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27th Sep 2023

Hungary challenges new EU loan plan for Ukraine

  • Commissioner Johannes Hahn (r) joked to reporters: "Hungary is the author of this bestseller 'How to make Friends'." (Photo: European Union, 2022)
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EU plans to provide Ukraine with €18bn in loans is already being challenged by Hungary.

On Wednesday (9 November),the European Commission told reporters it hopes Kyiv receives its first instalment of some €1.5bn under a proposal that, in part, requires unanimity among member states.

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"Hungary is the author of this bestseller 'How to Make Friends'," EU budget commissioner Johannes Hahn joked to reporters in Brussels.

"I'm sure that in the second edition we will find the solution," he said, following the presentation of the Ukraine loan alongside EU trade commissioner Valdis Dombrovskis.

The package proposed on Wednesday includes three legislative texts, two of them requiring a qualified majority in the Council, representing member states, while the third, a regulation, requires unanimity among EU states.

Hungary remains upset that the EU still has not paid Budapest some €7bn in Covid-pandemic recovery funds, given wider concerns over corruption.

On Tuesday, Hungary's finance minister Mihály Varga appeared to directly link the Covid recovery funds issue to Budapest's refusal to support the European Commission's loan for Ukraine.

He also said Hungary had accepted over one million refugees from Ukraine. According to the UN refugee agency (UNHCR), around 31,000 Ukrainians have protection status in Hungary.

Hungary's foreign minister Péter Szijjártó made similar comments, noting that Budapest also provides bilateral financial support to Ukraine.

"We will certainly not support any kind of joint EU borrowing in this field," he said.

The EU commission wants to borrow on capital markets using the diversified funding strategy to raise the €18bn. Ukraine would start paying back the loan over a maximum 35 years, starting in 2033.

Meanwhile, EU states would cover the loan's interest rates costs of around €630m year, spread across member states. Of that, Hungary would have to contribute €6m a year.

"We are talking about €6m a year as of 2024, so I'm confident that by the end of the day, like always we can find a positive solution," said Hahn, noting his home country of Austria would have to pay €8m.

"Time is of essence, what we need to disperse the first money already in January," he said.

Dombrovskis says the deal is needed to provide Ukraine with a stable and predictable financial flow. "Clearly this will require intensive work with member states, including Hungary," he said.

The Czech EU presidency is hoping for a breakthrough decision on 6 December.

EU Commission tightlipped on Hungary recovery-plan decision

Among the criteria needed for EU pandemic recovery funds is for member states to propose arrangements "expected to prevent, detect and correct corruption, fraud, and conflicts of interests when using the funds provided."

EU Commission to keep Hungary's EU funds in limbo

The EU executive, on the other hand, is expected to approve Hungary's recovery plan, worth €5.8bn, but only would disburse actual money if Hungary delivers on some 27 key reforms.

EU countries struggle to crack Hungary's vetos

Hungary will be in the spotlight on Tuesday as EU governments struggle over suspending EU funds to prime minister Viktor Orbán's government — despite rule of law concerns — and unlock key EU policies which Budapest has been blocking.

EU farm chief backs extending Ukraine grain ban and subsidies

EU agriculture commissioner Janusz Wojciechowski has backed extending the temporary ban on Ukrainian grain imports in five frontline countries until the end of 2023 — and proposed providing subsidies for Ukrainian grain exporters.

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