It will be no surprise that at yesterday’s European Council summit, Hungary was compelled to withdraw and stop blocking funding to Ukraine. It remains unclear whether, besides the threat to use a stick, some form of carrot was also employed, as suggested by PiS MEP Bogdan Rzońca in an interview with PAP.
The situation unfolded as anticipated. Hungary yielded and halted its obstruction of EU financial aid to Ukraine. At this stage, it is not entirely certain whether, in addition to the pressure—the risk of disenfranchisement and the press reports of measures aimed at destabilizing the Hungarian currency—a matching incentive was offered.
— said Rzońca, a member of the European Parliament’s Committee on Budgets.
“Hungary has been misled multiple times by the European Commission.”
What is clear is that the European Commission has agreed to underscore in its final communication, echoing the 2020 Summit Conclusions on the Conditionality Mechanism, that the rule-of-law assessment should be objective, fair, impartial, and fact-based, guaranteeing non-discrimination when triggering the EU funding blocking mechanism for member states. It is difficult to gauge how much this addition will influence the Commission’s actions toward Hungary. Based on current practice, optimism is limited. Hungary has allegedly been misled by the Commission on several occasions, making the newly stated reservation look like a fleeting gesture rather than a decisive shift.
– noted the Polish politician.
IFF increased by 64.6 billion euros
As he emphasized, the figures finally approved in the Multiannual Financial Framework (MFF) review align with prior expectations. The newly approved expenditures include: 50 billion euros for the instrument for Ukraine (17 billion in grants and 33 billion in loans), 2 billion euros for migration and border management, 7.6 billion euros for neighborhood and world-related spending (covering Middle Eastern refugees, the Southern Partnership, and support to the Western Balkans), 1.5 billion euros for the European Defense Fund under the STEP instrument, 2 billion euros for the Flexibility Instrument, and 1.5 billion euros for the Solidarity Instrument and the Extraordinary Aid Reserve.
Altogether, the IFF is slated to rise by 64.6 billion euros. The source of this money remains a question. The EU will need to borrow 33 billion euros (out of 50 billion) to be advanced to Ukraine as loans on financial markets. In theory, Ukraine would repay these funds. The conclusions do not resolve how repayment would occur if Ukraine cannot meet the obligations, a possibility that seems increasingly likely. That leaves 33 billion euros without guaranteed revenues.
– noted Rzońca.
€10.6 billion would have to be redistributed from existing funds.
Typically, these would be amounts already allocated to specific funds but no longer usable for their original purpose. Brexit reserves or items already written off could be repurposed. To speak plainly, there is some maneuvering and accounting artistry here. A more diplomatic way to describe it would be to call it increasing flexibility.
– explained the MEP.
It is unclear how the missing 21 billion euros should be financed
He pointed out that the amount of EUR 21 billion, which is smaller than the total 64.6 billion, does not appear in the summit conclusions. The table in question lists it only as “fresh money.” It is likely based, at least in part, on revenue estimates and the so-called traditional own resources. It is plausible these calculations were crafted to produce a favorable outcome aligned with perceived needs. There is a wide margin for interpretation, as GDP and VAT estimates rely on forecasts of the economic situation—and recent years have shown how easy it is to err in such projections. If the estimates prove inaccurate and the expenditure is incurred, the 21 billion euros or part of it would have to be borrowed, delaying repayment to a later date.
– predicts Rzońca.
What he highlights as particularly important is that the “new money” will not come from new own resources.
The conclusions about new own resources remain vague, stating that “the Union will work toward their introduction,” with the intent to use these funds for early repayment of existing loans to the Next Generation EU Fund. While it is commendable that the EU aims to repay the loan swiftly, if the approach relies on diverting current revenues to fund old obligations instead of meeting present needs, it could normalize financing through credit. That would be a worrying shift in EU spending rules.
– concluded the Polish Member of the European Parliament.
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Marked citations: Cited from wPolityce