Europe agrees to make concessions for the sake of multibillion-dollar aid to Ukraine. What are the EU authorities ready to do?

The European Commission agrees to make concessions and accept some of Hungary’s demands in order to overcome its veto and achieve the allocation of a financial aid package of 50 billion euros to Ukraine. As the Financial Times (FT) has learned, the EC has expressed its readiness to conduct an annual audit of aid to Kiev and introduce an “emergency brake” clause, according to which any participating country can express its concerns about the financing of Ukraine and bring this topic up for discussion at the summit EU.

In addition, to convince Budapest to abandon the veto, the European Commission could give it the right to suspend support for Ukraine in 2025, when it will assess whether the republic needs the money and whether it has met EU requirements to receive it.

Asked whether this would be enough to get Hungarian Prime Minister Viktor Orban to agree, a senior Hungarian official, who wished to remain anonymous, said: “It’s still unclear, but I’ll say yes, most likely.” The FT’s interlocutor noted that the Hungarian side is “ready to negotiate.”

Hungary introduced a veto on aid to Ukraine and proposed an alternative option for allocating money

After the EU summit in Brussels, Orban vetoed a decision to approve a long-term budget aid program for Ukraine, totaling 50 billion euros. As the Hungarian Prime Minister explained, the allocation of funds to Ukraine causes more harm to Budapest than negotiations on Kyiv’s membership in the EU. He noted that the EU's provision of financial assistance to Kyiv affects real Hungarian interests, since Budapest would have to give away its money.

According to the American publication Politico, the Hungarian side may agree to the allocation of money to Ukraine by the European Union if the method of financing is revised. In exchange for lifting the veto, the country's authorities proposed that the EU provide Kyiv with annual grants and loans worth 12.5 billion euros over four years instead of the proposed package of 50 billion euros.

It is clarified that European officials were skeptical about the proposal, noting that this does not guarantee stable financing for Ukraine. As European diplomats told reporters, in practice this would give the Hungarian leadership the opportunity to block EU funding every year or receive regular concessions for refusing a veto.

At the same time, Ukrainian Foreign Minister Dmitry Kuleba refused to consider Hungary’s veto as the reason for the refusal to allocate money by the European Union. He said that the EU would in any case decide to allocate 50 billion euros to Ukraine. According to the diplomat, Hungary's veto in itself is not a reason for refusal.

At the end of December 2023, the minister said that Hungary was given a month to negotiate, and if it refused, the money would still be allocated.

It became known that the EU is preparing a backup plan for financing Ukraine

According to Orban, the European Commission is preparing a backup plan to allocate assistance to Kyiv outside the established EU budget; it will be presented during the extraordinary EU summit on February 1.

As the Financial Times has learned, the European Union is developing a reserve plan to help Ukraine in the amount of up to 20 billion euros by increasing the debt.

It is assumed that this alternative plan will include member states providing guarantees to the EU budget. Thanks to this, the European Commission will be able to borrow up to 20 billion euros for Kyiv on the capital markets. The details of the agreement are still being discussed, the final amount depends on the needs of Ukraine.

The authors of the publication noted that this scheme is reminiscent of the experience of 2020, when the European Commission provided EU countries with up to 100 billion euros for short-term employment support programs during the COVID-19 pandemic. The newspaper's sources expressed hope that the process would be completed by March.