New Ecofin failure: Hungary vetoes aid to Ukraine and the minimum rate of Corporate Tax

Once again, Victor Orban gets away with it. The Hungarian is the most controversial and conflictive leader of the European Union. The most marked, the one who stars in a more authoritarian and “‘illiberal’ drift, in his words. The closest to Vladimir Putin and the most hostile to Ukraine. But also one of the two most veteran within the European Council and one of those who best knows how to play his cards.This Tuesday, the Ecofin, the meeting of the 27 finance ministers, has been forced to postpone the discussion and approval of four key issuesdue to pressure and the Hungarian veto: a package of financial aid to kyiv worth 18,000 million euros, a common position on a single rate for the tax on multinationals and two decisions referring precisely to Hungary and the Community Funds that Brussels wants to freeze.

Orban has been putting spokes in the community wheels for years. Blocking or preventing dozens of statements or sentences in foreign policy, especially what has to do with China, Israel and Russia. It is the country that has hit the most sanctions against Moscow for the invasion. The only one in the Union that has not yet ratified the entry of Sweden and Finland into NATO. And the one who is mixing, with great skill, the dossiers that directly affect him with those that matter most in Europe, although he publicly maintains that he has never linked both things.

A few days ago, the European Commission gave the green light to the Hungarian Recovery Plan. It was the only country that had it pending and risked losing access to almost 6,000 million if everything was not unlocked before the end of the year. Brussels, however, has conditioned all disbursements on the fulfillment of 27 special super -milestones . Simultaneously, in addition, the Commission has recommended to the ministers that they freeze up to 7,500 million euros of Cohesion Funds, by activating for the first time the so-called Rule of Law Mechanism, which makes it possible to do just that when a State systematically fails to comply with the common norms.

The Ecofin had to decide this Tuesday whether to cut the funds, and it has decided not to do so. The chosen formula is a patch, a trick to save time and perhaps lower the bill. Ministers have asked the European Commission to make a second updated assessment. Budapest maintains that since the cut-off date used by the Commission, real progress has been made. And they believe that if it is updated as of this week, it could, to begin with, lower the amount of funds to be frozen, which would drop from the 7,500 that have been identified so far.

Once that report is made, probably this week, the ministers should assess it. What is foreseeable is that Orban will continue saying that it is disproportionate and excessive, so the ball will remain in the court of the European Council, of the Heads of State and Government, who meet in Brussels on the 14th and 15th of this month. . Perhaps another Ecofin would be very fair but it is being studied and it would most likely be a videoconference. Until that happens, in any case, Hungary maintains its veto on the 18,000 million for Ukraine and the common rate for the tax on multinationals. As it has been doing for a long time.

Orban has three reasons for this, above all what affects kyiv, which is a total priority for the Union. The first is its affinity with Moscow and its energy dependence on its hydrocarbons. The second, that Hungary has had a friction with Ukraine for years over the Magyar minority in the country, whose rights, says Orban, are not respected. And the third, pure interest. That veto gives him a very strong hand in the game and he’s not going to sell it cheap.

 The EU is looking for alternatives to help Ukraine at a very delicate moment, with the cold hurting and very high financial needs. Commissioner Johannes Hanh , responsible for Union Budgets, explained on Tuesday that they are looking for legal alternatives, with the Budget available, to send funds to Kiev as soon as possible. One option would be for the Member States to increase the guarantees they provide for the Commission to borrow, but this is slow because in many cases it requires procedures in the national Parliaments. “We have not been able to adopt the package in its entirety, but we will not be discouraged,” said Czech Finance Minister Zbynk Stanjura, in his role as temporary head of the meeting of finance ministers.“Our ambition remains to start disbursements to Ukraine in January,” he added.

The negotiation is now being done at the highest level. Emmanuel Macron and Olaf Scholz have taken advantage of the informal summit held today in Albania to discuss the issue with Orban. Hungary insists that it is not vetoing anything, that it is in favor of the macro-financial aid package for Hungary and is sure that it will be approved in the next few days. And he has promised that the entry of the Nordic countries into NATO will be approved in the first parliamentary session of 2023.

Next week there is another opportunity. On the one hand, Budapest has part of the upper hand. But at the same time Hungary also urgently needs these European funds. The 13,000 million that will be frozen until the Government approves the pending reforms and guarantees the independence of its institutions and courts are essential for its economy, badly affected by the energy crisis and inflation. On the 19th the period contemplated in the Next Generation Funds regulation expires, and if the EU has not given the go-ahead to the Hungarian recovery plan, they risk losing up to 70% of all of them. A tight schedule, a lot of ego and a lot of risk in the same basket.

Everyone in the Union understands that there will be an agreement, it only remains to know what the price will be. It seems less than that 7.5 billion euros that could be frozen until Budapest corrects the deficiencies. The ministers have said that there is not much margin because the real changes have been few these weeks. But the EU is as much about law as it is about politics, and if the leaders decide next week that Orban’s promises and efforts are enough, and that it is enough to unlock everything else, they will not waver. The precedent has been sealed and the next times, that there will be, it will not be as difficult as up to now to ‘punish’ those who do not comply systematically.

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