Hungary Vetos €50 Billion EU Funding Package for Ukraine; Fuming EU Leaders Promise Workaround, but How?

Interestingly, Ukraine is so considered yesterday’s news in some circles that the latest blow to its rapidly sinking fortunes is getting no press play. While the BBC and the Financial Times have the Hungary veto of the proposed €50 billion of new EU funds to Ukraine as the lead story, it is literally not to be found on the first page of the online Wall Street Journal. Apparently the finance paper’s editors have deemed Ukraine’s new money prospects to be tantamount to nil after the second failure n Congress to secure $60 billion (and now a Biden impeachment inquiry on). Note that Congress agreed on a mere $300 million for now as the (what looks to be lost) fight over the $60 billon continues. Oddly there seems to be no proposal for a smaller multi-billion package in play.

In other words, any significant new funds of the EU would be a last ditch. It is hard to see large scale additional support forthcoming after the US cut its money spigot.

We’ll soon turn to the fact that EU leaders are still in denial as to the state of play, that more money (even more so if the EU is largely going it alone) will not salvage Project Ukraine. They still plan to get Ukraine the funds in the new year.

This is the Journal’s lone Ukraine piece….at least above the fold:

Bloomberg does have a story on Hungary’s funding veto…below the fold: Hungary Vetoes Ukraine Aid After EU Agrees on Membership Talks. Keep in mind that Hungary literally sat out the EU membership vote, with Orban leaving the room to allow a technical unanimous approval. Orban pointedly noted that any eventual Ukraine ascension would be subject to Hungary’s Parliamentary approval, which was far from assured. Bloomberg noted:

The move is a somewhat symbolic one. The bloc won’t launch the more formal negotiating framework before March, when Ukraine has been asked to meet several additional conditions related to its membership bid.

Even with a green light from member states, the negotiations would still take years as the path to membership is lengthy and complicated. Croatia was the last country to join the bloc and its application lasted 10 years before it was formally accepted in 2013.

Of course, this discussion also pre-supposes that there will be a Ukraine to enter, as opposed to say, Greater Galacia or Lambert’s favorite, the Free City of Kiev.

Needless to say, there is a lot of pundit and comments section consternation about Hungary, with about 2% of the EU’s total population, throwing a spanner in the world. Conveniently forgotten is the reason small countries were willing to join the EU in the first place was that they had strong protections of their rights. The Financial Times’ comment section contains lots of bright ideas about changing voting rules on the fly, such as:

There should be a qualified majority in the EU, let’s say 80%.

It cannot be that a single state can veto such an important and strategic decision.

Also, Hungary should decide whether it is pro Europe or pro Russia, maybe there is no place for pro Russian countries in the EU anymore. Maybe we should welcome Ukraine and kick out Hungary.

But some in the peanut gallery are getting their digs in:

Can anyone explain how the EU benefits from having Hungary as a member? It seems much more aligned with the Russian empire.

Olaf the First
in reply to Nuffsaid
Can anyone explain how the EU benefits from having Ukraine as a member?

The EU officialdom is applying large amounts of porcine maquillage:

And vowing Ukraine will get its dough. From the Financial Times:

EU leaders gathering in Brussels have vowed to find a way to support Ukraine after Hungary’s Viktor Orbán vetoed a €50bn lifeline for the war-torn country.

Estonia’s Prime Minister Kaja Kallas said that “Ukraine will not be left without support” and that there was a “strong will” among the other 26 EU member states to deliver the necessary aid. Belgian PM Alexander De Croo also reassured Kyiv that “we will be there to support you, we need to figure out a few details”.

In the early hours of Friday, EU leaders failed to convince the Hungarian prime minister to agree to the €50bn funding package for Ukraine, which would have come from the bloc’s common budget and be paid to Kyiv over the next four years in the form of grants and loans.

The EU’s leaders will reconvene for a summit in January for further talks in the hope that they can bring Orbán on board or force the package of support through without his backing.

