Over corruption concerns, Hungary could lose multi-billion-euro defence loan

Despite the launch of the second wave of the EU’s SAFE defence loan programme, the fate of Hungary’s “mega-loan” remains undecided. The assessment of the country’s EUR 17.3 billion request is unlikely to be concluded before February, and Brussels has tied approval to unexpected rule-of-law and anti-corruption guarantees.

Corruption can prevent another big fund

The European Commission has taken another step towards expanding EU defence financing: in the second round of SAFE (Security Action for Europe), the national investment and procurement plans of eight member states have been given the green light. However, as reported by Portfolio, the package approved so far does not include Hungary’s substantial EUR 17.3 billion request, which is expected to be assessed only at the very end of the process.

In this second wave, the Commission approved the plans of Estonia, Greece, Italy, Latvia, Lithuania, Poland, Slovakia and Finland. SAFE has a dual objective: on the one hand, to rapidly strengthen member states’ defence capabilities, and on the other, to promote joint procurement based on the European defence industry. Accordingly, the programme explicitly favours projects in which at least two countries participate jointly.

From Hungary’s perspective, Italy’s role is therefore particularly important, as the government is in talks with Rome on joint procurements in several areas involving SAFE funding. While such a partnership could improve the chances of Hungarian projects, it does not replace the need to meet the conditions required for approval by Brussels.

In total, 19 EU member states have indicated their intention to participate in the SAFE loan instrument. In the first round, in mid-January, several countries’ plans already passed the initial screening, while larger-scale requests were deferred. According to the Commission, these include Hungary as well as France and Poland, partly due to more in-depth financial scrutiny and examinations related to the rule of law. Decisions are expected in early February.

The role of corruption in Hungary and other specific features of the application

Hungary’s application has proved more complex than those of other EU countries for several reasons. The main issue is that the Commission had preliminarily deemed a EUR 16.2 billion envelope justified, while the government submitted a higher request of EUR 17.3 billion.

In addition, the Brussels institutions are examining Hungarian regulation in a politically and legally sensitive environment, as serious doubts have been raised regarding public procurement practices, the independence of the prosecution service, university foundation systems, and anti-corruption safeguards.

Another distinctive feature of the Hungarian plan is that the government would use part of the funds—around EUR 2 billion—to refinance existing, higher-interest government bonds, which, according to calculations, could result in noticeable interest savings.

However, SAFE rules prescribe strict allocation ratios: 65 per cent of the funds must be spent on joint procurement and 35 per cent on infrastructure development, meaning that this framework is unlikely to allow the full Hungarian request to be approved.

If the Council adopts the implementing decisions, the Commission can begin signing the loan agreements. The first disbursements could start in March 2026, when the 15 per cent pre-financing would also be paid. In Hungary’s case, this would mean an immediate inflow of several billion euros—provided that Brussels ultimately gives its approval to the application.

If you have missed it, you can also read about the loss of earlier EU funds in our related article.