National Interest

by Monika Palotai and Kristóf György Veres

    With roughly $20 billion in frozen funds at stake, Hungary is now testing whether it can beat the EU at its own game.

    On April 12, Hungarian Prime Minister Peter Magyar won a landslide victory on a platform that promised to weed out systemic corruption, curb inflation and fix the economy. One of his most important pledges was to unlock roughly $20 billion in EU funds that Brussels has held back from Hungary over “rule of law” concerns. After rushing through judicial, procurement and anti-corruption reforms, the European Commission recently proposed releasing the first tranche of about €4.2 billion ($4.8 billion).

    The question was never whether the Hungarian government could secure the funds. It was what Brussels would ask in return. This past August, a Heritage Foundation analysis by Paul McCarthy warned that the anti-corruption and rule-of-law reforms aimed at satisfying the European Union would dismantle former Prime Minister Viktor Orban’s legacy, leaving Hungary less able to resist pressure on core sovereignty issues, above all on migration.

    The risk is very real. The Commission’s “rule of law” objections, which have justified withholding funds, explicitly included Hungary’s refusal to comply with EU asylum policy. On top of the frozen $20 billion, Budapest is still paying the $1.17 million-per-day fine, plus a $235 million lump-sum fine imposed by a landmark 2024 European Court of Justice (CJEU) ruling for what it called an “unprecedented breach of EU law.”

    Earlier this May, Prime Minister Magyar’s attempt to suspend the EU’s fines drew a sharp rebuke. The Hungarian government then chose to disengage from the issue for the time being and pivoted to meeting the Commission’s rule-of-law and anti-corruption demands over the summer.

    Magyar drew a line in the sand on migration amid pan-European outrage over the 80,000-strong migrant influx into the Spanish enclave of Ceuta. Sharing a podium with Czech Prime Minister Andrej Babiš—a longtime Viktor Orbán ally—Magyar contrasted the fines levied on Hungary for defending its border with the $225 million awarded to Spain after it failed to do the same.

    Domestically, Magyar also extended the national state of emergency over the migration situation, in force since March 2016, through the end of this year. The state of emergency allows asylum seekers to return immediately beyond the border fence without any formal procedure. The United Nations High Commissioner for Refugees (UNHCR) issued its concerns over the extension—lifting the state of emergency had been one of the EU’s conditions for suspending the fines. Magyar argued that the reason was operational: an abrupt relaxation could risk an uncontrollable influx of migrants.

    At the same time, Budapest turned its attention from compliance to leverage. As the Commission proposed releasing the first tranche of €4.2 billion ($4.8 billion), Hungary has shifted to the penalties themselves. The aim is not only to stop the daily fines but also to recover roughly $1 billion already deducted by leveraging the national veto right every EU capital has over the multiannual EU budget. Already in July, Magyar declared: “We will ask for this money back. I believe we will get it, since the budget requires a unanimous decision.” This sentence should get Washington’s attention—as it threatens a veto.

    Viktor Orban repeatedly used Hungary’s veto power—“the nuclear option”—inside the EU. The strategy sometimes extracted concessions from Brussels, but it also contributed to Hungary’s political isolation and encouraged other EU governments and the Commission to search for increasingly “creative” mechanisms to circumvent Budapest.

    Magyar is attempting a more limited maneuver that might just succeed. His threat of a veto flows from pragmatism, not ideological grandstanding. His government has shown it is prepared to compromise with Brussels on corruption, transparency in public procurement and institutional reforms. But on migration, he is drawing a line. Boosted by support from his V4 partners, Magyar’s leverage is strengthened by Brussels’ desire to see his government succeed, if only to prove that replacing Orban benefits Europe as a whole. All this comes against the backdrop of immigration restrictionist sentiments increasingly dominating the continent “post-Ceuta,” which makes Budapest’s stance even more powerful in European public opinion.

    Moving beyond the broader Hungarian strategy to defend its national interest in Brussels, the policy question for the United States is narrower: can Hungary say no to the EU on core sovereignty issues like migration  So far, the Hungarian government has not traded the border for hard cash.

    Budapest’s strategy of selective confrontation has cornered Brussels: rejecting the bargain would lock in an obsolete policy even as the rest of Europe turns restrictionist. The upcoming EU budget showdown will be the ultimate litmus test: can Hungary’s new prime minister walk this delicate political tightrope? Will Brussels demand the one concession he has promised never to make?