Yves here. It’s hard to see how Orban will be more tractable in January. Politico claimed the EU was working on bribing Orban, and his ask was the release of all the EU funds held back so far. Mind you, that’s €10 billion, so one would think Hungary comes out ahead even effectively having to kick some back to Ukraine. Apparently the EU did agree but Orban decided no. His objection was that he viewed giving Hungarian funds to Ukraine via the EU to be a violation of Hungary’s rights.

One wonders if Orban trusted the EU to live up to its side of the deal.

Absent some new-found means for appeasing Orban, Ukraine will look like more of a lost cause in January, so the news will be favoring his stance.

The other way to get more dough to Ukraine is for member states to agree to fund it out of their national budgets. As the pink paper explained:

Estonia’s [Kaja] Kallas said that a solution among the 26, outside the EU budget, could be found but warned it would take more time.

EU economies will be further on their way into recession. If there is particularly cold weather, budgets will be under more strain than planned due to higher expenditures for energy subsidies.

And then we have the elephant in the room, that Germany, which normally provides about 25% of total EU funding, is in the midst of a budget crisis due to an adverse German constitutional court ruling, barring it from applying a funding authorization for Covid emergency monies to other uses. The normal budget hairshirt rules means Germany has no other pocket for finding meaningful new funds.

Europe is the master of fudge and kick the can. Perhaps they’ll find a way to bludgeon Orban into line, but that seems not very likely. Perhaps they can cobble together a deal outside the EU common budget. EU experts please opine, but I see it hard for them to get to €50 billion that way. Could there still be some special pockets or tricks?

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  1. NN Cassandra

    And people were worried how Western rulers will extract themselves from the rhetorical corner they created. Well, if you own the press, you just stop talking about it and maybe blame guy from country you already hate anyway.

  2. ciroc

    Biden knows that it is easier to “ask” Europeans than to convince Americans. So the EU will end up paying on behalf of the US government.

  3. St Jacques

    Colour revolution in Budapest anyone? Wasn’t five months of failed counteroffensive enough? When will the magical thinking and its attendant slaughter end? Honestly, Orban is doing the EU, not to mention Ukraine, a huge favour by forcing Ukraine down the path to a negotiated peace with Russia. A neutral Ukraine that is still large and a buffer between Russia and NATO would seem a surprising outcome at this stage and yet it still seems possible. Bye, bye clown president.

    1. Rain

      Possibly, a ‘colour revolution’ – but Orban may also possibly be reflecting his people’s sentiments, far more than other EU countries and putting Hungary’s national economic interests first. The EU in general, just like the US, has a significant disconnect between their people and their political elites – the EU political elites and oligarchs are trying to force through the Ukraine Aid money, because most of it will ultimately return in one form or another into the pockets, assets and bank accounts of that same elite class.

      As for anti-Russia ‘evil empire’ rhetoric, well its worked before to keep the domestic masses under control – give them an external threat to worry about, along with MENA immigrants/reffos etc, instead of the state of their economies and loss of living standards. However, I am unsure with demographic changes over recent decades, whether it will continue to work.

  4. timbers

    Orban should tell the EU that he will submit a realistic proposal for aid. In dramatic fashion, he explains it will be unlimited funding for mandatory Russian language courses for every citizen of Ukraine and European Union. It’s only logical given the narrative the EU has embraced that once the bear is finished with Ukraine, the rest of Europe is next on the menu.

  5. JW

    I find it very difficult to believe that the majority of western European leaders actually believe the tripe about Russian threats.
    So what exactly is their game as they see the US pull the plug. I can sort of understand them being bullied by the WH, but now they have the perfect opportunity to take a step back. Why don’t they, what is their motive?
    Their economies are impoverished by this strategy , it encourages ‘populist’ movements, it just encourages the killing of hundreds of thousands of people as Russia grinds on.
    Surely by now even the thickest of them realise that there are no ‘wonder weapons’ in the NATO armory that Russia can’t overcome?
    So what drives them? Herd behaviour? Led by the ‘German’ young WEF types to the edge and beyond?
    Or is it numbered Swiss accounts fed by somewhere in the US?

