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EU Seeks Workaround to Hungary’s Veto on Ukraine Aid, Eyes $22 Billion Loan Plan

According to the Financial Times, the European Union is exploring options to get around HUngary’s resistance to ongoing financial aid for Ukraine. This workaround involves individual EU countries providing assurances to the EU budget, potentially enabling the European Commission to borrow up to EUR20 billion ($22 billion) for Ukraine in the upcoming year.

Hungary had previously vetoed a proposed EUR50-billion aid package for Ukraine over a four-year period. Consequently, Brussels is seeking alternate strategies before an imminent summit scheduled for February 2024.

Unnamed EU sources revealed to the Financial Times that this debt model is the most viable among several options under consideration. A similar framework was employed in 2020 by the EU to secure additional funds for member states during the Covid-19 pandemic.

Although the specific terms are not yet set, the plan may only necessitate financial assurances from member states boasting high credit ratings, bypassing the need for unanimous backing.

However, while technically feasible, officials caution that the scheme could encounter political complexities. Another option being weighed involves extending the current year’s funding structure for an additional year. Despite these discussions, the European Commission remains optimistic about securing approval for the original EUR50-billion package, with the goal of channeling funds to Kiev by March at the latest.

Last week, the Financial Times hinted that that Hungary’s opposition to aid for Ukraine prompted some EU members to consider invoking Article 7 of the Treaty on European Union against Hungary. This article allows the suspension of a member state’s voting rights for persistent violations of core EU principles.

Yet, the proposal to trigger Article 7 received limited support, with many favoring efforts to encourage Hungary to align with EU policies by outlining the potential repercussions of its isolation.

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