Hungary is expected to compromise on its veto of EU aid to Ukraine at the extraordinary EU summit on February 1, amid both threats and signs of flexibility from the EU, as well as efforts by Kyiv to build bridges with Budapest.

Hungarian foreign policy experts expect an agreement at the summit, as Brussels looks ready to give concessions to Hungary to secure a four-year €50bn funding agreement to Ukraine, whilst Budapest has also softened its stance and appears to be leaning toward a compromise solution, as it has often done before in confrontations with the EU.

Prime Minister Viktor Orban is under pressure to change course on his Ukraine policy, with media reports that the EU could indefinitely freeze aid to Budapest or even begin the Article 7 process to remove its voting rights. Budapest had described such threats as "blackmail", and EU sources later downplayed them.

A recent meeting between the Hungarian and Ukrainian foreign ministers in Ukraine was also constructive and could mark the first steps toward the normalisation of ties between the two countries.

At the December summit, analysts had expected Hungary’s pro-Russian leader Budapest to veto the launch of accession talks with Ukraine as he had promised earlier, but he simply walked out of the room during voting to guarantee a unanimous vote. According to analysts, Orban was not expecting such a united stance and he took the opportunity offered by German Chancellor Olaf Scholtz to skip the vote.

However, later at the summit he blocked the revision of the EU budget that included €50bn in financial aid to Ukraine, prompting leaders to call an emergency summit for February and consider come different versions of a "plan B" to circumvent Hungary.

The Belgian presidency is hoping for the approval of the same agenda that was torpedoed six weeks earlier: the amendment of the EU's long-term budget (MFF) that entails the release of €50bn assistance to Ukraine, €33bn in loans and €17bn in grants.

Although the updated agenda put forward by Belgium does not include the Hungarian government's set of proposals, according to Radio Free Europe, there are intense negotiations behind the scenes on these issues with the French-German tandem. 

Hungarian diplomats offered to drop its veto if disbursements from the MFF were made annually, which could give Hungary an option to block the deal in the future and possibly extract new concessions. This would run counter to the Ukraine Facility's aim to provide long-term, predictable financing to the war-torn country at a critical time and would enhance Orban’s blackmailing power.

A plan B seen as second-best in Brussels is committing funds through a special financial vehicle created by all 27 member states, outside their long-term budget. Under this option Budapest said it would accept commitments based on countries' gross national income and assistance to Kyiv agreed annually.

After the veto in December, EU leaders were examining another option of leaving Hungary out of the framework, as the EU26 would extend support directly to Kyiv on a bilateral basis. That would require ratification by parliaments. Consequently, it would be more time-consuming at a time when Ukraine urgently needs financing to remain afloat, particularly given the hold-up in US support.

According to press reports, Hungary had also put forward another demand, which was possibly presented by Orban at the December summit, calling for a two-year extension of the Recovery and Restructuring Facility (RRF), from 2026 to 2028. At present, member states have until the end of August 2026 to complete the milestones and targets necessary to access all the grants and loans; otherwise, the money that remains unused will be lost.

The EU has withheld €10.4bn from the RRF to Hungary, including €6.5bn in grants and €3.9bn in loans, as the government has failed to meet the necessary conditions on restoring the rule of law. The extension of the RRF timetable would give the government more time for the utilisation of funds, once released.

The legal service of the European Council said the extension can be amended by a qualified majority, and according to Radio Free Europe, this could be part of a deal to guarantee a unanimous vote on changing the MFF.

A third proposal by Hungary involves a derogation request to contribute additional payments to the RRF funds. While such a concession could be claimed as a success by the Orban government, its financial impacts are marginal.

According to the latest reports, the negotiations over the package are at a final stage and focus on the so-called emergency brake, introduced in the Treaty of Lisbon in 2007. This  would give Budapest the chance to bring the issue of Ukraine aid to the European Council when it wanted,   without giving it a veto of the deal. The RRF timetable would also be extended and Budapest would be given  more EU funds for surveillance of external borders .

Frustration grows over Orban's blackmail

The Hungarian premier may not have expected such a strong and united position by the leaders of the other 26 countries on the launch of accession talks with Ukraine, seen as a symbolic step, foreign policy expert Botond Feledy told bne Intellinews. EU leaders like EC President Charles Michel alluded to the rift as the EU26 versus Hungary, making this comparison for the first time.

Hungary's interest is that any deal is better than no deal. If there is no agreement, then the European Council would trigger plan "B" bypassing Hungary, which would be a diplomatic setback. It would also mean Orban "losing" his veto card in the future. Therefore there is more chance of an impending agreement as both parties are inclined to make compromises, he argues.

Other foreign policy experts believe that Hungary's leader, who likes to push his boundaries to the limit, will eventually concede due to the squeeze from his Western allies. The EU and the US seem determined to secure further support for Ukraine at this critical time before the elections, and are exerting pressure on Orban.

Following the December 14-15 summit in Brussels, there has been growing frustration among EU leaders with the obstructionist policies of Orban. Some have called it a wake-up call and a day of reckoning, a realisation that the Hungarian prime minister has held the EU hostage. EU politicians have repeatedly likened Orban's demands to "blackmail" and there have been calls to harden the tools to bring Hungary back into line.

One option entails a mechanism allowing it to cut off EU funds, while another is the Article 7 procedure laid out in the EU treaty that can strip voting rights of a member country.

"We shall see whether the leaders have enough patience to negotiate with Viktor Orban, or whether they will undertake this new way by using Article 7," Vera Jourova, European Commission Vice President for Values and Transparency, told reporters earlier this month.

The European Parliament is also putting pressure on the EU's executive to tighten the grip and take more resolute action against Budapest. It approved a resolution in mid-January to investigate the European Commission's decision in December to release €10.2bn of EU funds to Hungary.

MEPs said the EU must not give in to Hungary's blackmail and give up the strategic interests of the continent. But these resolutions are politically driven and have no binding force.

The European Commission's decision to unblock around a third of all funds to Hungary had come on the eve of the December summit, which raised doubts of possible behind-the-door arrangements, but the events unfolding at the summit proved these allegations groundless.

The European Commission and Hungary dismissed the idea that the release of funds was made in exchange for Budapest giving up its resistance to Ukraine’s financing. It said Hungary had simply met key milestones to guarantee the independence of the judicial system by December.

But there is still some €22bn of EU funds locked, including the RRF and its credit leg, pending progress on issues including academic freedom, LGBTQ rights, and protection for asylum seekers. Orban remains staunchly opposed to backtracking from these policies, as he risks losing face among radical voters.

A confidential proposal circulating in Brussels called for shutting off all EU funding to Budapest to spook investors and sabotage Hungary's fragile economy. Although the report by Financial Times published on January 29 was downplayed by an EU official, who called it a background note on the current status of the Hungarian economy, which does not reflect the status of the ongoing negotiations, the suggestion that EU leaders were even contemplating such a step raised eyebrows in Brussels. There would be serious legal obstacles that would prevent Brussels from permanently suspending funds to Budapest, experts noted.