How Viktor Orban’s ouster could unblock EU over Ukraine loan, frozen funds

For years, Viktor Orban was the European Union’s perennial blocker. His decisive election defeat in Hungary has now prompted a wave of relief across the bloc.

Mr Orban, Hungary’s nationalist prime minister, conceded defeat yesterday after parliamentary elections delivered victory to conservative Peter Magyar, a former government insider turned political newcomer who campaigned on a promise of “system change”.

Whether the issue was support for Ukraine or sanctions on Russia, Mr Orban repeatedly slowed or stopped some of the EU’s most important initiatives.

With Peter Magyar preparing to take office on a pledge to repair relations, attention in Brussels is already turning to how quickly those stalled files could start moving again.

€90 billion for Ukraine

At the top of the list is a badly needed €90bn loan for Ukraine, which Mr Orban effectively held hostage after making opposition to aid for Kyiv a central theme of his campaign.

His veto — linked to a dispute with Ukraine over a damaged pipeline carrying Russian oil — infuriated fellow EU leaders, not least because it came after he had initially signalled his approval.

Conservative Mr Magyar is far from an outspoken champion of Kyiv, but if Mr Orban refuses to shift position in his final weeks in office, clearing the way for the loan could offer the incoming leader a straightforward chance to build goodwill in Brussels.

Still, the move would not depend on Budapest alone. Ukraine’s President Volodymyr Zelensky would also need to help ease tensions over the pipeline dispute and lower the temperature in his public remarks.

“Sooner or later this has to resolve itself. Hopefully sooner,” said one EU diplomat, speaking like others on condition of anonymity.

Sanctions on Moscow

Peter Magyar has pledged a referendum on Ukraine joining the European Union

Mr Magyar could also indicate a broader change in Hungary’s Russia policy by backing a sanctions package on Moscow that has been left in limbo over the war in Ukraine.

Mr Orban — who kept up close ties with Russia’s Vladimir Putin despite the invasion — drew fierce criticism from opponents who accused him of serving as a trojan horse for the Kremlin inside EU summits.

Hungary delayed earlier rounds of sanctions against Moscow, and as the election campaign intensified, Mr Orban again threw a spanner in the works of the latest package.

A different line from Mr Magyar would allow him to underline that Budapest is changing course.

That, in turn, would leave Slovakia’s Prime Minister Robert Fico — the EU leader seen as most sympathetic to Moscow after Mr Orban — as the bloc’s lone holdout.

Read more: Tusk hails Hungary vote as blow to authoritarian rule

Test over Ukraine’s EU membership push

A more significant challenge over time will be Ukraine’s bid to join the European Union.

Mr Orban was a steadfast opponent of Kyiv’s membership push and, to the frustration of both Brussels and Ukraine, had been blocking any forward movement.

As he heads for the exit, Mr Magyar could offer an early signal of cooperation by approving the opening of the negotiating “clusters” that EU officials say Kyiv has long been ready to begin.

But Mr Magyar, who has promised a referendum on Ukraine’s membership, is no soft touch, and there remain many stages in the process where progress could yet be slowed.

“We shouldn’t expect Hungary to become super pro-Ukraine membership all of a sudden,” said a second senior EU diplomat.

Other governments wary of Ukraine joining had also been content to shelter behind Mr Orban’s resistance.

Without him, they may be forced to state their objections more openly.

“The end of Hungarian obstruction to Ukraine’s accession does not mean it will accelerate,” summed up Sebastien Maillard from the Jacques Delors think tank.

Frozen funds for Hungary

The relationship will not run in one direction only. Mr Magyar is under pressure to prove that his promise to rebuild ties with Brussels can quickly deliver benefits for Hungary and its struggling economy.

The EU has frozen about €18bn intended for Budapest over concerns tied to Mr Orban’s democratic backsliding, anti-corruption efforts and the treatment of LGBTQ issues.

Mr Magyar has until the end of August to begin pushing through reforms in a bid to unlock the €10bn still outstanding from Covid-19 recovery funds, or see that money lost permanently.

Brussels may be prepared to act quickly on EU funding, much as it did for Polish Prime Minister Donald Tusk after he came to power a few years ago.

“It would give Magyar an enormous boost to say, ‘look I’m coming back from Brussels with these funds’,” said another EU diplomat.

A new mood in Hungary following election

Peter Magyar waves the Hungarian flag while greeting supporters in Budapest last night

Harder to measure, but no less important, is the prospect of a more cooperative tone around the EU leaders’ table.

Officials in Brussels had grown used to Mr Orban’s political theatre, but his increasingly combative stance in recent months — coupled with his closeness to Moscow — had badly eroded trust among fellow leaders.

“I think everyone will welcome Magyar with renewed enthusiasm,” an EU official said.

That does not mean the atmosphere will suddenly turn harmonious. EU leaders will continue to defend their national interests forcefully, and Mr Magyar is unlikely to be an exception.

“Magyar will want, as he did during the campaign, not to be caricatured as being a pawn of Brussels; do not expect him to say yes to everything,” said the second EU diplomat.