EU plans to sabotage Hungary’s economy if Orbán vetoes Ukraine aid

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Good morning. We start the week with an exclusive story on a significant escalation in the EU’s ongoing diplomatic battle with its most pro-Russia member state, Hungary.

In a document drawn up by EU officials and seen by the Financial Times, Brussels has outlined a strategy to explicitly target Hungary’s economic weaknesses, imperil its currency and drive a collapse in investor confidence in a bid to hurt “jobs and growth” if Budapest refuses to lift its veto against fresh aid to Ukraine.

Viktor Orbán, Hungary’s premier, has vowed to block the use of the EU budget to provide €50bn in financial aid to Kyiv at an emergency summit of leaders on Thursday. If he does not back down, other EU leaders should publicly vow to permanently shut off all EU funding to Budapest with the intention of spooking the markets, precipitating a run on the country’s forint currency and a surge in the cost of its borrowing, Brussels stated in the document.

“This is Europe telling Viktor Orbán ‘enough is enough; it’s time to get in line. You may have a pistol, but we have the bazooka’,” said Mujtaba Rahman, Europe director at Eurasia Group, a consultancy. Here’s more from the EU’s confidential plan to sabotage Hungary’s economy.

We have a packed agenda today, including a busy day in Westminster:

• UK politics: Rishi Sunak is set to announce a ban on disposable vapes despite criticism from some Conservatives of furthering a “nanny state”. As party infighting continues, business secretary Kemi Badenoch backed the prime minister yesterday and denied that her supporters were involved in a plot against him.

• Rwanda plan: The House of Lords will hold a second reading of Sunak’s bill after asking the government for evidence that the African country is safe to send asylum seekers. For the inside track on British politics and policy, sign up for our Inside Politics newsletter by Stephen Bush.

• Companies: Philips and Ryanair report results after the Irish airline’s boss criticised Boeing over quality control issues.

• British Virgin Islands: The trial of the territory’s former premier Andrew Fahie begins in a Miami court on charges of drug smuggling, money laundering and racketeering.

Join us on tomorrow at the Sofitel Brussels Europe or online to discuss a collaborative approach to AI implementation and regulations with industry leaders and experts. Sign up here.

Five more top stories

1. Three US soldiers have been killed in a drone attack by “radical Iran-backed militant groups” on a military base in north-eastern Jordan, the White House said yesterday. The deaths mark the first time US troops have been killed in an attack in the Middle East since the Israel-Hamas war started. President Joe Biden said the US would “hold all those responsible to account at a time and in a manner of our choosing”.

• US-China talks: US national security adviser Jake Sullivan has urged Beijing to help rein in Iran-backed Houthi attacks in the Red Sea during a back-channel meeting with Chinese foreign minister Wang Yi.

• Israel-Hamas war: UN secretary-general António Guterres appealed to world leaders to continue funding the agency that aids Palestinian refugees, after several countries suspended their support following allegations that staff had taken part in Hamas’s October 7 attacks in Israel.

2. A Hong Kong court has ordered China Evergrande to be wound up after it was unable to come up with a restructuring plan that would satisfy international creditors, despite months of talks. Trading was halted in Hong Kong-listed shares of the world’s most indebted property developer and two of its subsidiaries after the ruling. Here’s more on the uncertain next phase for the group.

3. Exclusive: EY has started monitoring UK employees’ office attendance, with anonymised “turnstile access” data being circulated at senior levels of the firm as some of its staff flout its hybrid working guidelines. A partner at the Big Four firm said that at least half of some teams were failing to meet its policy of being in the office at least two days a week. Simon Foy and Michael O’Dwyer have more details from London.

4. A London-based activist investor is pressing BP to ditch its clean energy pledges, including cuts to its oil and gas output. Hedge fund Bluebell Capital Partners, which previously took on Danone and Glencore, wrote to BP chair Helge Lund in October shortly after acquiring a small stake in the London-listed energy major. Here are more details from the letter seen by the FT.

• EU green push: In an interview with the FT, the bloc’s climate chief hit back at a “false narrative” that action against global warming was undermining the competitiveness of European businesses.

5. German rightwing populists suffered an unexpected defeat in a widely watched regional election yesterday evening. Polls earlier had indicated a victory for the Alternative for Germany party amid growing support for anti-immigration policies. The result follows a fortnight of nationwide protests by hundreds of thousands of Germans against the AfD. Here’s why they lost.

• Finnish elections: Former prime minister Alexander Stubb will face Pekka Haavisto, the foreign minister who took the Nordic country into Nato, in a run-off election to decide who becomes president.

News in-depth

Food industry bodies in Europe and the UK are warning of impending supply chain disruption as Britain introduces new border bureaucracy on EU food and drink imports for the first time since Brexit. The introduction of complex paperwork to certify all EU products of plant and animal origin entering the UK from Wednesday risks fouling up the supply of a number of products. Here are the goods that could be affected.

We’re also reading . . . 

• MBAs: The traditional elite course has “passed its peak” as fees and new UK rules on visas hit demand for longer programmes, London Business School’s vice-dean told the FT.

• Hinkley Point C: EDF’s woes over its nuclear power plant in England are piling pressure on the French operator already facing financial issues at home.

• Japanese chips: Tokyo’s $6.4bn swoop for semiconductor materials supplier JSR has rekindled memories of heavy state intervention and cast doubt on corporate reforms.

• Global fertility: As fertility rates plummet across the world, Finnish demographer Anna Rotkirch tells the FT’s Henry Mance why a societal rethink on having children is needed.

Chart of the day

The Bank of England is likely to acknowledge this week that it is seeing unexpectedly rapid progress in getting inflation down, analysts said, but the central bank is not expected to begin cutting interest rates yet. It is widely anticipated to hold rates at 5.25 per cent for a fourth straight month at its first meeting of the year this Thursday.

In his latest Central Banks newsletter, Chris Giles forecasts rate-setters’ decisions in the months to come. Premium subscribers can sign up here to get the next edition tomorrow, or upgrade your subscription here.

Take a break from the news

The haze of jet lag from a 23-hour flight to London from Australia made the FT’s Pilita Clark wonder how long researchers had been studying the tedious scourge, and whether they were any closer to a decent solution. The answers were not quite what she expected.

Additional contributions from Benjamin Wilhelm