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EC, Hungary and Ukraine allManeuver on Funding, Accession

Ukraine Crisis

Image by Yanosh Nemesh / Shutterstock.com

The European Commission is reportedly preparing to release EUR 13 billion in frozen funds to Hungary to solicit further support for Ukraine, both in securing continued funding during the war and in launching talks for the country’s accession to the EU.

In December, EU member states are scheduled to decide whether to allow Ukraine to begin accession negotiations, which would require unanimous agreement from all 27 countries. Prime Minister Viktor Orbán told Kossuth Rádió as recently as Sep. 29 that “very difficult questions” still needed to be answered before the EU could even start membership talks, such as the issue of Ukraine’s treatment of its ethnic Hungarian minority population.

The bloc also hopes to bolster its financial support for Ukraine, which is expected to run out by December, with an additional EUR 50 bln. Hungary has suggested that halving that amount to EUR 25 bln would be sufficient for Ukraine at this stage, with an additional EUR 25 bln coming after an evaluation halfway through the 2024-2027 disbursement period.

To facilitate Hungary’s cooperation in both these endeavors, senior EU officials told the Financial Times that it was preparing to unlock EUR 13 bln of funding that has been withheld over rule-of-law and corruption concerns. “

“I can’t imagine Hungary agreeing without there first being a solution to the blocked funds,” said one EU official. A second confirmed a connection between releasing funds to Hungary and EU plans requiring unanimity, namely in the enlargement and budget talks, while a third confirmed the EUR 13 bln figure.

December Freeze

In December last year, the EU froze EUR 22 bln in cohesion funds, intended to narrow the investment gap and improve the infrastructure of less developed member states, allotted to Hungary, having determined that the Orbán’s government was failing to comply with regulations protecting human rights and the rule of law.

Following the report from the Financial Times, Minister of Regional Development Tibor Navracsics told journalists that he believed Hungary would reach an agreement with the EC to access the country’s EU funding by the end of the year. He said the latest press report “underpinned an optimism” he had held during the negotiations for the financing over the past year and a half. According to Navracsics, the government had not received official communication about the situation. He added that it had become a “tradition” to learn of the EC’s position from the press.

However, in yet another twist, European Commission VP Vera Jourova categorically rejected the press reports an agreement was in the pipeline. At a press conference in Strasbourg on Oct. 3, she said the suggestion was “baseless speculation.”

Meanwhile, Ukraine’s National Agency on Corruption Prevention (NACP) removed OTP Bank from its list of “war sponsors,” according to the agency’s press service.

“During the discussions that lasted for the last few days 24/7 with the participation of the EU External Action Service, OTP Bank made a number of commitments regarding its future plans for the Russian market,” the press release stated.

This article was first published in the Budapest Business Journal print issue of October 6, 2023.

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