The EU swats a gadfly

For political cynics, the European Union has long been an easy target. The size and scale of its ambitions and the continual overproduction of bureaucratic absurdities offer ample opportunity for derision – inside Europe and beyond. But a February 1 summit meeting to hash out member-state differences over a multi-year EU funding package for Ukraine reminds us again that on priority issues the EU works far more effectively than conventional wisdom and Euroskeptic populists suggest. 

February’s success was not inevitable. A meeting in December meant to provide Ukraine with a €50 billion EU aid package ended in acrimony when serial political blackmailer Viktor Orban, Hungary’s prime minister, vetoed a plan that required unanimous support from all 27 EU member-states. Kyiv needs that money to help pay pensions, salaries and other costs over the next four years as Ukraine fights to repel Russian invaders, and the growing political uncertainty over the future of US aid for Ukraine, exacerbated by concerns that November US elections could create new obstacles, added a sense of urgency to the request. 

In exchange for unblocking the plan, Orban made several demands. First, he called for an annual review of aid to Ukraine plan. EU officials decided, rightly in my view, this was Orban’s bid to grant himself an annual veto threat that would give him long-term leverage to extract a steady stream of new EU concessions. He also wanted to secure the remainder of €20 billion in EU funds earmarked for Hungary that’s currently locked up until Orban addresses EU concerns over corruption and human rights concerns in his government’s treatment of some of Hungary’s minority groups. (€10 billion in funds were unfrozen late last year, but much of this money has yet to be disbursed.) 

Orban is widely considered Russian President Vladimir Putin’s best friend in Europe, adding credibility to suspicions he wants to undermine European support for a country Putin is trying to conquer. But Orban has a more practical concern about Ukraine’s future. If that country one day joins the EU, Hungary would become a net contributor to the EU budget rather than a net recipient, since the much larger country, in desperate need of post-war reconstruction, would require so much early financial support.

Hungary’s prime minister also wanted to help boost the performance of populist parties in European elections scheduled for June by making “Ukraine fatigue” an electoral theme that might win him new allies inside states with sympathetic political parties – states like Germany and the Netherlands, for example.

But Orban lost this fight because the other 26 EU member-states – including Poland, where an election last year produced a government much less like-minded with Orban’s social conservativism and anti-EU populist bent – voted to deprive Orban of the chance to use future reviews of this package to veto it. Hungary lifted its veto when other states promised a review, if needed, after two years, but one that would not provide Hungary another veto.

EU officials also appear to have persuaded Orban that other EU governments could support Ukraine individually without his support, by offering Kyiv loans outside the EU budget. “Get what you can,” EU officials warned, “because you don’t have the bargaining leverage you think you do.”

Finally, and most importantly, other EU member-states know Orban is playing a weak hand. Hungary’s economy contracted last year, with inflation surging to more than 25%. Interest rates stood at 10.75% as of December, and its debt-to-GDP ratio has reached 70%. These are weaknesses the EU knew it could exploit. Orban understood that another veto of Ukraine aid might even limit Hungary’s access to the €44 billion it could access from the EU budget. And senior EU officials knew the country’s economic and financial conditions would sink quickly if Orban lost permanent access to these funds. Orban realized he had picked a fight he couldn’t win, and he folded.

Make no mistake: The EU still has substantial limitations. Aid to Ukraine has been held up through seven months of war because the plan remains bound to a review of broader EU spending. More concerning, no one believes that €50 billion over four years, though badly needed and warmly welcomed in Kyiv, will come anywhere close to helping Ukraine win its war. Nor is this tactical victory over Orban the end of the Hungarian leader’s attempts to win concessions in exchange for cooperation. Next up, Hungary is now the only EU country that’s yet to sign off on Sweden’s bid to join NATO. We’ll have to wait and see what Orban wants for that.

But by using hardball negotiating tactics to maintain the Union’s unity on this high-profile issue, the EU has proven again that, when push comes to shove, it can still do big things.

Ian Bremmer is the president and founder of Eurasia Group and GZERO Media