Hungary, Slovakia and the battle over EU funds

Illustrative photo. Photo: Hannelore Foerster/Getty Images

Hungary, Slovakia and the battle over EU funds

While Hungary is using its veto power to push for the release of frozen funds, Slovakia is trying to prevent the suspension of EU money through political negotiations.

For years, a quiet dispute has simmered within the European Union over the question of where Brussels is undermining national sovereignty. The tension is most clearly personified by two Central European leaders: Hungarian Prime Minister Viktor Orbán and Slovak Prime Minister Robert Fico.

Both like to present themselves as rebels in European politics who are willing to challenge the majority. When major decisions arise – whether on sanctions, migration or cultural and ethical questions – they often rely on the one powerful instrument still available to them: the veto. Brussels, in turn, holds its own leverage in the form of EU funds.

Brussels and the frozen billions

The situation surrounding EU funds for Hungary is complex because the country’s allocations have been frozen under several EU mechanisms at once.

In December 2022, after months of negotiations, member states blocked €22 billion in cohesion funds for Hungary on the recommendation of the European Commission. Only Hungary and the Polish government led by Mateusz Morawiecki opposed the decision.

Brussels justified the step by citing ‘violations of the principles of the rule of law’. In practice, the concerns mainly related to the functioning of public procurement, conflicts of interest and the way the use of European funds is supervised. It is also worth noting that in 2022 the Court of Justice of the European Union rejected a joint Polish and Hungarian lawsuit against the mechanism linking EU funds to the rule of law. The court decided that making the use of funds conditional on respect for rule-of-law principles is compatible with EU law.

You might be interested EU approves 90 per cent emissions cut by 2040 – four states oppose

Not a legal but a political problem

To regain access to the funds, Hungary was required to meet 17 conditions. At first it appeared that the government was making progress. According to sources cited by Telex, the atmosphere changed in 2023 and relations between Budapest and Brussels cooled.

Minister for European Affairs János Bóka eventually acknowledged that the government no longer regards the dispute as a technical or legal matter. In his view, it is simply a political conflict.

European Commission President Ursula von der Leyen suggested in a speech to the European Parliament in early 2024 that broader issues lie behind the dispute, from Hungary’s stance on illegal migration to the state’s opposition to the LGBTQ+ lobby and concerns about ‘academic freedom’.

In other words, EU funds sometimes become part of a wider ideological debate in European politics.

Suspended funds can only be held aside for two years, after which they are definitively forfeited. As a result, Hungary lost approximately €1.04 billion at the end of 2024 and another €1.08 billion in 2025.

Pre-election issue

The difficulty lies in the way EU financing normally works. Brussels reimburses projects retrospectively, that is, only after they have been implemented. If part of the funds is permanently forfeited, the state will no longer have the resources available for planned programmes.

The most prominent figure in the Hungarian opposition, Péter Magyar of the TISZA party, is also using the issue ahead of the parliamentary elections on April 12. He told Reuters that if he wins, he will conclude an agreement with Brussels that would release the remaining €10 billion from the cohesion funds.

Time is short. Hungary is also unable to access another €11 billion from the post-Covid recovery plan, which can be drawn until August this year. If the situation does not change, the country will lose that money as well.

Analysts say the Hungarian forint has recently strengthened in anticipation of a possible victory for the TISZA party and the subsequent release of EU funds.

Orbán uses his veto

At the same time, Hungary is making full use of its veto power in negotiations with Brussels. The government can employ the veto to block important decisions in foreign policy. This is particularly visible in relation to Ukraine, where Hungary – together with Slovakia – often holds a different position from the rest of the EU-27.

One such episode occurred in December 2023, when €10.2 billion was unfrozen. During a European Council summit that was to decide whether to open accession negotiations with Ukraine, Prime Minister Orbán left the room rather than veto the decision. By absenting himself from the vote, he allowed the decision to proceed.

In March 2024, the European Parliament filed a lawsuit over the decision to unfreeze the funds. According to members of the European Parliament, Hungary had still not implemented all the required reforms.

You might be interested Orbán: Today's decision ends the rule of law in the European Union

Sanctions, oil and further negotiations

Tensions continue. At a meeting of the EU Foreign Affairs Council, Budapest and Bratislava blocked not only the 20th package of anti-Russian sanctions. They also linked their veto to the resumption of oil transit through the Druzhba pipeline. Hungary has likewise maintained its position of politically blocking the already agreed EU loan to Ukraine worth €90 billion.

However, according to diplomatic sources cited by Politico, Hungary’s demands go beyond the repair of the pipeline. Budapest may continue to block the sanctions until the European Commission approves a €16 billion defence loan under the SAFE programme.

The Commission has not yet approved the loan and, according to Politico, is also delaying an initial payment of €2.4 billion in an effort to push Budapest to support the sanctions package.

From disputes to combustion engines

Slovakia also drew attention last year by blocking sanctions. It refused to approve the 18th package six times before receiving guarantees from the EU concerning the Union’s planned phase-out of Russian gas.

‘We cannot allow the decisions of the entire EU to depend on a small minority,’ said German Chancellor Friedrich Merz in May. He also warned that European funds could be withdrawn. ‘We will deal with it if necessary,’ added the chancellor.

After receiving written assurances from members of the European Commission concerning gas prices, potential shortages and transport fees, Prime Minister Fico eventually instructed his government not to block the anti-Russian sanctions.

That experience is one reason why both Central European countries strongly oppose the abolition of the veto and its replacement with qualified majority voting. Without such a mechanism, they would have to accept decisions that could have far-reaching negative consequences for them.

Although Fico strongly criticised Merz’s remarks, he later eased the tension through telephone diplomacy and by emphasising areas of common interest. Both politicians subsequently began to advocate a revision of the planned ban on the sale of cars with combustion engines after 2035.

Fico also invited the German chancellor to visit Slovakia to discuss economic cooperation. He added a symbolic gesture that often matters more in politics than formal statements. Merz was the only European politician Fico called directly after his January meeting with US President Donald Trump and Secretary of State Marco Rubio.

You might be interested Politico: Fico said in Brussels that he is concerned about Trump's mental state

Threats that have not yet materialised

The Slovak opposition warned that after the abolition of the Special Prosecutor’s Office in March 2024 Brussels might suspend EU funds for Slovakia. The European Commission has mentioned that possibility but has not yet taken concrete steps.

For such a measure to be adopted, the Commission would have to trigger the rule-of-law conditionality mechanism, the same instrument it previously used against Hungary.

During the parliamentary recess in July 2024, the Slovak governing coalition addressed concerns over amendments to the Criminal Code. It convened an extraordinary parliamentary session and adopted the so-called Eurofund amendment. The changes were designed to address the European Commission’s reservations by tightening penalties for damage to the EU’s financial interests.

Nevertheless, the Commission continues to monitor the government’s actions closely. On 21 November 2025 the Commission initiated proceedings against Slovakia over a constitutional amendment that recognised two genders, male and female, adjusted the rules on adoption and banned surrogacy.

The outcome remains uncertain, but the Slovak government insists that such matters fall within the competence of nation states.

Concessions

In 2026 Slovakia continues to pursue a policy of cautious balancing.

In early March the government announced that it would repeal legislation that had transformed the anti-corruption Office for the Protection of Whistleblowers. The European Commission had requested additional explanations and, as a precaution, suspended the payment of €590 million from the recovery plan.

Following negotiations, the Slovak government backed down. Prime Minister Fico described the step as the removal of a ‘legislative corpse’ that had merely complicated the situation.

Even a vocal rebel such as Slovakia usually finds its way back to the negotiating table. And thus to EU funds.