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4 months ago
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ARTICLE AD BOX
This article is part of the Hungarian presidency of the EU special report.
The Hungarians are taking over the helm of the Council of the EU in the aftermath of June’s European election, just as horse-trading over the bloc’s top jobs gets into full swing.
As a result, Hungary’s six-month stint will likely be more of a political moment than one marked by progress on legislative files.
That hasn’t stopped the country from putting together an ambitious policy agenda for its mandate, though.
Illegal migration, the future of the bloc’s farm subsidies, and reinforcing European defense are just some of the topics Hungary has chosen to focus on.
Despite Brussels being in political flux, Hungary will still have a number of policy files to deal with.
Select a policy area
Farm to Fork strategy and Common Agricultural Policy (CAP)
Why they matter: Two leftover proposals from the Farm to Fork strategy will be carried over to the Hungarian presidency: the EU’s rules on a new generation of genetically modified crops and a revision on the welfare of farmed animals during transport. The Hungarian presidency will also be tasked with a draft of the first document that will pave the way to the next CAP.
State of play: The Belgian presidency is trying to seal a last-minute deal on the rules that would allow certain gene-edited crops into the EU market, while the European Parliament already approved its position. Talks on the animal transport proposal are in the early stages both in Council and in Parliament, as priority was given to a sister file on the welfare and traceability of dogs and cats — which the Hungarians will also have to finalize. The current CAP only entered into force in 2023 and is due to end in 2027, but negotiations on its next iteration are expected to be drawn out.
EU fault lines: Poland is blocking the text on gene-edited crops, citing concerns over a lack of rules on the patentability of such plants. The animal transport rules have been criticized especially by northern and southern member countries, which disagree with the journey length limits and temperature restrictions. The CAP conclusions are also expected to give diplomats headaches, namely over trying to reconcile economic competitiveness with climate and environmental goals, as well as setting the ground for the accession of new member countries.
Likely progress: 
— Paula Andrés
Regulation on combating late payment in commercial transactions
Why it matters: The new rules, as is the case with the promised SME envoy, are a key part of European Commission President Ursula von der Leyen’s pitch to champion small businesses announced in her 2023 State of the Union speech. They aim to ensure that small- and medium-sized firms — the vast majority of the bloc’s businesses — are paid on time by setting tighter time limits to remunerate suppliers. Executive Vice President Margrethe Vestager and Internal Market Commissioner Thierry Breton labeled the regulation a crucial step to boost European competitiveness.
State of play: EU lawmakers agreed their position in April, extending the payment limit to 60 days if agreed by businesses in their contracts. But member countries didn’t make concrete progress under either the Spanish or Belgian presidencies, with most of them criticizing the proposed 30-day payment period. Fourteen governments, led by Austria and Germany, directly asked the Commission to withdraw its proposal. Vestager promised to call for a push on the file under the Hungarian presidency.
EU fault lines: Some EU countries are disputing the need to set a new regulation. There is strong criticism over the proposed 30-day time limit, the planned enforcement authorities network, and the impact the new rules could have on the economy more generally. The fourteen “rebel” governments said the Commission failed to show that its policy choices can tackle the issue and answer firms’ needs.
Likely progress:
— Giovanna Faggionato
Standard essential patents
Why it matters: Nokia and Ericsson used to be famous for their mobile phones before the iPhone came along (remember “Snake”?), but they now make huge amounts of money from standard essential patents. These apply to technologies like 5G that are essential for today’s smartphone-selling giants. The patents in question have stoked long and expensive legal battles over royalty rates, which the European Commission wants to fix. Its proposal aims to cut down on litigation that it says holds companies back from rolling out new products. Under the rules, companies would need to enter their standard essential patents into a register and negotiate fair, reasonable and nondiscriminatory license fees before they can go to court.
State of play: The European Parliament voted to adopt its position on the file in February. Talks in the Council are still in the early stages, but things could start moving in October.
EU fault lines: Opinion is fiercely divided between those who support patent-holding companies — like Finland’s Nokia — and those on the implementers’ side — a broad church that includes car manufacturers and tech groups. Bones of contention include whether companies really have to list the patent they own in the new register in order to be valid, and if the EU’s Intellectual Property Office (EUIPO) should be in charge of such a complex corner of the IP world. With EU members still wading through a broader package of reforms on IP, this one could be on the to-do list for a while.
Likely progress: 
— Edith Hancock
European Defence Industry Programme (EDIP)
Why it matters: EDIP has a budget of €1.5 billion over the 2025-2027 period, which can be used to build up stocks of weapons, finance “ever-warm” factories and incentivize joint procurement. The program embodies the European Commission’s ambition to boost the bloc’s defense industry and allow it to compete with non-EU rivals as short-term emergency measures come to an end. It aims to achieve the goals outlined in the European Defence Industrial Strategy (EDIS), such as having at least 40 percent of military equipment purchased jointly by EU countries by 2030.
