Brussels is on Thursday set to be the scene of a momentous summit where European Union leaders will plead with Viktor Orbán to lift his intractable veto on a €50-billion special fund for Ukraine.
The Hungarian premier is single-handedly blocking the release of fresh money for Kyiv, despite repeated pleas from the war-torn nation, which needs $37.3 billion, or €34.45 billion, in Western donations to keep its economy running in 2024 and sustain essential services such as healthcare, education, social protection and pensions.
The sense of urgency ratcheted up in mid-December when Orbán made good on his threat and blocked the proposed €50-billion fund leaving the European Commission without any more cash to wire. The legislative impasse in Washington has only compounded the dramatic situation, making Thursday’s summit a make-or-break date in which leaders have no choice but to break the impasse somehow.
Approving the Ukraine Facility, which is tied to a wider review of the bloc’s common multi-year budget, requires a unanimous endorsement, a voting rule that Orbán has masterfully exploited in the past to derail collective decisions and extract concessions.
“The level of nervousness is quite high. But we need to stay calm and focused,” said a senior EU official, describing the political atmosphere in anticipation of the occasion.
“We’re doomed to unanimity.”
Officials in Brussels have spent the past weeks scrambling to understand what exactly Hungary wants in exchange for lifting the veto. However, according to diplomats who spoke on condition of anonymity due to the ongoing negotiations, the signals they so far received from Budapest have been irritating at best and unpalatable at worst.
Under the proposal on the table, the Commission will oversee the disbursements of the Facility, averaging €12.5 billion in a mix and grants every year until 2027, and report back to the Council and the European Parliament. Kyiv, in turn, is expected to meet a series of conditions to gradually access the funds.
Hungary demands an annual review of the entire facility, an idea that diplomats interpret as a poorly-veiled attempt to ensure that Orbán would have ample opportunities to wield his veto. Additionally, the country has asked for changes to the COVID-19 recovery funds, which it has been unable to unlock due to rule-of-law deficiencies.
Budapest has also expressed opposition to paying for the interest rates that stem from the Ukraine Facility and the COVID-19 recovery funds, both of which are partially financed by the joint issuance of debt and will need to be progressively repaid.
On top of that, Orbán and his deputies have become increasingly vocal about the release of frozen cohesion funds. Although the Commission controversially unsealed €10.2 billion right before the December summit, about €11.7 billion remains held up. Orbán frequently describes the long-running dispute as financial “blackmail.”
The amalgam of unrelated requests suggests there might be space, albeit limited, to find a compromise at the end of Thursday’s meeting. As a manageable alternative to the annual review, some countries have floated an “annual debate” about the Facility’s implementation, rather than its core principles and financial figures. The high-level discussion will not be subject to a vote and therefore shielded from veto.
“We’ll have to wait until the start of the meeting tomorrow and hear from Viktor Orbán what his room for manoeuvre is,” said a senior diplomat.
“Nobody is willing to introduce new vetoes,” the diplomat went on. “One way or the other, we need to get money to Ukraine.”
If Orbán digs his heels in and refuses to budge, leaders could be forced to opt for a makeshift solution backed only by 26 member states. Building a new financial structure from scratch, instead of using the existing EU budget, will be energy-consuming and entail parliamentary procedures at a national level.
More worryingly, such a Plan B would mark the death of the political unity built in the wake of Vladimir Putin’s decision to launch the all-out invasion. The unity, which Orbán has repeatedly put to the test, has been instrumental in approving 12 rounds of sanctions against the Kremlin and ensuring continued financial and military support for Ukraine.
“This will be a defining moment,” said a senior diplomat from another country. If leaders fail to reach an agreement at 27, “someone else would celebrate.”
The stakes have become so high – and the odds so precarious – that some officials have revived the long-dormant conversation about Article 7, the “nuclear option” under the EU treaties to rein in countries who commit serious breaches of the bloc’s fundamental values. Under the article’s very last step, which has never been triggered, the accused state can be stripped of voting rights.
But moving Article 7 forward requires unanimity and it’s unclear if all the 26 will be on board with the idea of punishing Hungary in such a radical way. Slovakia, under Robert Fico’s rule, is the first guess in Brussels when it comes to potential obstacles.
Leaders might prefer to be more practical and go down faster avenues. The obstruction of the Ukraine Facility has hindered the review of the bloc’s common budget. In the proposal that was nearly approved in December, member states agreed to earmark €9.6 billion for migration, €1.5 billion for cutting-edge technologies, €1.5 billion for emergency assistance and €2 billion for a flexibility instrument to react to unforeseen crises.
From the very beginning, Brussels linked the Facility to the budget top-ups and made the two inseparable from each other. Speculation about a “decoupling” strategy has been simmering for months and could turn into action if Orbán insists on his veto.
Besides the Ukraine aid and the common budget, leaders will discuss ammunition deliveries to Kyiv, the Israel-Hamas war, the crisis in the Red Sea, the controversy surrounding UNRWA and the growing farmers’ protests.