EU ambassadors reached a provisional agreement on the €50 billion ‘Ukraine Facility’ on Wednesday evening, January 10th. While the agreement does allow the European Council—which brings together government ministers from all member states—to start trilogue negotiations with the Parliament, the most important budgetary details will need to be hammered out during the bloc’s upcoming special Summit on February 1st, the Council’s press release notes. Hungary seems to be on board, but negotiations continue in the background.
The so-called Ukraine Facility—an instrument comprising a maximum of €17 billion worth of grants and €33 billion worth of loans set to be disbursed to Ukraine over the next four years—was initially blocked by Hungary during the EU leaders’ December summit.
During the summit, Budapest objected to raising the EU budget in order to finance the instrument without unblocking Hungary’s €20 billion worth of EU funds that the Commission froze years ago for alleged rule-of-law concerns.
Earlier this week, several media outlets reported that Hungary was ready to compromise if the four-year disbursement of the funds was tied to an annual review of Ukraine’s reform progress and subsequent unilateral approvals each time. This would theoretically give Budapest further chances to assert its veto and pressure Brussels into releasing the frozen funds.
However, the Hungarian government replied by saying it continues to oppose using a budget hike to finance further assistance to Ukraine and instead welcomes the European Commission’s ‘Plan B.’ This plan bases the instrument on an extra-budgetary scheme involving loans and guarantees from only those member states who wish to participate.
Wednesday’s provisional agreement, however, shows that Hungary may have softened its stance at the last minute. The ambassadors’ adopted proposal shows the Council entering into trialogue negotiations based on the original plan, involving the budget hike and shared financial responsibility by all member states.
Furthermore—despite the idea being raised again by the Hungarian ambassador on Wednesday—the 56-page document does not include any references to the annual reviews proposed by Hungary. This means further chances to veto the process are out of the picture for now, although they could still be included in the final text at the February summit.
On the other hand, Politico reports, Budapest came with another request, namely the two-year extension of the period for using the pandemic recovery funds (NextGenEU) beyond the current deadline of 2026.
Since Hungary has still not been allowed to access its share of the funds, it’s crucial that it gains more time trying to unblock it and spend it. While certain member states scoffed at the idea, others are expected to join Budapest in this particular effort because they have themselves been unable to spend significant portions of their recovery funds.
However, this question—just like the fine print of the Ukraine Facility—will not be decided until next month’s Council Summit.
The press release accompanying Wednesday’s partial agreement makes it clear that it “does not include budget-related issues, in particular the overall size of the instrument and the share of grants and loans, which will depend on the final outcome of the horizontal negotiations” with the other EU institutions.
Essentially, this means that neither the €50 billion figure, nor its share covered by budgetary means is set in stone yet, and there’s still time for Hungary and other member states to advocate for their interests, including for an annual review of how Ukraine is spending the funds.
To be fair, there would be no problem if any other country—especially the so-called ‘frugal’ member states of North Western Europe—proposed this review, and the media would likely regard it as just fiscal common sense when dealing with massive amounts going to a notoriously corrupt country like Ukraine.
But since it’s Hungary behind it, it’s portrayed as further attempts at ‘blackmail,’ even though the Council’s unanimity principle—requiring all member states to be in agreement on policy areas considered particularly sensitive—was conceived to be the ultimate safeguard of democratic decision-making in the EU.
Regardless, the Ukraine Facility is one step closer to becoming a reality. The details however can still change until the very last minute.
