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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is managing director for Europe at Eurasia Group
The EU has a long-standing Viktor Orbán problem. For many years, it has proved to be manageable. Now it is life-threatening.
US President Donald Trump’s strategic goal of normalising relations with Russia and shifting his focus to China and the Indo-Pacific means disengagement from Europe — certainly from Ukraine, and possibly from Nato. This will destabilise the EU. That may be something that this US administration can accept; it may even be its aim.
Yet senior EU officials view the Ukraine war as existential. They argue there is no reason to believe Russian President Vladimir Putin, now enabled by Trump, will stop at Ukraine if he is successful there. French President Emmanuel Macron and Sir Keir Starmer, the UK prime minister, hope Putin’s ambitions can be contained, working in partnership with the US. Yet the truth is the US is unlikely to provide the guarantees that the Europeans need to deploy troops and secure a lasting peace. A more likely, ultimate, outcome is ongoing war. In these circumstances, Europe will have no choice but to support and arm Ukraine.
The EU’s ability to do this is directly compromised by Orbán, who has been hugely emboldened by Trump’s return. The Hungarian prime minister keeps in lockstep with Trump and Putin in the hope of winning favours from both.
At the EU leaders’ gathering on March 6, Orbán vetoed summit conclusions on Ukraine. That forced the remaining 26 leaders to adopt a separate statement, dealing a symbolic blow to EU unity.
There are many concrete ways in which Orbán can undermine European support for Kyiv. EU economic sanctions against Russia need to be renewed every six months, with the next decision due in July. This requires unanimity, handing him a veto. Should Europe decide to seize Russia’s frozen assets in Euroclear, worth around €200bn, Orbán would also need to agree. Senior European officials have developed a range of options to get around his blocking tactics, but these would take a long time to engineer and implement.
Orbán also enjoys huge leverage over Ukraine’s EU accession process. Each step, except the initial screening process comparing Ukraine’s domestic laws to the EU’s acquis communautaire, is subject to unanimity. Yet the EU has no need to surrender to Orbán’s blackmail. There are many levers it can pull. Given the new geopolitical reality, it would be well advised to do so.
The easiest lever to pull is cash. The EU has allocated €44.4bn for Hungary in its 2021-27 budget, of which €21.4bn is yet to be released. This is money Orbán needs.
The Hungarian economy has been virtually stagnant in 2024. Inflation has also been rising since last September, hitting an annual 5.7 per cent in February, a figure that includes a voter-sensitive food price rise of 7.1 per cent.
The meteoric rise of Péter Magyar, from an unknown figure in January last year to lead his Tisza party to second place in the European parliamentary elections with almost 30 per cent of the country’s vote in June, has shaken Orbán’s sense of supreme security. Worse still for him, support for the former Fidesz insider has continued to climb.
Desperate to bolster support, Orbán has announced phased tax cuts for mothers and VAT relief on key food items for pensioners. However, these measures will guarantee a budget deficit this year of around 4.6 per cent of GDP, against the 3.7 per cent target, threatening to undermine Hungary’s market credibility.
EU funds are therefore critical if Orbán is to boost investor confidence in the country’s economy. The European Commission has leverage and should use it.
European officials are considering repurposing around €30bn in unused cohesion funds for European defence. Orbán wants to ensure these would not be subject to the same strict conditionality that has prevented €17.5bn in cohesion funds and grants from the EU’s recovery and resilience facility being released to Hungary so far. But as conditionality applies to all money that is paid out from the EU budget or that is guaranteed by it, the commission’s new €150bn facility for defence may also prove inaccessible for Orbán.
The EU has an even more draconian weapon. If 22 member states and the European parliament find Hungary in serious breach of the rule of law, then, after a series of steps involving unanimity among the remaining 26 member states, they could ultimately suspend Hungary’s voting rights by qualified majority.
The EU is now facing a Darwinian moment. It will either adapt or die. To protect Ukraine and its Russian “frontline” states, it must face down Orbán. And the sooner the better.
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