Hungary is suggesting a new model for economic cooperation with Israeli companies - acting as a European production base for Israeli technology and defense companies. In an exclusive interview with TV10, Economy Minister Márton Nagy signaled that his country may be ready to offer what he described as a “joint venture” model, where Israel brings the technology, while Hungary provides the production lines and labor.
Minister Nagy floated a pitch to Israeli businesses that could benefit defense and technology firms facing political headwinds in Western Europe:
“So it can be a starting point for startups in form of a joint venture, and it also can be a factory for defense industry, for export activity from the European Union.”
The subtext here is that Israeli companies could establish production lines in Hungary - a NATO and EU member - and gain a “Made in the EU” stamp that bypasses regulatory friction. Meanwhile, Israeli companies could gain access to EU defense contracts, backed by Hungary’s €16 billion military modernization program.
Nagy highlighted the strong cooperation between Israel and Hungary’s defense and tourism sectors, and raised the topic of cooperation in outer space.
The two economies are more complementary than competitive. Israel functions as the architect, designing complex systems and generating high-margin software. Hungary positions itself as the builder, offering a 9% corporate tax rate, developed infrastructure, and labor to physically construct these systems for the continental market.
But a partnership like this carries geopolitical risk. Hungary’s ongoing friction with Brussels over rule-of-law issues means Israeli companies establishing headquarters in Budapest could find themselves caught in the crossfire between the Hungarian government and the EU leadership.
While they have a similar population size, Israel and Hungary’s economies reveal a structural divergence. Hungary projects 3.1% GDP growth for 2026, driven by its role as a manufacturing hub for German automotive and battery sectors - a high-beta derivative of the German industrial engine. Israel’s projected 4.9% rebound is powered by global demand for cybersecurity, defense technology, and AI, sectors less exposed to European industrial cycles.
Minister Nagy emphasized his invitation to Israeli companies to "produce, to have benefit, not just from Hungary, but also for the European Union market.”
