EU-Hungary megadeal closed! Brussels to unlock EUR billions for Hungary – UPDATED

Viktor Orbán
Photo: Creative Commons (CC BY 2.0)

The Czech presidency of the Council of the European Union announced on Monday night that a deal between Hungary and the EU was closed at the meeting of the member states’ ambassadors (COREPER).

The official Twitter page of the Czech presidency shared a tweet 1 hour ago stating the following:

  • EU ambassadors approved in principle a package of EUR 18 billion in support for Ukraine,
  • 15 percent minimum tax for big corporations
  • approval of Hungary’s RRP, and
  • an agreement on conditionality.

The package will be confirmed by written procedure.

According to telex.hu, based on the agreement, Hungary will receive EUR 5.8 billion from the EU’s RRF (recovery and resilience, the so-called COVID-recovery) funds. However, the Hungarian media outlet did not clarify what the agreement concerning the conditionality procedure meant in detail.

Based on the information of Világgazdaság, a government-close economic news outlet, Hungary will be granted an exemption in the case of the global minimum tax (GMT), meaning that the local business tax (abbreviated as HIPA in Hungarian) will be calculated in the GMT. As a result, no companies in Hungary will be required to pay more tax than the current amount.

Hungarian media outlets wrote before that Hungary would probably get the RRF funds. However, they argued that the development funds (7.5 billion EUR) were still at stake. The short statement of the Czech presidency uploaded on Twitter does not share anything new about that sum. We expect that the forint’s currency exchange rate will be better on Tuesday than it was on Monday, thanks to the good news.

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UPDATE (12.13. 9.04 am)

Politico.eu writes that this successful agreement could be viewed as PM Viktor Orbán’s victory over the EU. Interestingly, Ferenc Gyurcsány, the president of the leading Hungarian opposition party, Democratic Coalition, wrote the opposite in a post stating that signing the deal meant Orbán had to lay down his weapons against Brussels.

Politico says the European Union lowered the sum they suspended for Hungary from the development funds from 7.5 billion euros to EUR 6.3 billion. Furthermore, Brussels approved Hungary’s pandemic recovery funds, EUR 5.8 billion EUR, that can be spent by 2026 on various projects, including infrastructure development. The EU withheld that grant for more than 1.5 years due to concerns about the state of the Hungarian democracy. To receive that money, Hungary must carry out 27 anti-corruption and judicial independence reforms, politico.eu argues. The news outlet says Orbán could win for two reasons: “EU system that requires unanimity on many major decisions, and an intense EU desire to preserve a united EU facade as war rages nearby.”

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However, politico.eu adds that Hungary would still lose billions of euros since a large part of the development funds remained frozen.

Meanwhile, as a result of to yesterday’s deal, Ukraine will be able to get the first part of the EU grant next January, provided the EU Parliament gives the green light today.

Thanks to the good news coming from Brussels, the Hungarian forint started to strengthen this morning and currently stands around 410/EUR, which is a considerable improvement compared to the previous 420/EUR exchange rate.

Source: Twitter, Telex, Világgazdaság, Politico

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