December 7, 2022 - 7:00am

A meeting of EU finance ministers broke down on Tuesday amid the bloc’s ongoing “rule of law” standoff with Hungary, with the European Commission proposing to withhold billions of euros in funds for Budapest despite concessions made by Viktor Orbán’s government. Finance ministers had been expected to discuss the proposed funding block, with a final decision from member states due by December 19.  

Given the distaste for Orbán among many EU governments, this decision might have been assumed a foregone conclusion — but yesterday’s meeting showed that the bloc is belatedly realising the full ramifications of its rule-of-law crusade. A group of countries including France, Italy and Germany expressed frustration with the Commission’s unbending stance and sought a new evaluation which would reduce the amount of money to be withheld from Hungary, making it easier for EU member states to approve the plan. 

Given the political capital that Brussels has invested in the rule-of-law proceedings, failure to get the Hungarian funding block over the line would be a “complete disaster”, according to EU diplomats. But last-minute concerns about the scale of the punishment also indicate a glimmer of pragmatic thinking from EU leaders who have realised that a new system of blackmail based on financial penalties is not a one-way street. 

Withholding funding from individual member states breaks the EU structure which ensures that countries with varying political objectives sacrifice a portion of their national sovereignty in exchange for greater prosperity based on cooperation and compromise. If Hungary is denied EU money, it has little incentive to make the sacrifices and compromises which EU membership entails.

As such, Orbán is deploying his own methods of political blackmail to bring the EU’s agenda to a standstill. Budapest reaffirmed its veto on new EU loans for Ukraine on Tuesday, and is also blocking approval of a 15% minimum corporation tax. 

Hungary does not, of course, admit any link between these vetoes and the funding controversy, but the message is clear: if the EU continues to weaponise funds, it will be stuck with an uncooperative and potentially destructive member state for as long as Orbán remains in power. Panic resulting from this too-late realisation is feeding calls from France, Germany and others for the sanctions on Hungary to be diluted. It has also given rise to a drive from Brussels for national vetoes to be abolished entirely. 

The EU can still save the situation, but only if it can see past the blinkered view of some of its rule-of-law hawks. Lithuania’s finance minister described Hungary’s block on EU loans for Ukraine as “immoral” ahead of the ministerial summit, saying that funding issues and help for Kyiv should not be put “on the same level.” But this argument works both ways: if unity on Ukraine can override other considerations, then it is irresponsible for Brussels to persist in politically alienating a member state through financial penalties. 

Withholding funds has already brought about reforms in Hungary which Budapest would not have implemented, left to its own devices. But now, with Brussels appearing to move the goalposts, the EU risks straying into a minefield of recriminations and mutual blackmail which could paralyse the bloc for good.

William Nattrass is a British journalist based in Prague and news editor of