EU to Punish Hungary and other countries with New Proposal

For the last couple of years, Hungary has been considered one of the EU’s “problem states.” However, due to regulations, there has been nothing the EU could do to combat that.

A new proposal that was voted in on last Tuesday could change the deadlock and allow the EU to impose sanctions on Hungary and other problem states such as Poland.

The EU has their hands tied

In order for the European Union to impose sanctions and other diplomatic tools on a member state, all the members (with the exception of the said country) of the European Commission have to vote in favor of the decision.

This system is dangerous because it’s not difficult for a country like Hungary to convince another Eastern European member state to veto the proposal and hence save Hungary.

Because of this, a new proposal was put on the table that would make it considerably easier for the EU to punish states that aren’t operating within their guidelines.

Bloomberg makes it clear that this is what the EU is planning to do.

What could stop the bill?

On Thursday, January 17, the European Union voted to approve the proposal, but it’s far from being written in stone.

In order for the EU to get the new law in effect, they will have to outline and approve the law before Hungary goes to an election in May.

If the bill hasn’t been passed before the Hungarian election, the proposal will likely be terminated.

Why Hungary?

So, the EU is not happy with Hungary, Poland, and a few other member states because of several reasons.

To make it short, Hungary is openly questioning many of the EU’s policies, claiming that the European Union has too great of an influence on the country. Hungary has also been very reluctant to allow immigrants into the country which is a sensitive subject that has upset many.

In other words, the EU is upset that Hungary isn’t cooperating and fulfilling their obligations, and Hungary is angry that the EU is meddling too much in their business.

Who will be affected by the new bill?

If the new bill is approved, we should expect the EU to impose sanctions on Hungary and more countries. What exactly the sanctions would include is not yet known, but it will likely be focused on Hungary’s main imports and exports.

As learned from the ongoing trade war between the US and China, we know that a country often retaliates against sanctions. If that would be the case, we could expect to see Hungary closing their imports and exports further and starting to target industries across Europe.

One potential outcome would be that Hungary starts to target online businesses and even stock and forex brokers in the UK and elsewhere, coming up with their own regulations for online trading to hurt the rest of the European market. UK and EU based brokers are limited to strict guidelines within these regions.

They can easily capitalize and gain traction on the market since ESMA introduced new guidelines that limited the leverage for UK and EU based brokers. Something that causes traders based in those regions to seek brokerage elsewhere.

Hungary also produces and exports a lot of agricultural products and consumer goods, which would be another target for both the EU and Hungary.

Final thoughts

There is a political turmoil affecting almost all of our society right now.  There is a trade war between the world’s largest nations, the UK is trying to find a way to leave the European Union by March, and the EU is struggling to control their members.

In other words, we should expect much of this highly unstable situation to get worse, but if the EU manages to approve the proposal, it would give them more power to hopefully stop the segregation within the Union.