A proposed reform of the European Peace Facility would make financial contributions voluntary, rather than mandatory, as they are now.
European Union officials and diplomats are exploring a new plan to bypass Hungary’s firmly held veto on military assistance for Ukraine, which has accrued an extraordinary backlog of €6.6 billion and become an enormous source of frustration in Brussels.
The plan, still in the very early stages, will involve tweaking the European Peace Facility (EPF), the off-budget tool the bloc has been using to partially reimburse member states for the weapons and ammunition donated to Kyiv.
The main idea on the table is to allow member states to make financial contributions to the EPF on a voluntary basis, rather than a mandatory one.
According to officials and diplomats, who spoke on condition of anonymity to freely discuss the project, the switch from mandatory to voluntary would be acceptable for Budapest, as it would relieve the country from chipping into the common fund and supporting Ukraine’s resistance against the invading Russian troops.
Prime Minister Viktor Orbán has repeatedly decried the EU’s provisions of military equipment as a “pro-war policy.” His controversial trip to Moscow in July was denounced as an “appeasement mission” and an act of disloyalty.
“The idea behind this proposal is that no one can block,” said a high-ranking EU official. “This tranche of the EPF, which amounts to €6.6 billion, has been blocked for a year of a half. It’s a lot of time, a lot of money, and it’s undermining our support to Ukraine.”
However, making the EPF a voluntary tool could backfire, diplomats warned, because it could set a dangerous precedent and weaken the EU’s united front against the Kremlin, which has so far been based on an all-hands-on-deck philosophy.
For some countries, an EPF à la carte could prove a hard sell before national parliaments.
The reform “raises a number of questions about the cascading effects, the operation of the instrument in the longer term,” a diplomat said. “It also raises a number of budgetary issues for member states since it’s no longer a compulsory contribution.”
Foreign affairs ministers are set to have a first discussion on the plan on Monday during a meeting in Luxembourg. The premature nature of the plan suggests more internal reflections and negotiations will be needed before a conclusion is announced.
The switch in contribution to the EPF would require the unanimous support of all 27 member states.
It is unclear how much of the €6.6 billion would be released given the contribution from Hungary, and potentially other member states, might be removed.
The proposed overhaul does not mean leaders will give up on their Plan A: make Orbán lift his veto and resume reimbursements under the current EPF, although Budapest has made no indication this should happen any time soon. If anything, the renewed tension between Orbán and the European Commission suggests things will remain unchanged.
The Hungarian veto dates back to May 2023 when Ukraine’s anti-corruption agency blacklisted Hungary’s OTP Bank as an “international sponsor of war.”
The designation infuriated Orbán’s government and triggered a spat between Budapest and Kyiv, with Brussels awkwardly caught in the middle.
OTP Bank was eventually removed from the name-shaming catalogue but Hungary kept its veto firmly in place, arguing it needed “unconditional” guarantees it would not happen again. The continued blockage eventually created a €6.6 billion backlog, which capitals sought to compensate with bilateral contributions vis-à-vis Kyiv.
In July, High Representative Josep Borrell admitted he had “lost the hope” that Orbán would relent and described the impasse as “purely shameful.”
