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 the aid to Kyiv.
Viktor Orbán, Hungary’s premier, has vowed to block the use of the EU budget to provide €50 billion in financial aid to Ukraine 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.
The document declares that "in the case of no agreement in the February 1 [summit], other heads of state and government would publicly declare that in the light of the unconstructive behaviour of the Hungarian PM . . . they cannot imagine that” EU funds would be provided to Budapest.
Without that funding, "financial markets and European and international companies might be less interested to invest in Hungary”, the document stated. Such punishment "could quickly trigger a further increase of the cost of funding of the public deficit and a drop in the currency”.
János Bóka, Hungary’s EU minister, told the FT that Budapest was not aware of the financial threat, but that his country "does not give in to pressure”.
Brussels has wielded its financial leverage against member states before, such as with Poland and Hungary over rule of law concerns and Greece during the eurozone crisis, but a strategy to explicitly seek to undermine a member state’s economy would mark a major new step for the bloc.
Three EU diplomats told the FT that many countries backed the plan. "The mood has got harsher,” said one. "What kind of union do we have if we allow this kind of behaviour?”
While 26 member states have a plan B to send money to Kyiv outside the EU budget, that would require national parliaments’ ratification, causing delays and uncertainty.
Several capitals have considered whether it is feasible to use Article 7 of the Treaty on the European Union, which would allow Brussels to strip Budapest of its voting rights or, one diplomat said, block disbursement of money. But others have rebuffed the notion given that it requires unanimous support and many countries are reluctant to deploy such a serious sanction.
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