Hungarian Prime Minister Viktor Orban has threatened to veto the EU’s long-term budget for 2028-2035 unless the European Commission releases frozen EU funds to Hungary.

The EC is blocking almost €12bn in development money to Hungary, as well as €5.8bn in grants and €4.6bn in loans under the RRF mechanism because of the Orban regime's corruption and violations of the rule of law. Of that latter amount, Budapest only received €920mn in advance payments, which are not conditional on meeting so-called "super milestones".

Negotiations for the next long-term EU budget are slated to begin in mid-2025, but a potential veto could derail the entire process, throwing the EU's financial operations into uncertainty as approval requires the agreement of all 27 members.

“If the funds we don’t receive in 2025 and 2026 are not transferred in 2027 and 2028, Hungary will not vote for the next seven-year EU budget, approval of which requires a unanimous decision," Orban said in his regular interview with state radio on December 6. 

He dismissed concerns over the arrival of the funds,  saying that while there were "inconveniences", the funding would eventually "doubtless" flow into the economy.

Hungary’s ability to veto will likely become relevant only in the latter half of 2026, financial website Portfolio.hu reports, adding that the negotiations on the EU's next budget cycle are still in the preparatory stage. The EU executive is planning reforms, including potentially merging EU funding streams into a single framework.

In the interview, Hungary's illiberal leader blamed bad policies adopted by the EU for the "disintegration" of the European economies, including Germany and France. He named rising energy prices and the deterioration of European competitiveness.

The Budapest Declaration on the New European Competitiveness Deal signed at the November EU summit in Budapest would require Brussels to take concrete measures to that end in the coming half year, he added.

In the more than 30-minute long interview, Orban claimed Hungary was the "new opposition to Brussels", criticising the EU leadership for its policies on migration, gender, and energy. He accused Brussels of promoting policies harmful to the country’s interests and undermining its sovereignty, and described the EU’s economic policies as detrimental, particularly citing energy policies.

Orban emphasised the need for Hungary to resist Brussels until a new majority, led by conservative and patriotic groups, took control – something that does not look likely in the foreseeable future.

He accused EC President Ursula von der Leyen and EPP leader Manfred Weber of treating Hungary as an "enemy" and allegedly supporting opposition forces in Hungary to instigate a government change. He warned that Hungary would fight back against any attempts to dictate its governance or enforce unwelcome policies.

On other economic issues, Orban said German carmakers have agreed not to shut down their factories in Hungary.

"We have agreements with these companies, not only will they not shut down the factories but they will develop them," the prime minister said.

"They think that there is trouble in Germany, but the Hungarian economic environment is more favourable to them and they are better able to preserve their jobs here." The prime minister did not specify which companies the government had an agreement with.

According to Portfolio.hu, Hungary faces broader challenges regarding EU funds, with €21.8bn in cohesion funds allocated for 2021-2027. As of October 2024, only 8.3% (€2bn) of this amount has been received.  Due to the delay in reforms required by the EU, Hungary has already incurred a loss of over €1bn under the "N+2 rule", which mandates that unutilised allocations expire after two years if not freed from legal blockages.

Hungary’s access to RRF funds also hinges on meeting transparency and anti-corruption benchmarks. Non-compliance could result in the loss of 60-65% of these funds by 2026.

In addition, Budapest faces a rising financial burden related to its non-compliance with EU asylum laws.  In the summer, the EU’s top court imposed a €200mn fine on Hungary, with an additional €1mn penalty accumulating daily due to its failure to meet the 15-day payment deadline.

Hungary’s strongman had used veto threats in the past to exert pressure on the European Commission. In 2020, Poland and Hungary jointly threatened to veto the EU's decision to tie fund allocation to rule-of-law compliance. Ultimately, the conditionality mechanism was upheld, but the preamble included a Hungarian-Polish demand stating that the procedure should not be applied to migration-related issues.  

If member states fail to reach an agreement on the Multiannual Financial Framework (MMF), the EU would default to a "provisional twelfths" system. In this case, payments may be made monthly up to a limit of one-twelfth of the appropriations entered in the budget of the previous financial year. 

While this arrangement ensures basic operations, it has significant political and economic ramifications as funding for new initiatives, such as green energy projects or cohesion support for less developed regions, is also affected, Portfolio.hu adds.