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EU could hit Hungary's economy if it does not support aid package for Ukraine - FT

EU could hit Hungary's economy if it does not support aid package for Ukraine - FT Photo: Prime Minister of Hungary Viktor Orbán (GettyImages)

The European Union has prepared a plan for economic sanctions against Hungary if it does not agree to provide assistance to Ukraine. The aim is to inflict damage on the economy of Hungary and compel it to lift the veto, reports Financial Times.

The EU has warned Hungary that if it does not lift the veto on assistance to Ukraine at the summit on February 1, other EU countries will publicly declare that they will not provide financial aid to Hungary.

This could lead to investors being less interested in investing money in Hungary, resulting in a depreciation of the Hungarian forint.

As a result, this could lead to economic problems in Hungary, such as job losses and a slowdown in economic growth. Under pressure from the EU, Hungary has agreed to a compromise regarding assistance to Ukraine.

The European Union is concerned about the economic vulnerability of Hungary. The Hungarian economy is characterized by a high state deficit, high inflation, a weak currency, and a high level of debt servicing payments. Additionally, the Hungarian economy is heavily reliant on foreign financing, particularly from the EU.

Hungarian Minister for EU Affairs János Boká stated that Hungary is willing to support the €50 billion aid plan for Ukraine but requires an annual veto right on disbursements.

Other EU countries rejected this proposal, fearing that Hungarian Prime Minister Viktor Orbán might use it to block payments annually and seek further concessions. However, one diplomat mentioned that Orbán does not have the ability to veto funding.

Some EU countries considered the possibility of invoking Article 7 of the Treaty on the European Union, which allows the EU to suspend a member state's voting rights or block its funding. However, other countries dismissed this idea since it requires unanimous support, and many nations are unwilling to impose such serious sanctions against Hungary.

Boká emphasized the importance of maintaining EU unity. He stressed that Hungary is willing to compromise but only if it does not touch upon its vital interests.

If no compromise is reached, Hungary will prefer its initial proposal for a separate fund for Ukraine outside the EU budget.

Hungary's veto on aid to Ukraine

In December 2023, Viktor Orbán laid out a condition for supporting the new aid package for Ukraine from the European Union. To secure Hungary's approval, the organization needed to release all funds frozen for Hungary.

The European Union was unable to approve the allocation of €50 billion for Ukraine, as Hungarian Prime Minister Viktor Orbán vetoed the decision.