Why EU support for Ukraine again depends on Hungary

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Good morning. A Greek prime minister has called on Brussels to take action to stop “extreme” electricity prices in a private letter to the president of the European Commission.

Today, our financial correspondent explains why diplomats are flocking this morning to persuade Hungary to lift its last veto on Ukraine aid, and our Rome bureau chief reports on Benito Mussolini’s granddaughter quitting the ruling party because she is too extreme.

Have a wonderful weekend.

Roadblocks

Hungarian Prime Minister Viktor Orbán once again holds the keys to EU foreign policy in his hands – as well as unlocking US and IMF aid to Ukraine, write Paola Tamma and Laura Dubois.

Background: G7 leaders agreed in June to collectively lend $50 billion to Ukraine, backed by future profits from Russian state assets frozen under Western sanctions. The EU and US are to provide $20 billion each, with a further $10 billion split between the UK, Canada and Japan. But progress was slow.

Washington has demanded ironclad guarantees that Russian assets, most of which are held in the EU, will remain frozen until Russia pays reparations, to bypass congressional approval of its tranche of the loan.

Currently, EU sanctions are applied every six months.

To reassure the US, the European Commission will this morning present EU ambassadors with options to extend the sanctions period to 36 months or extend them indefinitely, according to three EU officials. Any decision would require all 27 member states to agree.

“Thirty-six months remains the viable option. . . The Americans were determined that anything less than that was indigestible to them,” said an EU official.

But Hungary’s ambassador to the EU has already signaled that expanding sanctions would be a question for leaders – giving the Hungarian prime minister, who has refused aid to Ukraine in the past, extra leverage. He could use it to influence Commission President Ursula von der Leyen’s distribution of portfolios in her new college.

Time is crucial. The EU must adopt its loan proposals by the end of this year or lose its ability to do so through a qualified majority vote, giving Hungary another veto opportunity. “The time pressure is there,” an EU official said.

The next tranche of the IMF’s loan to Ukraine is also tied to the package, as the IMF needs “firm assurances of sufficient funding to fill the funding gap for the next 12 months,” a spokesman said, before of the expected disbursement in October.

A possible solution for the EU could be to proceed without the US-requested sanctions extension – the commitment of an EU loan of “up to $40 billion” – and the hope that Budapest will agree to it in the coming weeks, allowing the US to recover Part of the $20 billion loan later, several EU officials said.

Some officials believe that US concern about expanding sanctions is overblown. “Sanctions have been in place since 2014. We have always managed to renew them,” said an EU official.

For now, the keys remain in Orbán’s hands – exactly where he likes them.

Chart of the day: Slowdown

The European Central Bank cut interest rates to 3.5% yesterday in response to falling inflation and signs that the bloc’s economy is at risk of stalling.

A family business

Rachele Mussolini, the granddaughter of Italy’s former fascist leader, has been politically associated with Prime Minister Giorgia Meloni since 2016, when she won a seat on Rome’s city council on a ticket linked to the then far-right opposition leader.

But the Rome councilor is now breaking away from Italy’s Meloni Brothers to join the more traditionalist Forza Italia, the centre-right party founded by the late media baron Silvio Berlusconi. write Amy Kazmin.

Background: The Brotherhood of Italy has its roots in the Italian neo-fascist social movement started after World War II by loyalists of Benito Mussolini, the Italian dictator who allied with Adolf Hitler and imposed anti-Jewish racial laws.

In recent years, Meloni has distanced his party from its neo-fascist origins, seeking to broaden its popular appeal to a wider part of the Italian population, although the party – and its core supporters – still hold extreme views on many social issues.

Rachele Mussolini, the younger daughter of Benito’s younger son, who plays jazz piano, Romano, told the Italian news agency Ansa that “the time has come for me to turn the page and join a party that I think is closer to my moderate and centrist sensibility”.

The city councillor, who describes himself on Instagram as “a supporter of secular, liberal and open-minded political thinking”, told Italian journalists in May that he had a “more progressive idea” of the family than the “Catholic fundamentalist” elements of his Melons. part.

Mussolini said that while he supported the ideal of the “traditional family”, politicians “must take into account that society has changed”.

What to watch today

1. Informal meeting of EU finance ministers in Budapest.

2. Sweden’s Foreign Minister Maria Malmer Stenergard meets her Finnish counterpart Elina Valtonen.

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