State of play: The Council’s Ad Hoc Working Party on Defense Industry is working on the text. Hungary is expected to reach a general approach during its presidency.
EU fault lines: There is consensus among diplomats and officials that the money on the table is peanuts, while leaders are in agreement that more funds are needed to boost defense. One of the key questions is over the criteria for which companies will have access to EDIP funds. Countries such as France don’t want European companies who produce weapons from U.S. companies under license to benefit from the money, while others are open to it. Diplomats also want clarity on how the Defence Industrial Readiness Board, proposed in EDIP, will operate. Another complicating factor is that Hungary is blocking EU money to reimburse member countries for arms provided to Ukraine. It’s included defense among its presidency priorities so how this ambivalence plays out remains to be seen.
Likely progress: 
— Jacopo Barigazzi and Laura Kayali
Retail investment package
Why it matters: The EU wants to boost its coffers to fund political priorities like the green and digital transitions, and defense. But governments can’t (and won’t) fund them through public spending. Enter a plan to encourage EU citizens to invest their savings instead of parking their money in bank accounts, thereby freeing up investment and access to capital for companies across the EU, including small businesses.
State of play: Measures planned by the European Commission to boost citizens’ investment — like banning kickbacks for selling investment products to consumers — were killed before the proposal was even published due to heavy lobbying from the finance industry. What’s left after Council and European Parliament negotiations is hollowed out on both sides. Three-way negotiations between the EU institutions are coming under the Hungarians, but don’t expect major changes under the watered-down rules.
EU fault lines: Countries are keen to protect national champions like banks and money management firms — and those firms are in no hurry to give customers a better deal if it hurts their bottom line. Most countries are against measures that would boost retail investment but could hurt their finance industry’s profitability—- no matter how much leaders say they want citizens to invest more.
Likely progress:
— Kathryn Carlson
Crisis Management and Deposit Insurance (CMDI) package and European Deposit Insurance Scheme (EDIS)
Why they matter: The EU had a lot of momentum in stabilizing its banks and preparing them for future crises to avoid taxpayer-funded bailouts after the 2007-2008 financial crisis. But there are still gaps in the security net and momentum has slowed in patching up the eurozone’s single market for banking.
State of play: Inter-institutional negotiations will start under the Hungarian presidency in the fall, but they’re unlikely to finish before 2025. The package is one of the most technical out there and national divisions over the way forward run deep. The EDIS proposal is particularly contentious — it was blocked for nearly a decade before MEPs made symbolic progress on the file this spring. But despite positive rumblings from Germany, don’t expect that kind of movement in Council — eurozone finance ministers agreed two years ago not to move forward on EDIS until CMDI is done.
EU fault lines: Progress has crept forward at a snail’s pace as capitals try to preserve their decision-making power over how to deal with failing midsized banks instead of centralizing the process. Some countries want to avoid being on the hook for winding up banks that fail in other countries, while others (ahem, Germany and Austria) want to preserve traditional (and cheap) national banking protection schemes rather than moving to a new system, which would force them to hold more cash against risk.
Likely progress:
CMDI:
EDIS: 
— Kathryn Carlson
Using the proceeds from frozen Russian assets for Ukraine
Why it matters: Ukraine desperately needs Western financial support because it faces a looming budget hole in 2025. G7 leaders struck a political deal to use the profits of frozen Russian assets to secure a $50 billion loan to Ukraine but, crucially, they didn’t agree on the details. Governments are in a race against time to send the money to Ukraine before the end of the year, as there’s no certainty that a Donald Trump presidency would back the initiative. Finance ministers will discuss different options during a gathering in July that will be chaired by Hungary.
State of play: The EU plays a key role in transforming the G7’s plan into reality. The Western alliance agreed that each country would channel its own loan to Ukraine, but the EU has more at stake as its financial institutions hold most of the Russian assets. In order for the G7 plan to bear fruit, Brussels needs to amend a separate initiative to funnel the annual profits of the assets — worth around €3 billion per year — to Ukraine. To make things even more difficult, the EU might also have to revise its multi-year budget in order to use joint money as collateral for the loan.
EU fault lines: The big unknown is Hungary. Officials fear that Orbán’s Russia-friendly government might block the renewal of sanctions, thereby unfreezing the Russian assets. There were rumors that in order to avoid having Hungarian officials running the meetings, the file might be handed to a restricted format of eurozone-only finance ministers chaired by the group’s president, Paschal Donohoe.
