Hungary blocks EU loan to Ukraine

Budapest has previously criticized the multibillion-euro scheme and opted out of co-funding it

Budapest has imposed a veto on a €90 billion ($106 billion) EU loan for Ukraine agreed in December, Financial Times has reported. Hungary, along with several other EU members, had previously opted out of the scheme, which was expected to be covered through joint EU borrowing.

The Hungarian representative raised an objection, the outlet said on Friday, citing four people familiar with the matter. The report did not provide any details. Brussels requires the unanimity of its 27 EU members to move forward with the plan.

According to the European Commission, the proposed loan package for Ukraine allocates €60 billion for military assistance and €30 billion for general budget support.

Under the plan, the loan could only be repaid if Ukraine receives war reparations from Russia. The scheme was approved after the bloc’s members failed to reach a consensus on a ‘reparations loan’ of around €140 billion that was to be secured through the use of frozen Russian assets as collateral. The proposal faced staunch opposition from Belgium, where most of the frozen assets are held, as well as from several other EU nations that cited major legal hurdles and risks.

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Moscow has said it would regard any use of its frozen assets as theft and could retaliate by seizing €200 billion in Western assets held in Russia belonging to foreign governments and companies.

The European Commission had previously warned that the joint borrowing scheme could result in up to €5.6 billion in annual interest payments for bloc members. Budapest has been one of the most outspoken critics within the EU of large-scale financial and military support for Ukraine.

Kiev expects its Western backers to cover a budget deficit of around $50 billion this year, with most non-military government expenses, including salaries, pensions, healthcare, and education, relying entirely on foreign aid. El Pais reported in October that the Ukrainian government could literally run out of money by April.

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