thursday’s talks, to coordinate their positions.

While some EU leaders present advocated for incentives for Orbán, others favoured increasing threats, including the use of the EU’s Article 7, which could ultimately strip Hungary of its voting rights, people familiar with the discussions said.

Just before the actual summit talks kicked off, a small breakfast-format meeting was held with German Chancellor Olaf Scholz, French President Emmanuel Macron, Italian Prime Minister Giorgia Meloni and EU chiefs Ursula von der Leyen and Charles Michel.

As the talks were underway, Orbán published a picture and called them a “casual morning conversation”.

The urgency comes as Thursday’s summit is the last opportunity to reach a deal before abandoning the EU budget as a way to fund Ukraine and return to the more complex, costly and less predictable financing used previously.

EU26 or EU27?

There is broad agreement, that if EU leaders face deadlock with Orbán, they have pledged to move forward with EU26 to keep aid flowing for Ukraine’s government to keep paying salaries and services.

Such an option would be more expensive, complex, and more politically challenging, but still possible, using the same method the EU employed to pay out €18 billion to Kyiv in 2023, EU diplomats said.

The option would also take more time to implement, with the need to set up two separate intergovernmental schemes to allow the bloc to transfer grants and loans to Ukraine for the rest of the period.

Speaking on arrival at the summit, German Chancellor Olaf Scholz said the goal should be a unanimous agreement on maintaining the aid.

“We need an agreement at 27,” Scholz told reporters. “We shouldn’t look out for workarounds.”

Dutch Prime Minister Mark Rutte struck an upbeat tone, saying he was “cautiously optimistic” that a deal could be found if Hungary was willing to compromise.

“One way or another, we will find some solution, with or without Orbán, to support Ukraine,” Poland’s Prime Minister Donald Tusk said ahead of the talks.

“Patience is really running out,” one EU diplomat quipped, echoing those from many other EU member states that are fed up with the Hungarian blockage.

Other EU diplomats have warned that independent of the outcome of Thursday’s summit, the frustration that has built up could impact relations inside the bloc permanently.

“Independent whether we reach a deal with or without Hungary, we will have to think about our common way forward –  because it’s becoming less and less of a Union,” a second EU diplomat said.

Speaking to reporters in Brussels on Wednesday evening, Estonia’s Prime Minister Kaja Kallas summed up the mood ahead of the talks, saying: “There’s definitely geopolitical pressure (…) Is Europe able to deliver on the promises given?”

A third diplomat said that “everything is unpredictable” when it comes to this EU summit.

“We do not know what Orbán wants (…) some we wonder if he really wants something or he just aims to buy time, hoping the political balances will change after the June EU elections and next November in the US”, they said.

The stability of the predictable financing to Kyiv has gained importance when financial assistance from the United States, Ukraine’s largest aid provider, is uncertain due to infighting in the US Congress.

What leverage?

But facing down Orbán, a veteran of numerous summit standoffs with Brussels, will not be easy, with EU diplomats expecting the summit to last late into the night on Thursday.

A major leverage for Brussels is around €20 billion in frozen EU funds that it refuses to give Budapest over rule of law shortcomings.

In December, Orbán allowed through a decision to open membership talks with Kyiv a day after getting a separate €10 billion released from Brussels.

While Brussels insist the two issues are not linked, EU officials and diplomats behind closed doors voice strong suspicions that he is playing the same game of chicken now to try to get more of those funds.

“It’s not about Ukraine, but Orbán is using this opportunity to blackmail the institutions of the EU and other member states,” a senior European diplomat said.

Mounting frustration at Hungary’s role as a spoiler has seen calls grow for other leaders to unleash the EU’s Article 7 and strip Budapest of its voting rights – a “nuclear option” that would require unanimity from all other 26 leaders.

EU diplomats say only a few would be willing to go down that road for now.

“We don’t have a problem with so-called Ukraine fatigue for sure, we have Orban fatigue now in Brussels,” Tusk said.

“It’s for Viktor Orban to decide if he is a part of our community,” he added.

Military aid, too

While the focus will be Ukraine’s financial aid, EU leaders will also discuss the future of EU military support for Ukraine.

Scholz, whose country is the largest European arms donor to Ukraine, has called for others to lay out their military support and do more to help Kyiv.

“We will do everything to ensure that the joint contribution from Europe is so huge that Ukraine can build on it and that Putin would not be able to count on our support waning at some point,” Scholz told the German Bundestag on Wednesday before heading to Brussels.

“Many members have sent their input and I can say that at least it’s going to be €21 billion budgeted for 2024,” EU’s chief diplomat Borrell said on Wednesday, confirming bloc military aid to Ukraine has so far amounted to €28 billion since the war started.

But the EU also acknowledged that the bloc will fall short of the promised one million artillery rounds it had pledged for Ukraine by March, as Brussels urged EU member states to step up weapons deliveries to Kyiv.

[Edited by Alice Taylor]

Read more with Euractiv

Hungary's ties to Russia make Europeans 'increasingly uncomfortable'

Over the past two years, Budapest's ties with Russia have become the 'elephant in the room'.