By Gabriela Baczynska
BRUSSELS (Reuters) – Germany pointedly reminded Hungary on Monday of the importance of the European Union’s democratic values as the bloc threatens to keep billions from Budapest unless it lifts its veto on a joint loan to Ukraine and a global corporate tax.
Foreign Minister Annalena Baerbock’s comments add to pressure ahead of a meeting of national ambassadors of the EU’s 27 member states at 1700 GMT to try to break the deadlock.
At stake is 5.8 billion euros from an EU economic stimulus pot the bloc’s executive has withheld, citing poor judicial independence in Hungary, and a further 7.5 billion euros the Brussels-based Commission said should be frozen over corruption.
As the wrangling has gone on, Hungary also blocked the 18 billion euros joint EU loan to Ukraine and the tax plan, drawing ire from other countries for what they said was an attempt to blackmail the bloc into releasing the funds to Budapest.
Hungary says it opposes joint EU borrowing to support Ukraine but that it would extend bilateral aid to Kyiv instead. Budapest has also said the OECD plan for a minimum corporate tax is against Hungary’s national interests.
Other EU countries are divided between those willing to punish Hungary more harshly and those saying the amounts frozen would be lessened if Hungary moved on Ukraine and OECD.
EU rules say 70% of 5.8 billion would be lost unless the bloc approves by the end of the year handing it over to Budapest. The deadline for deciding on the 7.5 billion is Dec. 19.
Asked about cutting the money, Baerbock told reporters in Brussels: “The rule of law is the backbone of the European Union.”
“This is why Germany supports the excellent proposals by the European Commission to make clear that this is about our values, about the rule of law in the entire European Union.”
ECONOMY WOES
The money is worth nearly 9% of Hungary’s 2022 GDP.
Veteran populist Prime Minister Viktor Orban needs the resources for his ailing economy with inflation seen climbing to 26% this month, state debt shooting up and the forint currency visibly underperforming regional peers.
An unusually blunt warning about the precarious state of the economy has also come from the head of the Hungarian central bank, while Citibank said Hungary was “entering a new phase of market pressure”.
Orban has sought to cut a deal with the EU in recent months and changed domestic laws to take into account the Commission’s long-standing concerns over corruption.
Brussels, however, was unconvinced, while other countries fumed at Orban’s vetoes of the EU’s joint foreign policy.
“For us, it’s important to be able to support Ukraine. The rest depends on Hungary, it’s their money,” said one EU diplomat.
Should no deal emerge on Monday, the whole set of decisions — on the Ukraine loan, the global tax and the money for Hungary — could end up on the agenda of the summit of the bloc’s 27 leaders, including Orban, in Brussels on Thursday and Friday.
Over more than a decade in power, Orban has had many run-ins with the EU over damaging the tenets of liberal democracy in Hungary through restricting the rights of the media, academics, judges, NGOs, migrants and LGBTI people.
As the latest dispute goes down to the wire, Orban’s spokesman said after a government sitting on Saturday that Hungary fulfilled conditions set by the Commission to get the money.
“Brussels is imposing new conditions because they want to impose their will on Hungary on the issues of immigration, sanctions and gender,” said the spokesman, Zoltan Kovacs.
(Additional reporting by Sabine Siebold in Berlin and Krisztina Than in Budapest; Writing by Gabriela Baczynska; Editing by Alison Williams)