    1. Jack

      I listened to a podcast recently, where (I think it was Mark Sleboda) talked about why the Euro pols acted against their countries best interest. It’s money. They are angling for lucrative think tank appointments and consulting fees after they are out of office. US pays far better than the European counterparts.

      1. Polar Socialist

        The thing is it’s not just the pols, but the whole media and all the talking classes, too. It was eerily obvious already when US pulled out of Afghanistan and didn’t tell about it to any ally there. I was sure there would be a great purgatory in the media about the whole Afghanistan mess and especially how it ended (for The West, for the Afghans it’s still a mess).

        And there was nothing. Basically a collective shrug after for years wasting money and lives for nothing far away from Europe and then were just left to hang and figure our way out ourselves.

    2. Michaelmas

      JW: I find it very difficult to believe that the majority of western European leaders actually believe the tripe about Russian threats.

      Never underestimate both human stupidity and the power of human beings to retain an ingrained, culturally shared picture of the world long after it’s lost any validity. For instance, Napoleon’s invasion of Egypt in the early 19th century was a profound shock to the muslim world, because it overturned assumptions about muslim military supremacy that had ceased to be true 3-4 centuries before.

      Also relevant is that for most of the last century the Europeans lived with the Soviet — and Stalinist threat — next door geographically speaking, in a real way the US didn’t. Yes, the Russian Federation isn’t the USSR. Yes, practically speaking, there’s no way that Putin wants or would gain from, or would be able to send his armies into Europe. Yes, it’s all deeply stupid.

      But a lot of ordinary stupid people here in Europe honestly believe it. Whether their leaders truly do on a conscious level, this assumption is there among the ordinary masses to be tapped and played into.

      JW: Surely by now even the thickest of them realise that there are no ‘wonder weapons’ in the NATO armory that Russia can’t overcome?

      No, they honestly don’t. Here the European leaders are absolutely that stupid and belief in Western — and US — technological superiority in all things is absolutely ingrained, all real-world evidence to the contrary.

      The real world evidence is that while the US has a lead in some areas — nuclear submarines and orbital satellite surveillance — Russia leads in electronic warfare, many aspects of military aviation, and missile/rocket technology. In the latter, it mostly always has: first battlefield use of the Katyusha rockets in WWII; first satellite in orbit; first man into space; first space station; first long stays in space; carrier-killer missiles like the Moskit-Sunburn since the late 1960s-early 1970s; the fact that US astronauts had to be carried to the ISS by Russian launchers for a decade after the demise of the US shuttle program.

      But tell this to educated people and it just bounces right off their ingrained world-view. Many of these people honestly believe that giving Ukraine F-16s — fourth-generation fighter planes almost a half-century old and far inferior to current Russian equivalents — will turn the tide on the battlefield.

      Because F16s are US-Western military technology, which is by definition always superior.

      1. Paris

        Nice summary. Just to add, and I have those people in my family, they still carry a cold war mentality and cartoonish notions that Russians bad, Americans good, so need to be on US side for everything no matter what, and no, I don’t want to listen to your views/opinions because they shake my long held beliefs about the world and this makes me uncomfortable.
        To them, it’s a matter of faith. And, being a matter of faith, facts don’t matter. They are true believers.

    3. Feral Finster

      If you ever have spent any time among political class europeans, they are, to an even greater extent than Americans, all about Proper Form, Social Niceties, and The Done Thing.

      You don’t buck the educated people consensus, you don’t point out that the Emperor is buck naked if the right sort of people insist that His Majesty is wearing a Zegna suit of a conservative stripe.

  6. Mikel

    “Could there still be some special pockets or tricks?”

    Use illicit drug money and smugglers. Some kind of Iran-Contra inspired set-up. Or variation of.
    Belgium is a bit of drug smuggling hub anyway.

    1. Yves Smith Post author

      Clever but I think not.

