Budapshka

The conflict of Hungary and the EU about the European budgets ended in a "big deal". Both parties declared themselves winners, but the European Union is now ready to confront in 2023

In early December, the conflict between the EU and Hungary reached its climax. Brussels was preparing for the first time in its history to freely achieve the funds of pan -European budgets for the EU member. In response, Budapest used all possible tools for blackmailing his colleagues in the European Union, including imposing a veto on the next European financial assistance package of Ukraine in the amount of 18 billion euros.

Nevertheless, on the eve of the December summit of the EU, the parties were able to agree on a big deal. Hungary refused to provide assistance to Ukraine, and in return was preparing to receive 1.25 billion euros from 7.5 billion initially frozen in pan -European funds. Thus, a temporary compromise was found, but in the long term the victory is more likely on the EU side. Budapest will be able to receive the remaining 6.25 billion only if it will carry out reforms that restore the rule of law in Hungary, to which Orban's regime is unlikely to go. But it is even more important that Brussels finally was able to test a new tool for coercive autocracy to discipline is a financial lever that will probably greatly increase the price of an authoritarian rollback for countries such as Hungary or Poland.

Historical confrontation

All 2022, the EU leadership continued to fight the growing authoritarianism in Hungary. Despite the support and literally allied relations of Viktor Orban’s regime with Vladimir Putin, who unleashed the war in the center of Europe and caused several tens of thousands of Ukrainian refugees in Hungary, the Party of the Fides Orban in April of this year again managed to win the elections. Victory gave Budapest for the strength in the confrontation with Brussels lasting the last few years. The EU insists that the regime of Viktor Orban is authoritarian, destroys the institutes of the rule of law and uses the public procurement system in order to distribute contracts to the necessary firms in exchange for their loyalty during the elections. Orban does not recognize the accusations and enhances anti -European sentiments within the country.

Since there is almost no arsenal of pressure instruments for the EU to member countries, for a long time the confrontation of Brussels and Budapest was limited to statements to each other.

Since 2014, Orban in these attacks on European officials quite successfully succeeded, having formed at leastpart of the Hungarian society by a steady conviction that the EU is trying to take sovereignty from member states, trying to turn the population of all countries into a single mass without national self-awareness. In this civilizational conflict of Hungary, according to Orban , it protects the Western values ​​from Western Europe, which already lives in a certain “post -Western” reality of mixed races. For this, Brussels allegedly constantly and tried not to pay Budapest part of the budgets intended to him as a member of the EU.

Until this year, Brussels' attempts to use a financial lever underwent collapse. The issues of the distribution of budgets in the EU-like many others-should be agreed by all member countries, and it is obvious that if one of the countries is trying to punish the “ruble”, it will simply block these attempts. In addition, Hungary had a faithful ally in the European Union, which Brussels also accused of authoritarian trends and violation of the principles of the rule of law in domestic politics, Poland. However, the war in Ukraine drove a wedge between two-assists. Poland took an extremely stringent position in Russia and sanctions against it (for which Brussels closed his eyes to part of the problems of human rights within the country), while Hungary continues to try to maintain semi -consulting relations with the Kremlin.

However, a more serious blow to Hungary’s positions is not connected with loss of support from Poland, but with the advent of new rules for the distribution of part of the funds that form a single EU budget after the pandemic. In the formation of new budgets for restoring economies after coronavirus and Locksuns of the Donor country, that is, those who introduced more to this fund more than received in return, put forward the requirement to develop a new rule of budget use in the EU legislation- the “accusation mechanism” .

It is he who gives the right of the European Commission to propose freezing funds intended for a particular country, if this state violates the principles of the European Union or there is a threat that its public procurement system may be corrupt.

The proposal of the European Commission still needs approval by EU member countries, but now a consensus is not needed, there are enough support for 15 countries in which at least 60% of the population of the entire European Union lives in total. Get so many votes against Hungary, especially taking into account its position in relation to the war and the actions of the Kremlin, is more than realistic.

Blackmail and "Vetocracy"

Fearing that the European Commission will bring the issue of freezing funds to voting at the EU Council on December 19, and there the position of Hungary will be in the minority, Budapest moved to extreme measures. Orban imposed a veto on 18 billion euros already approved by European Parliament, allocated to help Kiev in 2023. This money should cover about half of the deficit of the budget of Ukraine, and the EU intended to start translating them right in January, as Kyiv asked. At the same time, Hungary blocked the introduction of a single minimum tax of 15% in the EU on large companies - a project that Germany and Olaf Scholz, who tried to achieve this was promoted by the Minister of Finance of Germany for the last year. The EU and so introduces this corporate tax late - the G7 leaders approved it last year, but Poland and Hungary opposed the European Union level. In Hungary, this tax is 9%, and Orban stated that the increase in the rate will lead to the ruin of large companies and unemployment.

