Europe is braced for a showdown over money for Ukraine

By Luke McGee, CNN

CNN  —  Leaders of the 27 member states of the European Union will meet in Brussels on Thursday and try to unlock €50 billion of funding for Ukraine that was blocked by Hungary in December, in a crucial summit at a pivotal moment in the war.

Failure to reach an agreement would mark a major blow to Ukraine, at a time when outmanned and outgunned Ukrainian forces are struggling on the battlefield in the face of a renewed Russian assault, and military aid from the United States has dried up amid an ongoing battle in Washington over future funding for Kyiv.

Hungarian Prime Minister Viktor Orban says he doesn’t oppose European funding for Ukraine, but is insisting that the money should not come out of the EU’s budget. On Tuesday, Orban said he also thought the figure of €50 billion was too high, and repeated his demand that any deal for funding be reviewed every year. The 26 other EU leaders are opposed to those demands.

Critics of Orban have noted that the EU is currently withholding money from Hungary for breaching the bloc’s rule of law requirements – fundamental values enshrined in EU treaties. It is widely suspected that Orban is using his veto on the funds for Ukraine to force Brussels into unlocking the money for Hungary. Orban and members of his government have repeatedly denied that there is any connection between the two, or that they have breached EU rules.

If Orban continues to block the €50bn, it is possible that the other 26 member states will seek an alternative arrangement outside of the EU’s structures.

Brussels sources told CNN this will most likely mean individual governments sending money directly to Ukraine, rather than through the EU. They say that this is less desirable as it will be more expensive and make it harder to coordinate how the money is spent with existing EU programs in Ukraine.

There are other suggestions that the EU could generate revenue for Ukraine from frozen Russian assets within the block.

Ahead of the summit, Hungary accused Brussels of blackmail after a report in the Financial Times said that EU officials were drawing up proposals on how to hit the Hungarian economy as punishment for blocking the funding plans. Hungarian officials also say that they have sent proposals to Brussels regarding money for Ukraine.

“Brussels is using blackmail against Hungary like there’s no tomorrow, despite the fact that we have proposed a compromise,” Balázs Orbán, political director to the Hungarian prime minister wrote on X Monday, along with a picture of the FT story.

He had specifically highlighted a passage of the article that said: “Brussels has outlined a strategy to explicitly target Hungary’s economic weaknesses, imperil its currency and drive a collapse in investor confidence in a bid to hurt ‘jobs and growth’ if Budapest refuses to lift its veto against the aid to Kyiv.”

The FT report claimed that a document it has seen described how failure to reach an agreement on the package for Ukraine would likely lead to EU funds being withheld from Hungary, which “could quickly trigger a further increase of the cost of funding of the public deficit and a drop in the currency”.

A senior EU official told CNN that the document cited in the FT article “does not outline any specific plan relating to the MFF (EU budget) and Ukraine Facility, nor does it outline any plan relating to Hungary.”

Hungarian Prime Minister Viktor Orban (L) is welcomed by NATO Secretary General Jens Stoltenberg (R) as he arrives for the NATO (North Atlantic Treaty Organization) summit, at the NATO headquarters in Brussels, on July 11, 2018. (Photo by Francois Mori / POOL / AFP) (Photo credit should read FRANCOIS MORI/AFP via Getty Images)

Most diplomats are optimistic that some kind of deal will be done over the two-day summit, whether Hungary agrees or not. Several diplomats have told CNN that they think Hungary will ultimately be persuaded, based on the fact that until this point it has gone along with most EU and NATO initiatives for Ukraine.

It has done so despite a well-known closeness between the Hungarian PM and Russian President Vladimir Putin, even if Orban has made unhelpful, pro-Russia noises in public over the past two years.

The summit and decision on funds comes at an extremely important time in the war effort for Ukraine. There are frequent reports that the war is reaching a stalemate and that Ukraine’s soldiers and leaders are exhausted. European security officials say that Ukraine is on the whole outperforming Russia on the battlefield, but that victory will require support from Western allies until the end.

There are also fears that Ukraine is slipping down the agenda of the West. This has been a concern ever since the Hamas attack on Israel last year and has been exacerbated by the widening conflict in the Middle East.

Aside from the tangible distractions, Kyiv and its allies are also acutely aware of the political changes that could happen over the next year.

European elections in June are predicted to welcome the largest-ever cohort of far-right parliamentarians to the legislative branch of the EU.

Opinion across the European right is not uniform, of course, but there are a large number of politicians on the right who are against funding Ukraine and in some cases are very pro-Russia. Current polls predict that the right will have the numbers to act as a block in the Parliament, which could make passing legislation very difficult.

Ukraine is also falling down the list of things that European citizens care about. At the start of the war, European opinion was relatively solid in its support of Ukraine and remained so for a long time. However,the conflict has now slipped in the minds of some behind issues such as economics, climate change and immigration, according to research by the European Council on Foreign Affairs published this year.

Beyond Europe, there are also major concerns about what a second Donald Trump presidency would mean for Ukraine and European security as a whole.

Trump’s rhetoric during his first term caused EU and NATO officials to speak more seriously about the need for Europe to become more self-reliant in defense and security. However, Europe has not made that much progress on its long-term defense strategy.

This could make sending money and arms to Ukraine for much longer very difficult for countries who are actively trying to beef up their own forces.

Of course, there are also fears that Trump, who was seen as sympathetic to Putin during his last presidency, will try and broker a negotiation that ultimately costs Ukraine.

As the Ukraine crisis approaches the two-year mark it is becoming increasingly difficult for Europe to manage. On one hand, fatigue is raising questions about the practicality of endless support. On the other, the consequences of Ukraine losing the war could be unconscionable for the rest of Europe.

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