The EU threatens to hit Hungary with the markets if it does not comply with aid to Ukraine
The EU will sabotage the Hungarian economy if Budapest blocks new aid to Ukraine at this week's summit, the FT reports, according to a confidential plan drawn up by Brussels that marks a significant escalation in the battle between the EU and the its most pro-Russian member state.
Even the fact of seeing an EU country as an "Enemy", to the point of deserving economic sabotage, signifies a step forward in the policy of an EU which, at this point, also becomes an enemy of its own members, if they do not follow the majority in decisions. A point that deserves further study and perhaps even more respectful regulation of all positions.
In a document drafted by EU officials and seen by the Financial Times, Brussels outlined a strategy to explicitly target Hungary's economic weaknesses, put its currency at risk and collapse investor confidence in an attempt to damage "the jobs and growth” if Budapest refuses to lift its veto on aid to Kiev.
Viktor Orbán, the Hungarian prime minister, has vowed to block the use of the EU budget to provide 50 billion euros in financial aid to Ukraine during an emergency leaders' summit on Thursday. If it does not back down, other EU leaders are expected to publicly vow to permanently block all EU funding in Budapest with the intention of spooking markets, causing a run on the forint and a surge in the cost of borrowing of the country, Brussels said in the document. We would return to using the markets as a cudgel to hit the policies of individual states, as we saw done during the EU debt crisis.
Europe is telling Viktor Orbán: “Enough is enough, it's time to fall in line. You may have a gun, but we have the bazooka,” said Mujtaba Rahman, Europe director of Eurasia Group, a consultancy firm.
The document states that “in the event that an agreement is not reached at the [summit] on February 1, the other heads of state and government will publicly declare that, in light of the unconstructive behavior of the Hungarian Prime Minister . . . they cannot imagine that” EU funds will be provided to Budapest.
Without these funds, “European and international financial markets and companies may be less interested in investing in Hungary,” the document reads. Such punishment “could quickly trigger a further increase in government deficit financing costs and a decline in the currency.”
János Bóka claimed ignorance of the document, but also said his government would not give in to pressure.
“Hungary does not make a link between support for Ukraine and access to EU funds and rejects other parties to do so,” he said. “Hungary has participated and will continue to participate constructively in the negotiations.” Bóka said that Budapest had sent a new proposal to Brussels on Saturday, specifying that it was open to using the EU budget for the Ukraine package and even issuing joint debt to finance it, as long as other conditions were added that give Budapest the chance to change its mind later.
In reality, the other 26 countries, which want to send the funds to Kiev, have a plan B, which however requires the approval of national parliaments and would therefore require more time, despite being, evidently, also more democratic: there would be a vote that would legitimize the decision more, but democracy doesn't seem to matter too much in Brussels.
Several capitals have been considering using Article 7 of the Treaty on European Union , which would allow Brussels to deprive Budapest of its voting rights or, according to one diplomat, block the infusion of money. But others have rejected the idea, as it requires unanimous support and many countries are reluctant to implement such a serious sanction that would completely call Hungary's EU membership into question.
This story shows how, without a real democratic process, which also includes the possibility of states to disagree with EU decisions without fearing exemplary punishments such as those indicated, the EU remains an imperfect and fundamentally authoritarian construction without the provision of decoupling mechanisms . Decisions cannot always be made unanimously, but these must not bind those who oppose us and, in the end, it is also necessary to provide acceptable rules that allow a country to voluntarily exit without a traumatic process. Using markets as cudgels should not be part of the diplomatic toolbox between friendly countries.
Thanks to our Telegram channel you can stay updated on the publication of new Economic Scenarios articles.
The article The EU threatens to beat Hungary with the markets if it does not comply with aid to Ukraine comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-ue-minaccia-di-manganellare-lungheria-con-i-mercati-se-non-si-adegua-sugli-aiuti-allucraina/ on Mon, 29 Jan 2024 08:30:07 +0000.