Orban kneels down to save EU money after ‘humiliating night’

With his opposition on two crucial EU dossiers, Hungarian Prime Minister Viktor Orban hoped to pressure other member states to be more lenient than the Commission on freezing European funds to his country.

At the end of November, the Commission proposed to approve the Hungarian Corona Recovery Plan – worth 5.8 billion euros – in principle, but to link the payment of funds to the implementation of a number of “milestones”. In addition, she said €7.5 billion in cohesion funds for Hungary should be frozen until Orban’s government implements a series of 17 commitments to restore the rule of law and tackle corruption. The latter proposal falls under the new rule of law mechanism, which aims to prevent abuses with European funds.

Role reversal

But the Czech Republic decided to put everything in one package and turned the tables. If Orban does not give up his veto power, other member states have threatened not to approve the recovery plan before the end of this year. In this case, most of that 5.8 billion was lost permanently.

In addition, the other 26 member states have developed an alternative loan scheme for Ukraine, using national budgets as collateral. A similar approach has been envisaged for the minimum tax, by approving it at the member state level. This has weakened Orban’s position. He is also in dire need of European money, now that his country’s economy is starting to sag and inflation has soared to 22% in November.

A billion less frozen

Late Monday evening, Hungary got to its knees during a meeting of ambassadors. It approved an $18 billion loan to Ukraine over ten years to cover current expenditures in 2023, with the European budget as guarantor and member states paying the interest. Orban also dropped his veto over the minimum tax for multinational corporations, which had been agreed upon within the Organization for Economic Co-operation and Development.

In exchange, the Hungarian Prime Minister obtained a reduction in the amount of frozen cohesion funds from 7.5 billion to 6.3 billion euros. But neither that money, nor the $5.8 billion from the recovery fund, will be disbursed until Hungary implements 27 “transcendental commitments” to reduce corruption and repair the erosion of the rule of law.

Relief for Michelle

Reverse Policy One diplomat described it as “an insulting night for Orban”. He had to swallow his veto and narrowly obtained a reduction under the rule of law mechanism. And all this to save the recovery plan and calm the markets a bit.

The deal, which will be formally approved tomorrow by 27 countries without unexpected change, is also a relief for Charles Michel, the president of the European Council. There were fears that the European summit would be held hostage for hours on Thursday to discuss the Hungarian problem.