The EU Threatens To Cripple Hungary's Economy If Orban Vetoes Aid To Ukraine

World » EU | January 29, 2024, Monday // 10:05
Bulgaria: The EU Threatens To Cripple Hungary's Economy If Orban Vetoes Aid To Ukraine

The EU will sabotage Hungary's economy if Budapest blocks new aid to Ukraine at a summit this week, the Financial Times reports, citing a confidential plan drawn up by Brussels that marks a major escalation in the battle between the Union and its most pro-Russian country. member.

In a document drawn up by EU officials and seen by a financial publication, Brussels outlined a strategy to explicitly target Hungary's economic weaknesses, threaten its currency and cause a collapse in investor confidence in a bid to damage "jobs and economic growth". , if Budapest refuses to lift its veto on aid to Kyiv.

Hungarian Prime Minister Viktor Orban vowed to block the use of the EU budget to provide Ukraine with €50 billion in financial aid at an emergency summit of the union's leaders this Thursday.

If he does not back down, other EU leaders must publicly vow to permanently freeze all EU funding to Budapest with the intention of spooking capital markets, accelerating the devaluation of the Hungarian forint and causing a spike in the cost of servicing Hungary's loans. states in the document cited by the "Financial Times".

"This is Europe saying to Viktor Orban - enough is enough, it's time to respect the common policy. You may have a gun, but we have a bazooka," Mujtaba Rahman, director for Europe at the Eurasia Group consulting company, told the financial publication.

The document from Brussels stated that "in the event of no agreement at the February 1st Summit, other heads of state and government will publicly state this in light of the unconstructive behavior of the Hungarian Prime Minister. They cannot imagine that European funds will be provided to Budapest".

Without this funding, "financial markets and European and international companies may be less interested in investing in Hungary," the document also states. Such a penalty "could quickly trigger a further increase in the cost of financing the public deficit and a decline in the local currency".

The document, drawn up by an EU Council official, lays out Hungary's economic vulnerabilities — including its "very high public deficit", "very high inflation", a weak currency and the EU's highest level of debt service payments as a share of the gross domestic product.

It also noted how "jobs and economic growth depend heavily" on overseas funding, which builds on high levels of EU funding.

Hungarian EU Affairs Minister Janos Boca wrote on Facebook that "Hungary will not give in to blackmail", referring to a Brussels plan reported by the Financial Times.

The minister also said that "this information confirms what the Hungarian government has been saying for a long time: Brussels is using access to EU funds to exert political pressure." Boca also said Hungary would continue to participate "constructively" in the talks, but insisted it would not "give in to blackmail".

According to him, "Hungary does not establish a link between support for Ukraine and access to EU funds and rejects other countries doing so. Hungary participates and will continue to participate constructively in the negotiations."

But in a sign of growing pressure on Budapest to reach a compromise, Boca also said that Budapest sent a new proposal to Brussels on Saturday, specifying that it was now open to using the EU budget for the financial package for Ukraine and even issuing a general debt to finance it if other caveats are added, giving Budapest the chance to change its mind at a later date, the Financial Times reports.

Janos Boca told a financial publication that Budapest wants to "explore the possibility of a more constructive and European solution" and has offered to support the €50 billion plan for Ukraine if it gets an annual veto on payments. Other EU countries have already rejected this proposal because they fear that Orban will try to block it every year and extract new concessions.

A European diplomat quoted by the financial publication noted that there was "no way" Orbán could get a veto on the funding.

A spokesman for the EU Council said they do not comment on leaks, the Financial Times reports.

Three EU diplomats told the financial publication that many countries supported the plan. "The mood has soured. What kind of union do we have if we allow this kind of behavior?" one of them pointed out.

Another noted: "The stakes are high. This is extortion."

The foreign ministers of Ukraine and Hungary, Dmytro Kuleba and Peter Szijártó, will discuss the issue of Budapest's veto of financial aid to Kyiv today in Uzhhorod, western Ukraine.

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Tags: EU, Hungary, Ukraine, veto

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