(Bloomberg) -- Prime Minister Viktor Orban threatened to veto the European Union’s next long-term budget unless Hungary regains access to funds the bloc froze due to rule-of-law and corruption concerns.
Orban was referring to the EU’s next seven-year budget from 2028, which requires unanimity among the 27 member states to be approved. The Hungarian leader has a track record of delaying the bloc’s joint decisions, though lately the other 26 nations have sought ways to get around his objections.
“Hungary will undoubtedly obtain these funds,” Orban said in an interview on state radio Friday. “The funds we don’t receive in 2025 and 2026 we’ll have to receive in 2027 and 2028 because if we don’t, then the EU won’t have a budget because I won’t agree to it.”
Investors regularly point to the approximately €20 billion ($21.1 billion) the EU is currently withholding from Hungary as a major vulnerability for the economy. Moody’s Ratings cut the outlook for Hungary’s debt grade to negative from stable a week ago, citing the fading chances for the government to unlock frozen EU funds.
Orban tried to play down their significance in the medium term, arguing that the €12.5 billion the European Commission released to Hungary a year ago in exchange for legislation shoring up judicial independence would cover the economy’s needs until 2026, an election year.
Financing Plan
The government also allocated as much as €2.5 billion in international debt issuance for the first half of 2025, according to its annual financing plan published Friday.
Orban needs all the fiscal room he can muster. In recent polls, his Fidesz party trailed behind a new opposition group which has made unlocking EU funds one of its key campaign promises. The Hungarian leader resorted to record election spending in 2022 to secure a fourth consecutive term.
Concern over Hungary’s finances has put pressure on the forint, which slid 0.4% to 414.6 per euro by 12:27 p.m. in Budapest, less than a forint shy of last week’s two-year low.
This year, the government secured financing early by selling $2.5 billion in bonds at the start of January, followed by a euro-denominated green bond and a smaller Samurai note in Japan. In 2025, total international eurobond issuance will fall to at most €2.5 billion, including another benchmark-sized green bond, the Debt Management Agency said Friday.
Hungary plans to skip yen-based issuance next year, though it will probably return to the Chinese panda bond market, the agency said.
Hungary has also gained additional financing via loans from China for infrastructure projects.
(Updates with 2025 financing plan, forint from 6th paragraph)
©2024 Bloomberg L.P.