      The point here is visible, therefore legal, support. I was thinking questionable use of existing funds, like the way the US Treasury has repeatedly abused the, Exchange Stabilization Fund. Par for much of what you find on Wikipedia, its entry on the 1994 Mexican intervention is highly misleading. We were bailing out Mexico so as to put a floor under the peso and bail out the likes of Morgan Stanley which had made bad derivative bets on bonds issues by Mexican banks. But the ESF is big, about $50 billion then and over $90 billion now.

      Re drugs that is how to MOVE the money. Where do you GET the money? Unless the EU has some pretty big meth labs, illegal drugs come from places like Myanmar and Afghanistan, or say fentanyl from China. The EU could only get a comparatively small markup.

      And the #s in the Iran Contra operation strongly suggest the amount of money you can move is nice for insurgents, not enough to fund a big country budget or army.

      1. Mikel

        Now that you’ve mentioned bailouts and bad derivative bets, there possibly could be some kind of bigger financial crisis where emergency funds will be needed in various parts of the EU and the Ukraine funding can get “lost in” or tied to that.

      2. Feral Finster

        Why does the support have to be visible or legal?

        Poland delivered MiG-29s to Ukraine via border-smuggling. The airplanes work just the same.

    2. NN Cassandra

      What about our beloved oligarchs? Couldn’t they cough up something? I remember seeing recent headline saying they made another trillion this year.

  7. The Rev Kev

    No matter how many lunatics there are in the EU leadership, Orban is quite right when he recognizes how bringing in the Ukraine would physically wreck the EU. The Ukrainians themsleves are keen to join and Ukrainian FM Dmitry Kuleba said about what they can do to join ‘We can jump, we can dance if that is requested in addition.’ Yes, he actually said that.

    The EU tried to fob off Hungary by only giving them 10 billion of the 30 billion that the EU owes them so Orban threw the EU a bone by letting this stage of the negotiations go ahead by going for a coffee with von der Leyen at a strategic moment – but nothing else will happen until the EU gives the EU all the money that they owe Hungary. But trying to fast track the Ukraine into the EU is something that he will not accept. By this time next year it will be academic in any case. By then it may only be a rump State.

    Had a nasty thought today. Ursula von der Leyen has been going around acting if she was the Empress of the EU and deciding major policies for the EU by herself and not consulting the EU members. The latest example is when she decided by herself that the EU is firmly on the side of Israel as official EU policy. So imagine this. The Ukraine gets into the EU – and a Ukrainian ultra-nationalist gets Ursula’s job. Can you imagine what could happen next?

    1. DJG, Reality Czar

      Rev Kev: Living as I do in the Undisclosed Region of Italy, one of the core countries of the European Project, I am reminded that the early attempts to bring France, Germany, and Italy together, along with Belgium, Netherlands, and Luxembourg, were designed to break down rivalry between France and Germany and shore up the new republic of Italy and its economy. The Benelux wanted to avoid being invaded again.

      The lofty ideals of people like Altiero Spinelli (considered Italy’s greatest advocate of unifying Europe) are gone.

      Instead, the EU is dragging in countries with unresolved border issues that are left to fester. Cyprus, anyone? Of course one of the main beneficiaries of the Cyprus mess is former EU member, Great Britain, and its giant bases there. Moldova, sliver of Romania, with its own trans-Dnistrian disputed sliver? Georgia, missing a couple of regions after some seriously bad diplomacy with Russia?

      What benefit is there in allowing wrecked states like Bosnia and Herzegovina and Ukraine to accede? Is it that the EU leadership hasn’t show enough creativity in corruption?

      What is obvious is that the ruling class of the EU wants those not-so-mythical Polish plumbers, workers being one of Poland’s main exports. Italy is now home to a million Romanians. So is this the main benefit of the EU, as currently run, to Italy? Construction workers who don’t know the rules?

      The current EU is what happens when capital can cross borders freely, can corrupt all processes, and insists on a docile and underpaid workforce. .

      As I have written here at Naked Capitalism before, I will await Albania’s membership accession, which may take years. The others can get in line.

