All 27 leaders of EU member states agreed on an additional €50bn support package for the so-called Ukraine Facility within the EU budget, European Council President Charles Michel announced on February 1.

"It is very important that the decision was made by all 27 leaders, which once again proves strong EU unity," President Volodymyr Zelenskiy said reacting to the news on X.

The decision unblocks one of two crucial funding packages for Ukraine’s budget in 2024, after Western financial and military aid has become snarled in internal wrangling. The four-year €50bn support package will see the transfer of some €20bn to Ukraine this year to plug a $37.7bn hole in Ukraine’s 2024 budget, but is insufficient by itself to cover budgetary needs for this year. The Ministry of Finance (MinFin) has already admitted that there remains $29bn of funds needed to pay government expenses and military supplies that is unaccounted for, although the EU money will go a long way towards closing that gap.

Another $61bn of US support remains tied up in Congress and linked to spending on securing the US’ southern border demanded by Republicans. In January, Ukrainian President Volodymyr Zelenskiy said that Ukraine needed both the US and the EU money to continue fighting. The government in Kyiv has come up with a Plan B should the US money fail to appear that includes turning on the printing presses again to fund the budget by monetary means that would endanger the country’s macro stability if carried out.

Hungarian Prime Minister Viktor Orban had threatened to veto the decision unless the Ukraine funding was separated from the EU budget and also wanted an annual review as well as EU monies for Hungary released that have been frozen by the European Commission (EC) executive.

He failed to get any of these concessions. The EC agreed to “discuss” the Ukraine allocation after one year and “review” it after two years “if needed” but this does not include a vote on continuing the allocations. Moreover, the deal with Orban does not include releasing Hungary’s frozen funds.

In face-saving comments, Orban said that he ensured that EU funds for Hungary, which the EC froze due to concerns with the country's backtracking on the fight against corruption and lack of transparency in public procurement, "will not end up in Ukraine." In its latest Corruption Perceptions Index report, Transparency International found that Hungary is seen as the most corrupt country in the EU.

It seems that Orban backed down after the EU threatened to wreck Hungary’s economy and crash the florin should Orban veto the Ukrainian package.

The deal has made Orban look very isolated in the EU, which is becoming increasingly “tired” with the Hungarian Prime Minister’s antics. Polish Prime Minister Donald Tusk said in Brussels on the same day: “"Today, Viktor Orban's position is a threat to our security. This is unacceptable, so we need to think about the possible consequences, but maybe not today," he added.

The European Parliament now needs to sign off on the Ukraine Facility regulation during the plenary session scheduled for February 26-29, before the first funds can be released. Kyiv said it is expecting the first tranche of $4.5bn to arrive in March.

 

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REACTIONS 

https://www.eurointegration.com.ua/news/2024/02/1/7178716/

https://www.me.gov.ua/News/Detail?lang=uk-UA&id=0a45f828-ff91-4586-8972-0117376d8c45&title=VropeiskaRadaPidtrimala

Orban spreads misleading narratives: he claims that the EU would have guaranteed that the money that Hungary was supposed to receive (and which is now frozen due to the rollback of the rule of law) would not go to Ukraine as part of the €50 billion deal.⤵️ https://t.co/4G4f1mRupO

— Dionis Cenușa (@DionisCenusa) February 1, 2024

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