Hungary set to drop veto on Ukraine and Moldova EU bid progress

Good morning. A scoop to start: Brussels plans to "significantly limit" Ukraine's access to the EU's agricultural markets and lucrative farming subsidies if Kyiv becomes a member of the bloc, according to proposals to overhaul the enlargement process seen by the FT, which also include stricter links between cash and reforms and more explicit punishments for rule-of-law backsliding.

And two more pieces of news below -- I reveal that Hungary has signalled it will ease its veto on more accession negotiation progress for Ukraine and Moldova this week, and then report that Singapore's Temasek has agreed to invest in an EU scale-up fund.

Open mind

Hungary is expected to lift its veto on a technical stage of Ukraine's EU accession process this week, as Brussels eyes another significant step forward for Kyiv's bid before the end of the month.

Context: Russia's invasion of Ukraine kick-started the EU's previously frozen enlargement process, and saw Moldova and Ukraine race to start negotiations. Former Hungarian Prime Minister Viktor Orbán had previously vetoed their joint progress due to his opposition to Kyiv.

Orbán's successor Péter Magyar has told his national diplomats not to block the sending of letters to Ukraine and Moldova regarding the potential opening of the next two negotiation "clusters" -- covering internal market and competitiveness policy areas -- during working-level meetings this week, two officials told the FT, in a procedural but symbolic step forward.

Hungary's full political support for the opening of the clusters will depend on Ukraine's parliament voting through a law on October 12 to expand education for national minorities. Rights for Ukraine's Hungarian minority have long been a key issue for Budapest, and the law has been drafted with input and feedback from Hungarian officials.

Voting that bill through the Rada would make possible a formal political process to open the negotiations before a summit of EU leaders in Brussels in 10 days, the officials added.

"The accession path of Ukraine is taking shape, respecting the process, and realism," said an EU official briefed on the discussions with Budapest.

If the two clusters are agreed, only two would remain unopened -- on the green agenda and agriculture and cohesion -- which the European Commission hopes to have agreement on for both Ukraine and Moldova before the end of the year.

All the 33 negotiation chapters, grouped into six clusters, require unanimous approval from all 27 EU members to be "closed" once the Commission deems that the accession country laws have been harmonised with EU standards. Two more chapters, dealing with how a new member will fit institutionally into the EU and any leftover issues, are handled during the final phase of accession negotiations.

EU capitals agreed to open negotiations for Ukraine and Moldova in the fundamentals and external relations clusters in June and July, respectively.

Chart du jour: Breadline

Russia's war against Ukraine has shifted focus to crushing its economy, as Moscow's targeting of critical infrastructure halts the country's grain exports, severing an economic backbone.

Global attraction

Singapore-headquartered investment firm Temasek has agreed to invest $250mn in the EU's scale-up fund, people familiar with the agreement told the FT, in a strong endorsement of the continent's investment potential.

Context: The Scaleup Europe Fund, launched by the European Commission, has been designed to invest in promising European companies in highly competitive sectors including AI, quantum technologies and semiconductors, as the continent seeks to narrow the gap on tech development with the US and China.

Temasek has struck a deal to invest in the vehicle with the fund's manager, Swedish private equity firm EQT, two people familiar with the transaction said, with a public announcement expected later this month.

The Commission is a founding investor in the fund, alongside private companies including Novo Holdings, CriteriaCaixa and Santander.

Temasek's involvement is a boost to the fund's pitch outside of Europe, and an endorsement of the potential returns of investing in the continent's start-ups, one of the people said.

The fund, which has UK involvement and is expected to surpass its initial €5bn target size, was launched to address a longstanding European weakness: the shortage of large-scale growth capital that has pushed many successful start-ups towards US investors.

EQT and Temasek declined to comment.