      1. The Rev Kev

        To be honest DJG, I sometimes wonder what would have happened if the EU had stayed as the European Communities and not signed the Treaties of Maastricht, Amsterdam and Nice. It would have been more stable, there would have been no Euro to stifle countries with and probably the UK would still be a member and may have not felt the need to bail at all. The emphasis would maybe have been still on economics and not power building. Instead in ’93 then went with building a political EU power block which is now imploding as it seeks to sign up as many sacrifices, errr, members as they can.

    2. ChrisFromGA

      I’m reminded of how Greece turned out to be a bad fit for the EU – a poor country with mainly tourists as the driver for the economy.

      Or the PIIGS generally. It all blew up in the EUs face around 2010.

      Ukraine would make those places look like Asian tiger economies.

  8. ilsm

    EU sending money is not necessarily the same as sending ammunition and weapons.

    Most “assets” sent have come out of “drawdown of national stocks”, transfer of Soviet era weapons, and in case of F-16 retiring weapons that are scarcely supportable,,,, I doubt any EU country has much to give, outside the US the euro figure could be mostly shipping status on weaponry yet to be ordered from the MIC.

    While I suspect US “drawdown assets” exist but might be hard on combat rating of planned wars/contingency plans.

    I am not sure the logistics is there to back budgeted euro/$$ with hadr delivery.

    1. Yves Smith Post author

      I should have pointed it out here but did not. We showed a chart recently that showed that military aid overwhelmingly came from the US, pretty much none from the EU, and the European contributions were national, not EU, and even together much smaller than US assistance.

      1. berit

        Zelensky went from Washington DC to Oslo, surprising members of the government, who were not informed before he landed. After three hours here, PM Støre had promised 3 BNkr in support, possibly drawn from a pledged 75 BNkr in the course of 5 years. Antiaircraft defense to the tune of 335 million Nkr was also given, from existing defense storage. The Ukrainian president had lunch with the PM, visited with the royals, king, queen. crown prince and princess all in place for photo op in the castle and Stortinget. Promising tunes heard from leading politicians for more aid and armour. A blessed visit for mr Zelensky, I think, and for the locals too, hopefully bolstering national pride and faith in NATO and the great general secretary Jens Stoltenberg. Good grief.

          1. berit

            Norway was a sovereign state since 1905, after a trajectory of 300 years of Danish rule and some years under Sweden as war booty when the Danes lost the then war alongside Napoleon. Since WWll friend and ally with the US, with US sovereign bases on Norwegian soil. We, the people, were not asked, as we are a a most developed, most modern democracy under NATO-US-protection. Gentleman’s agreement that there were/are no atom bombs in storage and none aboard visiting USS Gerald Ford – said by defense minister Gram on NRK TV after the warship left Oslo for a visit at Tromsø up north, before heading to war in ME. We are sooo secure under the atomic protections of the US-NATO

  9. Aurelien

    Orban hasn’t really lost anything by being out of the room. Ukraine will never complete the accession negotiations, and indeed may never start them. What’s going on here is the continuation of a collective Brussels fantasy that so long as there is activity of any kind with Ukraine, all hope is not lost. By contrast, giving up on Ukraine as an EU member is automatically to grant victory to that monster Putin, who represents all the old-fashioned patriotic, religious, cultural, historical, linguistic heritage that the Brussels PMC has battled for so many decades to overcome. It thought for a long time that Russia, the last holdout against its ideology, would fall, and now it hasn’t and seems to be winning. In the fantasy world Brussels has constructed for itself, not admitting defeat is the same as winning. The final defeat will be a lot harder for Brussels to accept than Washington.
    And the chances of EU members finding the money … I don’t think so.

    1. Feral Finster

      You’re kidding, right? Ukraine doesn’t even need to do anything, because the Germans will say that Ukraine qualifies for EU membership and Brussels will change the terms of EU membership and/or throw out Hungary if they can’t get unanimity.

      1. Aurelien

        No, Brussels doesn’t work like that. This is an issue for member nations. (Compare the situation with Turkey.)

