BUDAPEST (Reuters) – The European Union has “shot itself in the lungs” with ill-considered economic sanctions against Russia, which, unless rolled back, risk destroying the European economy, Hungarian Prime Minister Viktor Orban said on Friday.
Gas supplies to Europe have been tightened and fuel costs have risen since Russia’s invasion of Ukraine in February and subsequent sanctions, leaving countries struggling to replenish stocks and diversify supply channels. Russia calls its actions in Ukraine a “special operation”.
The rise in gas and electricity prices forced nationalist Orban to limit a year-long cap on utility prices for higher-consumption households on Wednesday, rolling back one of the 59-year-old prime minister’s signature economic policies.
“At first I thought we had only shot ourselves in the foot, but now it’s clear that the European economy has shot itself in the lungs and it’s gasping for air,” Orban, a longtime sanctions critic, told the public radio. in an interview.
Orban said Ukraine needed help, but European leaders should reconsider their strategy, as sanctions have caused extensive damage to the European economy without weakening Russia or bringing the months-long war closer to any solution.
“The sanctions do not help Ukraine, but they are bad for the European economy, and if it continues like this, they will kill the European economy,” Orban said. “What we’re seeing right now is unbearable.”
“The moment of truth must come in Brussels, where leaders admit that they have made a miscalculation, that the sanctions policy was based on wrong assumptions, and it must be changed.”
Re-elected in April, Orban said that without Wednesday’s curb, which would trigger a jump in energy costs for households consuming energy above the national average, the entire supply price ceiling would have to be scrapped.
Economists at Morgan Stanley have said that the limits could add 1.5 percentage points to inflation, already at its highest in two decades, further exacerbated by a weak forint.
Prior to the April vote, economists estimated the cost of supply price ceilings at up to 1.5 trillion forints ($ 3.71 billion), which, along with a series of measures that helped Orban’s bid, caused an increase in the budget deficit.
Orban faces its toughest challenge to date since taking power in a landslide in 2010, with inflation at its highest in two decades, record-breaking forint plumbing records and EU funds in limbo amid a dispute over democratic standards.
Orban’s second decision to speed up legislation to raise the tax rate for hundreds of thousands of small businesses this week as part of a broader effort to curb the exploding budget deficit has led to several protests in Budapest.
(1 USD = 404.59 forint)
(Reporting by Gergely Szakacs; Editing by Christopher Cushing)