EU unblocks billions for Hungary even though its leader threatens to veto Ukraine aid

The European Union says it will grant Hungary access to billions of euros in frozen funds

The European Union on Wednesday relented and granted Hungary access to billions of euros in frozen funds just as Prime Minister Viktor Orban appeared ready to defy his EU partners and veto the opening of membership talks and vital financial aid for Ukraine.

A year ago, the European Union’s executive branch blocked substantial amounts of money out of concern that democratic backsliding by Orban’s nationalist government could put the bloc’s budget at risk.

The billions withheld mostly concern “cohesion funds” earmarked for Hungary. This envelope of money, one of the biggest slices of the 27-nation bloc’s budget, helps countries maintain their infrastructure at EU standards. They must apply for the money to fund building and other projects.

Now, the European Commission has ruled that Orban’s government has addressed some of its concerns, notably on justice reforms. So it’s willing to grant access to 10.2 billion euros ($11 billion) to reimburse project spending on approved projects. But Brussels also had a warning.

“The commission will closely and continuously monitor, notably through audits, active engagement with stakeholders and in monitoring committees, the application of the measures put in place by Hungary,” it said in a statement. It underlined, however, that should problems arise “it may again decide to block funding.”

Access to the frozen money will come as welcome relief for Hungary’s ailing economy, which in September only just avoided four straight quarters of contraction. A persistent deficit has caused the government to repeatedly amend its budget and cut social spending.

Skyrocketing prices – Hungary has recorded the highest inflation in the EU for most of the last year, rising over to 20% for 11 months – have undermined consumer demand. In October, Hungarians spent 7.3% less than a year earlier.

Critics say the commission’s decision appears to be an attempt to influence Orban after he demanded that decisions on Ukraine’s EU membership hopes and on a package of around 50 billion euros ($54.1 billion) in aid for its war-ravaged economy be struck off the agenda at an EU summit starting on Thursday.

Orban's 26 European partners plan to try to press ahead with their Ukraine plans anyway, according to a draft of their summit statement seen by The Associated Press, even though unanimous approval would be required.

But the commission insists that Hungary is technically eligible for the money and that Orban’s government could take the commission to court if it failed to provide access to the funds.

At the same time, it said, a total of 21 billion euros ($22.7 billion) in EU money will remain frozen.

Orban has complained of corruption in Ukraine and has demanded a “strategic discussion” on the country’s future in Europe as the war with Russia bogs down and concerns mount about what kind of administration might emerge in Washington after the U.S. elections in a year.

Speaking to lawmakers in Hungary’s parliament Wednesday, Orban said that the time for bringing Ukraine into the EU had “not yet come,” and that the development of a strategic partnership with Kyiv should be a prerequisite for beginning membership talks.

“We are interested in a peaceful and prosperous Ukraine, but this requires the establishment of peace as quickly as possible, and a deliberate deepening of the strategic partnership,” Orban said, adding that such a process could take “a number of years.”

The commission, for its part, has for a decade accused Orban of dismantling democratic institutions, taking control of the media and infringing on minority rights. Orban, who has been in office since 2010, rejects the allegations and accuses Brussels of interference.

The commission was worried about public procurement — purchases by the state of goods and services or for the execution of projects using EU funds. It’s feared that the awarding of such contracts have allowed Orban’s government to channel EU money into the businesses of politically connected insiders.

Officials estimated that about half of Hungary’s public contracts were awarded in tender procedures involving a single bidder.

The commission also had serious concerns regarding the detection and prevention of conflicts of interest, as well as about the supervision of a number of public interest trusts which manage significant amounts of money, notably in the area of education.

EU countries pay around 1% of their gross national income into the budget. Hungary was slated to receive at least 50 billion euros in all from the 2021-27 budget, according to commission estimates.

Separately last month, the commission announced that Hungary would receive 900 million euros ($972 million) under a program helping EU nations to recover from the energy crisis sparked by Russia’s invasion of Ukraine last year, and aimed at reducing their dependence on Russian fossil fuels.

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Associated Press writer Justin Spike in Budapest contributed to this report.