      2. Polar Socialist

        Orban himself replied to his critics upon returning to Hungary that there will be 75 separate votes ahead in EU before Ukraine becomes a member. That’s 75 opportunities for Hungary to prevent it, as the man said.

        We all know EU can easily fast and loose with it’s own rules when the need be, but becoming a member is in the very core of the organization, and there’s very little leeway for cheating. Those are the rules the member states will be upholding.

  10. Feral Finster

    “Apparently the finance paper’s editors have deemed Ukraine’s new money prospects to be tantamount to nil after the second failure n Congress to secure $60 billion (and now a Biden impeachment inquiry on).”

    I read last night that Congress has decided to delay its vacation a week in order to find a workaround on Ukraine. As soon as I read the words “border security” it was obvious that Ukraine would get its check and Lockheed-Martin would get joy.

    Team R and Biden are only haggling over price.

      1. Yves Smith Post author

        Now that there is an impeachment investigation on, the R’s really can’t approve Ukraine $. And the MIC will be just as happy if it is spent on being nasty to China instead.

      2. ChrisFromGA

        All spending bills must originate in the House.

        Chucky can try to pass a shell piece of legislation, but Johnson can simply ignore it. Or take it up and gut it in 2024.

        Without Johnson, Chucky is just negotiating against himself.

        1. scott s.

          “All spending bills must originate in the House.”

          That is a matter of practice, never confirmed by the Supremes. Justice Story’s “Commentaries” makes clear that the origination clause scope is raising revenues. Requiring “money” bills or appropriations to originate in the House was proposed in the convention but omitted in the adopted clause, though Madison in Federalist 58 suggested that the House did have that power (seems to be a bit of spin on his part). Regardless, House procedure has a “privileged” motion process known as “blue slip” where it will reject consideration of what it deems Senate originated appropriations.

          1. ChrisFromGA

            The usual workaround is to take a dead House bill and revive it, then replace the language with whatever non-germane bill the Senate wants to.

            However, it still has to go back to the House and Johnson is already saying he’s not going to bother bringing back reps before the New Years eggnog has expired.

            Thanks for the historical background I find that stuff interesting.

  11. fjallstrom

    If the Commission and the Council minus Hungary wants to, they can suspend Hungary’s voting rights and then proceed.

    Article 7.3: Once the European Council has unanimously decided that the breach is still occurring, the Council then votes by qualified majority to suspend rights of the accused country, including voting rights within the Council, until all duties are fulfilled.

    Just to be clear, I don’t think that’s on the table. But it could be done.

    I can’t find anything about Slovakia’s new governments position on the EU aid package. According to Reuters they voted for starting the membership process for Ukraine because nothing will come of it anyway.

  12. Fried

    I live in the capital of one of the federal states of Austria, with about 100,000 inhabitants. We don’t have an indoor swimming pool. They had to shut down the old one 2 years ago because it was too decrepit and we can’t afford to build a new one. The tarmac in the streets in this town consists pretty much entirely of patchwork and potholes. Austria is supposed to be one of the richest countries in Europe, but apparently we can’t afford to maintain public infrastructure. But we have tons of money to throw at Ukraine.

  13. fjallstrom

    Mulling this over, I’m reminded of statements from NATO countries after US declared they would leave. I can’t find it, and it might have been under Trump when he made the withdrawal deal with the Taliban.

    Anyway, some NATO countries (or NATO officials) made statements to the effect that while US would pull out, they would fight on. Delusional or a way to declare loyalty to the empire to avoid blame? Maybe a bit of both.

    If viewed through that lense, EU is currently stalling the funds while declaring loyalty to the project and reserving blame for the US and/or Hungary.

  14. Matthew G. Saroff

    This is yet ANOTHER example of how the enthusiasm for the “European Project” has led to an expansion in both the number of members, and the powers of the EU without regard to creating underlying structures that reinforce legitimacy.

    While there is never a good time to do this, by design there is always some sort emergency that demands expansion of EU membership and Brussels’ authority, now is a time to call hold, and allow governance structures, and the EU population, to catch up with what has already been done.

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