Likely progress:
— Gregorio Sorgi
EU pharmaceutical legislation
Why it matters: The revamp of the current 20-year-old EU pharmaceutical rules aims to incentivize the pharma industry and make Europe more attractive for business, while ensuring that all European patients have access to medicines. Currently, the European pharma market is being outshone by the U.S. and China, while patients from Central and Eastern European member countries get new medicines much later than their Western counterparts. However, striking the right balance between pleasing pharma and ensuring access is a tough nut to crack and so far the pharma industry isn’t pleased with the European Commission’s proposals.
State of play: The Council, under Belgium’s watch, only dipped a toe into both files. Now it’s over to the Hungarians, who have over 20 technical meetings planned. The most controversial elements are how long a new medicine can be protected from competition and the use of additional years of protection as an incentive to meet certain requirements (such as launching a drug in all EU countries). The European Parliament agreed its position in April.
EU fault lines: Scandinavian countries were vocal about giving a longer timeframe for data protection to industry, opposing the European Commission’s proposal. No surprise there, considering Denmark now hosts the EU’s most valuable drugmaker, Novo Nordisk. However, smaller countries such as Estonia and Latvia are siding with the Commission’s position.
Likely progress:
— Giedrė Peseckyte
Green Claims Directive
Why it matters: The EU is on a roll with tougher rules to stop companies misleading consumers with unfounded claims of their positive contributions to the environment. The empowering consumers for the green transition directive, which was adopted in March, bans generic claims like “environmentally friendly” or “climate friendly” unless they’re backed by reliable data. The Green Claims Directive is the EU’s attempt to contribute additional rules at company level.
State of play: Environment ministers agreed on a Council position on the directive shortly before the change in presidency. It will now be up to the Hungarians to lead the negotiations on the final rules with the European Commission and European Parliament.
EU fault lines: The main disagreement between EU countries and the Parliament is around how much proof companies need to give to substantiate green claims, and whether they can make claims based on carbon offsets. MEPs want strict rules on verification, and to limit claims of carbon neutrality to those companies that are using carbon credits only to offset residual emissions — the emissions that a business still produces after having made all other efforts to reduce its carbon footprint. But member countries don’t want to overburden companies and pitched a simplified procedure, which doesn’t include this limit.
Likely progress:
— Marianne Gros
Regulation to prevent and fight child sexual abuse
Why it matters: In 2022, the European Commission proposed a new law to force rules on tech firms to ramp up how they protect children and teenagers from potential sex offenders online. Police and child protection groups warned that since the pandemic offenders have been increasingly using messaging apps and social media to prey on kids and exchange images of sexual abuse of children. At the center of the Commission’s draft law is a requirement for companies like WhatsApp and Messenger to monitor people’s messages to find, remove and report illegal images and conversations between minors and potential offenders.
State of play: After over two years of tense negotiations, EU countries have yet to agree on a joint position. Belgium previously failed to garner sufficient support on amendments that could have forced messaging apps to scan people’s images and links for potential child sexual abuse material with their consent, or else block them from sharing such content.
EU fault lines: Hungary will have the complex and sensitive job of trying (again) to devise a joint position that both assuages the privacy concerns of countries like Germany, Austria and Poland, while proposing strong enough obligations for countries like Ireland and Spain. And the job is not done yet. Negotiations between the Council and European Parliament are widely expected to be complex. The Parliament in November 2023 voted on a privacy-friendly position to only enable the targeted scanning of messages from individuals and groups suspected of being connected to child sexual abuse material.
Likely progress:
— Clothilde Goujard
Sanctions against Russia
Why it matters: Russia continues to wage its brutal war in Ukraine, attacking civilian infrastructure and crushing the country’s energy output. Hungary, whose Prime Minister Viktor Orbán is overtly sympathetic toward the Kremlin, has often delayed sanction packages to win concessions on other files. While negotiations over new packages get a lot of attention, implementation and enforcement are arguably even more important now. Reducing circumvention via Belarus, Turkey, China and a swathe of other countries is top of the agenda for a number of EU members.
State of play: Most EU diplomats will be relieved that the 14th sanctions package was finalized before Budapest takes over the Council reins. Little initiative is expected from the country: “They’ll just sit on their hands and do nothing for six months,” one diplomat told POLITICO’s Morning Trade newsletter when the 13th package was nearing its conclusion.
EU fault lines: Germany long resisted expanding responsibilities on exporting companies to make sure their products don’t end up in Russia. The topic has opened a rift in the German coalition (again), this time over signaling support to Ukraine or protecting its Mittelstand that fears it might lose opportunities to export in cases that have no exposure to Russia. The ambassadors relented to Germany’s request not to expand this no-Russia clause, at least for now. But with Hungary’s attitude to sanctions, progress on this will most likely take until Poland takes the Council reins. Hungarian Minister for EU Affairs János Bóka wasn’t impressed: “It’s the right of each and every member state to make sure that the decision that we take on a consensual basis conforms to the national interests,” he told POLITICO.
Likely progress: 
— Koen Verhelst
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