In a bid to unlock EU funds for itself, the Hungarian government vetoed a proposal to provide additional macro-financial assistance to Ukraine during a meeting of EU finance ministers in Brussels on Tuesday, (6 December).
The European Commission is now looking into different ways to provide the €18 billion macro-financial assistance that it had proposed in November this year.
The assistance is intended to support the Ukrainian government’s finances, which are under severe strain as it has to keep going the public infrastructure while fending off the Russian invasion. Moreover, a significantly shrinking economy means that tax revenue does not suffice to finance government expenditures.
Nevertheless, the Hungarian government said during the meeting said it was “not in favour” of the regulation that would have allowed the EU to go ahead with the financial help.
Since the proposal needs unanimity to pass, the financial aid package stays blocked for now.
The Hungarian government has been blocking financial aid for Ukraine as well as an EU directive to implement the global effective minimum corporate tax rate in order to pressure the EU into releasing EU funds for the country.
The EU Commission has repeatedly proposed freezing EU funds for Hungary under the EU’s rule of law mechanism until the Hungarian government implements a series of governance and rule of law reforms.
“Let me be very clear on one thing,” Czech Finance minister Zbynek Stanjura, who chaired the meeting of finance ministers, said to journalists after the meeting: “I see the macro-financial support for Ukraine, Hungary’s national recovery plan, and the [minimum tax] directive as one package.”
During a long breakfast on Tuesday, EU finance ministers also talked about a proposal from the Commission to keep some EU funds for Hungary frozen.
Apparently in a bid to acquiesce somewhat to the demands of the Hungarian government, EU finance ministers asked the Commission to have another look at the developments in Hungary and to update its proposal.
The EU Commission’s Executive Vice-President Valdis Dombrovskis this request saying “the suggested timeline by the presidency is extremely compressed.”
“It’s difficult to provide a quality assessment in a few days’ time, but the Commission will engage constructively and we will do what we can,” he said.
Meanwhile, the Commission is looking for ways to get the macro-financial aid to Ukraine that would not need the approval by the Hungarian government.
“Ukraine is a country at war and it desperately needs our support and we just cannot allow one member state delay and derail this financial support,” Dombrovskis said.
“We must deliver it one way or another, and we will deliver it.”
Already in earlier attempts to get consensus on macro-financial assistance, EU member states had difficulties to agree on a way to do it. Of up to €9 billion proposed in May this year, member states could only agree on €6 billion. The rest has been reshuffled into the €18 billion proposal for next year.
The lack of financial aid is dangerous for the Ukrainian government since it makes the government have to resort to printing money to finance its operations, which can lead to run-away inflation.
