Hungarian government requests EU's military development loan, although they alone didn’t vote for it

At a background discussion on Tuesday, Hungarian Minister of Economy Márton Nagy announced, among other things, that the Hungarian government will be one of the member states requesting a loan from the European Union's military procurement programme, SAFE. According to the minister, they are requesting €20 billion – roughly HUF 8,000 billion – in financial assistance. The decision is expected in November.

According to the statement by the Council representing the national governments, under SAFE, the EU will provide a maximum of EUR 150 billion in financial support, which will be transferred to interested member states upon request in the form of long-term loans based on national plans. In principle, at least two participating countries must be involved in the joint procurement in order to be eligible, but for a limited period, the loan may also be granted to countries applying on their own.

Due to NATO's increased defence spending targets, Hungary will also have to spend more on defence. SAFE is guaranteed by the Union's budgetary security margin, which has the best possible rating, thus – in principle – making it possible to borrow at low interest rates, while the Hungarian state is financing its public debt at an exceptionally high cost. As mentioned in our article on the background discussions, SAFE would provide oreign currency resources at a rate which is 200 basis points more favorable than this – if we receive it.

Interestingly, Hungary was the only one of the 27 member states that did not vote in favor of SAFE and abstained (which is considered a polite no) in May. Due to its legal basis, the loan component of the REARM military development program did not require unanimous approval from member states or the European Parliament. According to Euractiv, the representative body is therefore preparing to take legal action.

Prior to the May vote, in March, the Hungarian Parliament adopted a resolution on the "loan component of the new EU financing instrument", REARM. In the resolution, parliament "opposes the joint European borrowing of up to EUR 150 billion necessary for the instrument proposed by the President of the European Commission." The resolution called on the Hungarian government to represent this position in EU institutions. The text was approved by Fidesz-KDNP, Jobbik, Mi Hazánk and independent MPs as well. The decision was justified by "principled reservations about the European debt union" and the lessons learned from the previously incurred loan behind the one-off recovery fund.

As for the recovery fund, the Hungarian government first criticized its loan-based part, saying that "Soros and similar financial speculators" are behind it, but later, after a lengthy series of twists and turns, it still ended up requesting funds from it. However, up until now, it has failed to fulfill all the preconditions for the disbursement of regular payments from the fund, which will expire in just over a year. (In one case, it even decided that it had fulfilled the conditions after trying to get by with half-hearted efforts, only to have dozens of shortcomings identified during the review.) As a result, the arrival of a total of 4200 billion forints' (consisting of a loan and a non-refundable portion) worth of funds is becoming increasingly questionable.