EU looks to win Hungary support for Ukraine aid in return for EU funds access

(Representative image: Reuters)

European Union finance ministers will on Tuesday look to get Hungary's backing for 18 billion euros ($18.89 billion) of support for Ukraine for next year in exchange for access to EU money from its recovery fund as well as budget.

EU officials said Budapest has also refused to endorse an OECD move to impose a minimum tax on global corporations as a way to increase its leverage in talks for EU funds.

At stake for Hungary is 5.8 billion euros of EU fund, for which it needs EU governments to approve its spending plan. If the plan is not approved by the end of the year, 70% of the amount will be irrevocably lost.

Hungary is also fighting for access to EU cohesion funds it would get between 2021 and 2027.

The European Commission last week asked EU governments to freeze 7.5 billion euros, or 65% of the funds to Hungary, until it addresses concerns over the high level of corruption and rule of law in the country.

A stalemate due to a lack of trust between Budapest and the EU institutions has made it difficult for EU finance ministers to come up with an informal package deal and sort out the separate issues.

The finance ministers can endorse the Commission's request, or reduce the amount of the frozen funds by a certain amount if Budapest convinces them that it has made progress since the last Commission assessment that ended on Nov. 19.

Hungary would need more time to convince the ministers of its progress, which could mean postponing a vote on the issues until Dec. 12, EU officials said.

On the EU side, all countries except Hungary want to move 18 billion euros in financial help for war-torn Ukraine for next year from a system of ad-hoc bilateral loans to the regular EU budget, to make the disbursements cheaper and predictable.

If Hungary does not agree, EU countries will still provide the money, but again in the form of bilateral loans, which is more cumbersome and tougher on the Kyiv administration.

The EU also needs Hungary's consent to implement the OECD agreement that large international corporations should be taxed a minimum of 15% where they operate rather than where they set up an office for tax purposes.

($1 = 0.9527 euros)