The European Commission has taken another aggressive step in its long-running battle with Hungary, unveiling a seven-year budget plan that ties EU funding more directly than ever to adherence to Brussels’ interpretation of the rule of law.
But for all its tough rhetoric, the plan may yet founder—ironically—on the very democratic principle it claims to defend: unanimity. Hungary still holds a veto.
This week, Commission President Ursula von der Leyen presented the EU’s next Multiannual Financial Framework (MFF), outlining how the bloc intends to spend its collective purse through to the end of the decade.
The new feature is what Brussels calls “smart conditionality”—a technocratic euphemism for a mechanism allowing it to withhold funds from any member state that strays from what it deems the acceptable path.
In practice, that means countries like Hungary, already locked in a bitter standoff with the EU over judicial independence, press freedom and academic autonomy, could see billions withheld unless they fall into line.
“We will ensure that EU money is spent responsibly, with robust safeguards and incentives that reward good governance,” declared von der Leyen. “The rule of law and respect for fundamental rights will be front and centre in every funding decision.”
It is a clear message, one aimed squarely at Budapest. Under the proposed framework, flagship schemes such as the National Regional Partnership Plans—covering agriculture, cohesion, and development funding—will be subject to a rigorous annual review based on the Commission’s own rule of law reports. If a country is deemed to be backsliding, the tap could be turned off.
In theory, the move introduces some much-needed accountability into the EU’s spending machine, where concerns over waste, fraud and political favouritism have lingered for years. In practice, it risks deepening the east-west divide in the Union, turning financial levers into political cudgels.
Indeed, while the European Parliament is expected to rubber-stamp the new budget, the real hurdle lies with the Council, where unanimity is required. That gives Viktor Orbán’s Hungary an effective veto. And given Budapest’s hostility to the rule of law mechanism—first introduced in 2020 to great acrimony—it is far from certain that agreement can be reached.
“This is a small step in the right direction,” said MEP Daniel Freund, a long-time critic of Hungary’s democratic decline. “But let’s be honest—there’s a long way to go. The entire framework could unravel unless Hungary agrees. And that’s a tall order.”
Freund also sounded the alarm over parts of the proposal that echo the COVID-19 Recovery Fund, where a looser performance-based model, in his view, allowed funds to flow without proper scrutiny. “Oversight was weaker, and the same mistakes could be repeated,” he warned.
Budapest, predictably, has reacted with fury. Csaba Dömötör, a Hungarian MEP from the ruling Fidesz party, dismissed the proposal as political blackmail in the service of liberal elites.
“This is not about the rule of law. It’s about punishing governments that don’t follow the Brussels consensus,” Dömötör said. “If you’re centre-right or conservative, and especially if you defend national sovereignty, they want to cut off your funding. It’s economic sabotage for political ends.”
Prime Minister Orbán himself went further, branding the budget a “pro-Ukraine budget” that prioritises Kyiv’s war effort over the needs of European citizens. “The Commission should withdraw this proposal immediately,” he thundered. “It’s not even strong enough to take seriously. We will not accept a budget that treats Hungary as a second-class member.”
Such comments are typical of Orbán, who has repeatedly clashed with Brussels over migration, media laws and the judiciary. But his criticism taps into a growing discontent within several member states over the centralising instincts of the Commission—and its readiness to weaponise cash.
The timing is also significant. As Brussels seeks to bolster Ukraine, increase defence spending, and expand its fiscal reach, it is asking member states to make sacrifices. Against that backdrop, tying funding to ideological compliance risks inflaming populist sentiment across the bloc.
The Commission insists the new system is fair, impartial, and rooted in the treaties. But its detractors see a selective enforcement regime that punishes dissent while turning a blind eye to similar problems in more politically convenient capitals.
In the end, von der Leyen may find that her bold vision for a more disciplined, value-driven budget falls flat—not because it lacks ambition, but because it misjudges the politics. The EU is still a union of sovereign states, not a centralised federation. And those sovereign states have a say.
If Hungary digs in its heels, as it often does, the Commission will have a choice: compromise, or risk a prolonged stalemate. Either way, the message from Budapest is loud and clear: Brussels may control the money—but it doesn’t yet control the members.
