The EU reckons it has more time than previously expected to get around Hungary’s opposition to a vital €90 billion loan needed to sustain Kyiv’s war effort.

Brussels now expects Ukraine to face a budget shortfall at the end of next month – several weeks later than initially anticipated – as Kyiv pins its hopes on Hungary lifting its veto following crucial parliamentary elections on 12 April that could push Kremlin-friendly Prime Minister Viktor Orbán out of office.

EU officials had initially expected Ukraine to run out of funding in early April, when the first payout from the €90 billion funding scheme was set to be disbursed before Budapest blocked the plan.

But people familiar with the matter now say that Ukraine will likely only face a fiscal crunch at the end of next month – weeks after after elections that Orbán, the EU’s longest-serving leader and a staunch opponent of supporting Kyiv’s war effort, currently appears set to lose.

Energy politics

Orbán is demanding that Kyiv repair the Druzhba pipeline, which carries Russian oil to Hungary via Ukraine, before giving the loan the green light.

Ukrainian President Volodymyr Zelenskyy has said that fierce Russian attacks on Ukraine’s energy infrastructure are preventing the pipeline from being quickly repaired.

Orbán has also repeatedly accused Ukraine of supporting Hungarian opposition leader Péter Magyar, whose Tisza party is leading the prime minister’s Fidesz party by around 12 percentage points, according to a poll released on Wednesday. Ukraine has denied the allegation.

Slovakia’s similarly Moscow-friendly premier Robert Fico also threatened on Wednesday to block the loan if the pipeline is not repaired.

Hungary and Slovakia, whose landlocked economies are both heavily dependent on the Druzhba pipeline, proposed last week that a “fact-finding mission” should travel to Ukraine to assess damage to the pipeline. The proposal has not received backing from Kyiv.

Zelenskyy also recently predicted that Orbán faces defeat on 12 April.

Next in line

Even if Orbán loses, however, there is no guarantee that an opposition government will be quickly created. Orbán himself took seven weeks to form the current government despite winning a landslide victory in 2022.

Ukraine faces a total budgetary and military funding gap of €135 billion in 2026 and 2027, according to the European Commission. The EU is seeking to persuade Western allies and institutions, including Norway and the G7 group of rich democracies, to finance €45 billion of this shortfall.

In a boost for Kyiv, the International Monetary Fund approved a four-year $8.1 billion (€7 billion) loan to Ukraine last week, of which $1.5 billion (€1.3 billion) was immediately disbursed. However, a preparatory document for an EU leaders’ summit on 19–20 March notes that €30 billion in non-EU funding for Kyiv has still not been secured.

Although Brussels is still aiming to begin paying out the €90 billion loan at the start of next month, it is also working on contingency plans in case Hungary fails to lift its veto, the people familiar with the matter said.

These plans include making a legal case that Orbán is obliged to greenlight the loan after previously agreeing to it at an EU leaders’ summit in December, and using national guarantees rather than the bloc’s long-term budget to back the loan.

Hungary is also not the only obstacle holding up the loan package. In particular, Ukraine has yet to submit a financial plan to the Commission detailing how it expects to spend the money. This plan must also be approved by the EU executive and member states before the funds can be disbursed.

The Ukrainian finance ministry did not immediately respond to a request for comment.

(jp)