Financial Times recently reported that EU leaders would clamp down on Hungary’s economy if Viktor Orbán uses his veto at the European Council summit on 1 February to block €50 billion in financial aid to Ukraine.

According to the document reviewed by the British business paper, Brussels has outlined a contingency strategy that would specifically target weaknesses in the Hungarian economy, pose a threat to the stability of the Hungarian forint, and trigger a collapse in investor confidence. The document also states that if no agreement is reached at the EU summit on 1 February, EU leaders will clearly express that ‘in the light of the unconstructive behaviour of the Hungarian PM…they cannot imagine that EU funds would be provided to Budapest’.

On behalf of the Hungarian government, EU Affairs Minister János Bóka was the first to react to the alleged EU plan, emphasizing that Hungary will not yield to any form of blackmail.

In an interview with the French newspaper Le Point, Viktor Orbán stated that

the document was akin to a guide to blackmail.

‘If Financial Times publishes a document describing in detail the scenario of a financial blockade against Hungary and blackmail against us, we can be sure that such a scenario exists,’ he said. Orbán added that while Hungary disagrees with the EU supporting Ukraine with €50 billion over four years, it is prepared to participate in finding a solution alongside other member states, on the condition that they guarantee annual renegotiation of the financing.

Disregarding the Law

Whether the plan presented by Financial Times actually exists is not yet known. A senior EU official told Reuters on Monday that the leaked European Council document did not outline any specific plan targeting Hungary.

What is certain, however, is that what Financial Times describes faces strong legal obstacles. Speaking to Euractiv, Zsuzsanna Végh, an associate researcher at the European Council on Foreign Relations (ECFR), emphasized that EU funds cannot be suspended merely based on the European Council’s decision. ‘That’s not how it works. There has to be some legal ground... Vetoing an EU position is not a legal ground to suspend funding.’

Zoltán Lomnici Jr., a constitutional lawyer and consultant at Századvég, told Hungarian Conservative that the withholding of funds rightfully due to Hungary has already fallen short of meeting the inherent criterion of legal certainty as a rule of law.

Therefore, it is reasonable to expect that Brussels will take steps to achieve its political goals that are not compatible with the spirit of the Treaties.

Zoltán Lomnici recalled that the European Commission is still holding around €20 billion frozen for various reasons. Most of it is subject to thematic and professional conditions. The fulfilment of these conditions, as long as Brussels adheres to its own rules, cannot be contingent on ideological or non-political issues and should not be susceptible to political blackmail. However, there is €8.9 billion for which Brussels can still resort to political pressure, as that is the primary concern. ‘Nevertheless, all this runs counter to the principles of democracy, the fundamental treaties, and undermines public confidence in the Brussels institutions, which are already not very stable,’ he underlined.

Sabotaging the Economy

‘...that it would be Armageddon in Hungary. This is what the Financial Times document says,’ Viktor Orbán stated in the aforementioned interview. Opinions are divided on the possible economic impact of the alleged plan. Economist Philip Pilkington, a visiting scholar at the Hungarian Institute of International Affairs, dismisses the article as a farce, citing numerous technical errors. Pilkington dedicated a lengthy post to the article on the social media platform X, concluding that it is not an EU plan but rather an expression of the writer’s desires. ‘Perhaps the Brussels crowd can persuade the financial press to weaponize their headlines against Hungary—a tactic that seems increasingly common at certain outlets, which are losing credibility in the process—but it likely won’t make a difference.’

According to Zoltán Lomnici, the alleged plan would aim to weaken domestic financial markets and the real economy ‘through financial attacks, leading to a very high public deficit, very high inflation, ultimately a weak forint exchange rate, and the highest debt service cost ratio in the EU relative to GDP.’ These developments would entail rising costs for many firms, which could pass on cost increases to customers. Externally induced rising inflation would lead to increasing yield expectations and higher borrowing rates on new loans, worsening debt ratios, falling living standards, social tensions, and so on. ‘With this move, which lacks empathy and goodwill, Brussels would put Hungarian entrepreneurs and the Hungarian people in general in a difficult situation,’ the expert pointed out.

Lomnici stated that if Brussels succeeded in weakening the Hungarian economy, it could lead to opening an excessive deficit procedure against Hungary. However, he pointed out that since Hungary is an EU member state, such actions also weaken the EU itself. ‘The fact that Brussels now wants to use for negative purposes what it used to employ positively to avoid crises within the EU

shows the moral degradation of the Brussels leadership

and the complete abandonment of its original core values.’

No ‘Nuclear Option’ Yet

The dispute between Hungary and other EU member states over support for Ukraine has recently become increasingly intertwined with the Article 7 procedure against Hungary, initiated in 2018. The left-wing majority in the European Parliament is urging the Commission to advance the procedure to the next stage, which would effectively pose a threat to Hungary’s voting rights.

However, almost simultaneously with the alleged EU plan being leaked, Justice Commissioner Didier Reynders clarified that the Commission currently has no intention to advance the Article 7 procedure any further. Reynders mentioned that the reason for this is the lack of consensus in the European Council. The Commission’s proposal must be adopted unanimously by the member states, with the country concerned being excluded. Subsequently, the Council, by qualified majority, decides whether to suspend certain rights of the country in question, such as taking away its voting rights.

So, it is clear that Brussels is in chaos and has not yet decided which instrument of political blackmail to use against Hungary.

All this while the Hungarian government has already put forth a compromise proposal: it has abandoned its own original idea for a separate ‘Ukraine fund’ outside the EU budget and has expressed a willingness to support a €50 billion plan within the budget, on the condition that Hungary is granted a yearly veto on payments to Ukraine.

‘...it seems difficult today to achieve a win-win situation on the issue, which would lead to a mutually beneficial outcome for the parties. There is a risk that the Ukraine dispute under negotiation will instead become a lose-lose scenario. The conflict resolution is about putting not only Hungary but the whole EU community in a difficult position, both economically and politically. This only underlines the serious stakes of the EP elections in June,’ Zoltán Lomnici concluded.

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