Blocking both initiative for the EU, Budapest informally made it clear that he was ready for auction. The position on Ukraine and the corporate tax can change if the EU is concessions of Hungary in terms of money in European funds. Such a frank neglect of the principles of the European Union and the cold calculation caused a flurry of criticism of the "vetocracy" of Orban in the European Parliament. The leaders of France and Germany tried to intervene in the conflict between Brussels and Budapest, convincing the European Commission to take a milder position of assessing the reforms of the public procurement system in Hungary, the holding of which Ursula von der Lyain linked with the unlocking of the Hungarian euros.

As a result, a big deal took place. On Monday December 12, at a meeting of the EU Council, Hungary withdrew the first veto. Ukraine will receive money, but according to the adjusted financing scheme. The EU will provide them to Kyiv not at the expense of new loans, which Orban formally spoke out against, but by transferring funds directly from the European Restoration Fund (RRF). The review of the second veto was covered by a similar formality: the corporate tax rate in Hungary will remain at the level of 9%, but in conjunction with other taxes on large companies, the level of taxation of these businesses will still be the same 15%.

In exchange for withdrawing two veto Brussels, Budapest unlocked the payment of 1.25 billion euros from the EU rally fund.

However, the remaining 6.25 billion can now be transferred to Budapest only in parts and if the European Commission recognizes the progress in the reforms that restore the supremacy of law and cover the possibilities for corruption in Hungary.

In addition to them, starting from last summer, Budapest was supposed to receive payments of 5.8 billion euros from the recovery fund mentioned above. However, the EU never approved Hungary, according to which this money could be spent, and without it - money remains in the budget of the European Union. This December, the deadline expired when the plan could be agreed by the parties, and in the absence of a compromise, the money would be irrevocably lost for Hungary. As a result of a large transaction, the EU replaced the main condition after which the funds will be unlocked: Hungary and the European Commission should sign a partnership agreement. This means that Budapest retained the chance of receiving money, but the terms and parameters of this partnership will remain at the discretion of the European Commission.

As a result, thanks to a large deal, both Brussels and Budapest can really consider themselves winners. Orban won the dispute with the EU, because some of the money from one fund can receive immediately, and the money from the second did not burn out irrevocably. Brussels can consider himself a winner, because Budapest recalled both of his veto, receiving in return only a small part of the funds, and all the others are now completely tied to the implementation of reforms as they formulated the European Union.

In anticipation of 2023

Orban is known for his pragmatism: his political position changes along with public sentiments and in order to extract maximum political dividends at a particular moment. Starting his career as an absolute democrat in 1989, at the end of the 1990s, the future leader of Hungary went to a conservative camp, and then became one of the incarnations of his right-wing up in European politics.

Pragmatism has determined in recent years and, probably, will continue to determine his relationship with the EU. The main thing that Hungary faced in 2022 is serious economic problems, even deeper than the neighbors in Central Europe. The National Hungarian currency Forinta lost 13% of its value in relation to the euro, which is more than in neighboring Poland, Slovakia or Romania. Inflation in Hungary, according to the results of the year, will become one of the highest in Europe - twenty -two percent. The level of public debt reached 75% of GDP again, and the optimistic forecast for economic growth in 2023 does not exceed 1.8% of GDP.

At the end of this year, Orban was vital to get at least a number of funds from European funds to close financial holes. It is precisely by this desire that his radical attempts to play with the EU in Vetocracy, and the final compromise with the European Commission, are explained.

In 2023, Orban will still be seriously dependent on finances from the EU. However, the results of the “big deal” are such that it will now be much more difficult to receive European money without serious reforms within the political regime built by Orban.

The situation for Orban is also aggravated by the fact that in 2022 he lost all potential allies within Europe. The split with Poland, due to a position in the war in Ukraine, was hoped to compensate for friendship with the new government of Italy: on issues of sovereignty and relations to migration, the positions of the two countries are really ideologically close. But Rome also extremely needs EU resources after a destructive pandemic, and on the Ukrainian issue, the new Prime Minister of Italy George Melony even more than its predecessors, focuses on NATO and the EU, and not on Russia.

Orban's foreign policy loneliness in the EU and the economic problems of Hungary will push him to the concessions of the European Commission in 2023. How serious these concessions will be, largely depends on whether Brussels can use his new “mechanism of precast” in full force.