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EU overcomes Hungary veto threat to seal £42bn aid package for Ukraine

(Alamy/PA)
(Alamy/PA)

Leaders of the 27 European Union countries have sealed a deal to provide Ukraine with 50 billion euros (£42 billion) in support for its war-ravaged economy after Hungary dropped weeks of threats to veto the measure.

European Council president Charles Michel said the agreement “locks in steadfast, long-term, predictable funding for Ukraine” and shows the EU’s determination “to support their future, to support freedom”.

The aid package — about two-thirds loans and one-third grants — is not intended to help fight off Russia. Apart from supporting the economy and paying for rebuilding, it is also aimed at setting Ukraine up for future EU membership.

Charles Michel
Charles Michel (Geert Vanden Wijngaert/AP)

The EU has a separate programme for funding arms and ammunition.

Almost two years after Russia invaded Ukraine, its economy is in chaos. The first months after the 2022 invasion saw the country lose a third of its economic output to wartime destruction and occupation by Russia, which controls Ukraine’s heartland of heavy industry.

Inflation soared to 26% because the central bank had to print money to cover budget gaps.

The economy rebounded last year, but Ukraine spends almost all the money it brings in through taxes to fund the war. That leaves a huge deficit because other bills must also be paid, including pensions and salaries for teachers, doctors, nurses and state employees.

Political infighting in the EU and the US has held up funding, with a combined total of more than 100 billion dollars (£78 billion) is at stake.

Mr Michel said the EU’s move would also send “a signal to the American taxpayers”, which could help the Biden administration in its efforts to get a Ukraine support package through Congress.

Volodymyr Zelensky
Volodymyr Zelensky (Markus Schreiber/AP)

Ukrainian President Volodymyr Zelensky welcomed the assistance, saying that continued financial help from the EU would strengthen Ukraine’s long-term economic stability, “which is no less important than military assistance and sanctions pressure on Russia”.

His country could receive the first tranche of money as soon as March, once the European Parliament has endorsed the deal.

Hungarian Prime Minister Viktor Orban, the EU leader with the closest ties to Russia, raised objections to the financial aid in December and blocked its adoption. He had threatened to do the same in recent days.

The populist leader’s government has been in a dispute with the European Commission over Hungary’s alleged democratic backsliding. Some of his country’s own funding was withheld as a result.

In December, the 26 other EU leaders agreed that the package would run from 2024 to 2027. They also agreed to make Ukraine a candidate for EU membership, which Mr Orban reluctantly accepted.

But the aid package was part of a review of the EU’s continuing seven-year budget, which requires unanimous approval.

Viktor Orban
Viktor Orban (Denes Erdos/AP)

To help assuage Mr Orban, the leaders agreed that the commission would review the budget in two years, if deemed necessary, but such a review would not include an opportunity for a future veto.

Mr Orban cast the decision as a victory, tweeting: “Mission accomplished. Hungary’s funds will not end up in Ukraine and we have a control mechanism at the end of the first and the second year. Our position on the war in Ukraine remains unchanged: we need a ceasefire and peace talks.”

Some leaders had earlier lashed out at Mr Orban, accusing the Hungarian leader of blackmail and playing political games.

“There is no problem with the so-called Ukraine fatigue issue. We have Orban fatigue now in Brussels,” Polish Prime Minister Donald Tusk told reporters.

“I can’t understand. I can’t accept this very strange and very egoistic game of Viktor Orban.”