Hungary is blocking EU money for Ukraine, here's what you need to know

Brussels: The European Union’s leaders are meeting in Brussels on Thursday to try to strike a deal with Prime Minister Viktor Orban of Hungary, who is blocking a multibillion-euro fund aimed at securing Ukraine’s financing for the next few years.

Talks are gridlocked and the mood toward Orban is negative, with European leaders, unusually united against one of their peers, fed up with his stance on Ukraine and his anti-EU bluster.

What’s at stake?

A 50 billion-euro ($54 billion) fund to support Ukraine through to the end of 2027.

Ukraine is facing one of is most difficult moments since Russia’s full-scale invasion nearly two years ago, with US aid held up and virtually no progress on the battlefield.

Ukraine urgently needs fresh cash to keep basic services running. The EU aid, to be dispensed in the form of loans and grants over the next four years, would both cover immediate needs and allow Ukraine to plan its long-term budget.

This money is part of auxiliary funds, still under negotiation, to supplement the EU budget and pay for things like emergency responses to natural disasters. If there’s no deal over the funding for Ukraine, the other parts of the budget will also be held up.

There are broader issues at stake. If EU leaders fail to agree on long-term support for Ukraine, it could undermine the bloc’s credibility. And a definitive rupture over Ukraine could be hard to recover from, reinforcing Hungary’s isolation.

Why is Hungary blocking the deal?

Orban has watered down or held up most EU decisions linked to Ukraine, including sanctions against Russia, which require the unanimous backing of all 27 EU countries.

The closest — and perhaps now only — ally of President Vladimir Putin in the EU, Orban says he believes Russia is not a threat to Europe.

Critics say Orban is simply angling to extend his power. The goal, they say, is to use Hungary’s veto as leverage to unfreeze billions of euros in EU funding that has been held up over Hungary’s breaches of EU rules.

Why is the EU-Hungary relationship so bad?

The EU and Hungary have long clashed over policies on the rule of law, corruption and minority rights, but their relationship has hit rock bottom since the outbreak of war in Ukraine two years ago.

The European Commission, which enforces the application of EU rules, believes that Orban’s policies at home have eroded democratic protections, and that he has diverted EU funds to benefit himself and his allies. It has punished Hungary by freezing money the country would normally be getting — and desperately needs — from the EU.

Orban and his officials reject the criticisms and say the EU is trying to impose liberal Western values on Hungary that run counter to his vision of his nation’s conservative Christian identity.

Can the EU change Orban’s mind?

Orban’s EU partners have committed to a robust annual review of how any money given to Ukraine is spent, but they say they won’t grant Hungary its demand for an annual vote.

If it is access to EU frozen funding that Orban is really after, that seems unlikely.

Late last year, the Commission concluded that Hungary had put in place judicial reforms, and unfroze 10 billion euros. But it said it would continue withholding the rest, 20 billion euros, because other issues remained unresolved.

While EU officials said the timing of the decision was coincidental, it came just before EU leaders officially opened talks that could lead to membership in the bloc for Ukraine. Orban had said he would veto such a move, but this time he left the room when the decision was being made, effectively abstaining.

A repeat of this scenario Thursday is highly unlikely. The commission has made clear that it believes Hungary has not made any fresh progress that would warrant releasing more of the frozen funds.

What’s the best-case scenario?

Orban and the EU leaders might still find room for compromise in the details of how the Ukraine fund will be operated. Hungary could, for example be given a financial incentive in the form of a reprieve from the small contributions it makes to the EU budget.

This would allow the EU to offer Ukraine predictable long-term funding. The rupture with Orban would be set aside. And leaders could focus on the victory of getting all EU member states behind Ukraine at a crucial moment.

What if Orban does not get on board?

If the talks break down and no Ukraine fund is announced, EU leaders will be forced to go home and work out what they’ll try next.

One option is to launch a special fund for Ukraine approved by 26 member states, leaving Hungary out.

That is cumbersome and risky, requiring the approval of each government, and in some cases parliamentary votes. And it would prolong uncertainty for Ukraine’s funding and put the division front and center, exactly what Putin wants.

A nuclear option would be for the 26 EU states to launch a fund for Ukraine without Hungary by legally stripping it of its vote. This is a lengthy procedure that has never been used, and would drastically escalate the rift between Orban and the rest of the bloc.

This option seems unlikely, as most EU countries are against it.