Brussels Brings Orban to Heel—for Now

BRUSSELS—Since the start of Russia’s war in Ukraine, Brussels has had to walk a fine line with Hungarian Prime Minister Viktor Orban. European Union leaders have sought to hold him accountable for Hungary’s democratic backsliding but also need his support on key EU measures to bolster Ukraine and hamstring Russia’s war effort, from arms deliveries to energy sanctions. 

All year, Orban and Hungary have slow-walked EU attempts to sanction Russian energy exports or have sought exemptions to shield its own economy. Hungary, a NATO member, has also impeded the delivery of defensive arms to Ukraine. Orban’s latest gambit was threatening to block an 18-billion-euro relief package that the EU put together to shore up Ukraine’s finances.

But now, Budapest and Brussels have both had their reckoning. Late Monday, both sides reached a deal under which Hungary would end its block on Ukraine aid and the EU would withhold a little less cash than it previously threatened. It shows that the EU is willing to take concrete measures to punish member states over rule-of-law concerns—but also that Orban has indeed found ways to use his veto power as leverage.

It was a historic move on the EU’s part: This is the first time the bloc has used its ability to withhold funding over rule-of-law concerns. Experts say the decision to freeze part of Hungary’s funding shows that the EU does have tools at its disposal to push back against member states that implement illiberal reforms. 

“This was a watershed moment,” said Daniel Hegedus, a senior fellow at the German Marshall Fund in Berlin who focuses on Central and Eastern Europe. “After 12 years of Orban-pleasing and appeasement … now no one can argue that no appropriate tools are available to protect EU fundamental values and financial interests.”

Orban has long been a thorn in EU leaders’ sides. In the 12 years since Orban returned to power, he has worked to consolidate control and undermine Hungary’s democratic institutions, whether it was overhauling the electoral system, working to eliminate independent media, or defanging the country’s judiciary. Earlier this fall, members of the European Parliament voted to condemn Orban’s illiberal conduct, saying the lack of EU action in Hungary has helped allow the emergence of a “hybrid regime of electoral autocracy.” 

Since the start of Russia’s war in Ukraine, Orban has been a particular problem for the West, a member of both NATO and the EU who seems lab-created to advance Russian interests in both blocs. The Hungarian leader holds leverage on the EU level because certain decisions require unanimity from the 27 member states—including the funding package for Ukraine and the various rounds of sanctions on Russia. Since the start of the war, he has sought to put distance between himself and other EU leaders on Ukraine-related issues, stressing the war’s impact on the Hungarian economy. Ahead of this April’s Hungarian parliamentary elections, Orban billed himself as the upholder of peace and security, refusing to allow other EU countries to send weapons to Ukraine via Hungary. 

This has put EU leaders in a difficult position, balancing a desire to hold Orban accountable on rule-of-law issues with a need to secure his backing on key war-related measures. 

At issue in the latest weekslong spat between Orban and Brussels was more than 13 billion euros in EU funding for Hungary. Some 7.5 billion euros were funds that had been withheld over corruption concerns, and 5.8 billion euros were pandemic recovery funds withheld over democratic backsliding and rule-of-law concerns. Ultimately, EU ambassadors struck a deal that withholds 6.3 billion euros from Hungary, slightly less than the 7.5 billion initially proposed. It also conditionally approved the 5.8 billion euros in pandemic funds, pending Hungary’s implementation of a series of anti-corruption and judicial reforms. In exchange, Hungary agreed to lift its veto on both the Ukraine aid package and a global minimum corporate tax measure.

“EU member states acknowledge the work done by the Hungarian authorities but decided that these remedial measures do not sufficiently address the identified breaches of the rule of law and the risks these entail for the [European] Union budget,” read a statement from EU ambassadors released after negotiations on Monday night. The deal came just a week before a Dec. 19 deadline for EU countries to decide on the fate of Hungary’s aid. 

The headaches caused by Hungary have been sharp and constant. This spring, Budapest held up negotiations over a new round of EU sanctions on Russia until it was able to get an exception for itself to the planned Russian oil embargo. Over the summer, Hungary was the only holdout in an EU plan to cut gas usage by 15 percent. Around the same time, Hungarian Foreign Minister Peter Szijjarto traveled to Moscow to negotiate for more gas supplies with Russian officials.

This fall, Orban has sought to play spoiler again. In November, the European Commission proposed the 18-billion-euro relief package for Ukraine, which would be disbursed throughout 2023 to help cover the country’s immediate needs. As discussions over freezing EU funds heated up last week, Hungarian officials announced that the country would veto the proposal. (Orban later tweeted that reports of a veto were “fake news” and that Hungary was ready to help Ukraine financially—but “on a bilateral basis.”)

Whether Orban’s strategy will shift going forward—and whether the country actually enacts the necessary anti-corruption and rule-of-law reforms to access the rest of its EU funds—remains an open question. The Hungarian leader has clearly calculated that serving as a roadblock on Ukraine-related issues can help get him concessions in other ways, but at a time when record inflation is hitting the Hungarian economy, Orban also can’t afford to lose more EU money.

“It’s a moment of reflection: They obviously have to redraft their strategies,” Hegedus said. “They’ve practically been holding political battles on three fronts: the rule-of-law front, the corruption front, and the geopolitical front. And this was a political overextension.”