Hungary and Poland are threatening to hijack the entire Multiannual Financial Framework budget negotiation over democracy and the rule of law.
While the regulation on rule of law budget conditionality has already passed by qualified majority vote, the Hungarian and Polish governments yesterday blocked the establishment of the EU’s €750 billion coronavirus recovery fund due to their opposition to linking EU funds to respect for the rule of law.
It is not known yet whether the two backslider regimes will indeed formally veto the MFF and Covid funds in December. While Hungarian Prime Minister Viktor Orbán made a big show of fighting prior to the July summit, he eventually backed down on that occasion, however insincerely, “for the sake of Europe”.
There is a huge discrepancy between the Hungarian government’s Eurosceptic rhetoric and the economic reality. Though Orbán even claims that Brussels is plotting to colonize Hungary, EU funding accounts for 3-4 percent of Hungary’ GDP and is the primary source of funds for state corruption. Orbán wants to cement his clientelist ecosystem for the long run and to secure power in case the mismanagement of the COVID-19 pandemic would result in an election defeat in 2022. Without the EU money, he might struggle to win the upcoming elections. Thus, he wants to water down the conditionality by narrowing its scope and implementing a deferral clause so that the Hungarian government tie it up in litigation at the European Court of Justice. Because the litigation is likely to take years, the regime would still be able to use EU funds during the 2022 campaign.
In contrast, Jaroslaw Kaczynski, who is a lot more ideology-driven and often more unpredictable than Orbán, may be less likely to retreat.
The worst-case scenario would be for the EU to make concessions to further weaken the conditionality mechanism, which could be best described as that of a most toothless lion. Nevertheless, even the mechanism already agreed is too weak.
Though the European Parliament has ensured that the rule of law mechanism is not as vague as it could have been, in a deeply legalized environment like the EU clear wording is crucial. Even now, the EU Commission would need to prove that a Member State “seriously risks affecting the principles of sound financial management of the EU budget or the protection of the financial interests of the Union in a sufficiently direct way.”
Since “serious risk” and “sufficiently direct way” are vague, the danger is that without political will, the process might result in another never-ending political stalemate, much like in the case of the Article 7 procedure.
But after a decade of authoritarian system-building, one of the lessons the EU should have learned is that Viktor Orban has become a master at formally complying with the rules while substantively undermining democracy. He plays dirty in a deeply legalized environment where the EU institutions are based in transparency and accountability, cautiously avoiding harsh language against its own Member States.
Just when the EU is trying to increase oversight of public funds through rule of law conditionality, the Hungarian government now wants to reduce it by amending its constitution.
Through new constitutionally entrenched foundations, the government will be able to channel public funds to its cronies by turning them into private funds. A second public funds amendment reduces the scope of what is classified as public funds, and so gives them more freedom to spend those newly non-public funds as it likes.
The icing on the cake is that the conditionality mechanism does not even cover broader rule-of-law challenges, the curbing of fundamental rights, or the freedom of press.
By blackmailing the EU in the middle of the pandemic Viktor Orban and Jaroslaw Kaczynski have given the EU all the justification it needs to finally take the gloves off. Here is that it could do.
First, the other member states could step up and make an intergovernmental agreement on the covid-related Recovery and Resilience Facility (RRF). The same method was used in 2012 with the Fiscal Compact (vetoed by David Cameron as an EU measure). While Orbán initially ruled out the idea of committing to the EU pact back then, he very swiftly made an about turn.
Second, because instruments like the Article 7 procedure and this rule of law conditionality typically target specific violations of EU law, they cannot counter the accumulated effect of many small legislative changes, or Orbán’s use of informal power to drive democratic backsliding.
Instead, it’s time for the EU institutions to finally use the rich toolkit at its disposal. Even should the new conditionality mechanism be difficult to enforce against Hungary, the Common Provisions Regulation already allows suspension of payments in case of systematic violation of the rule of law.
Furthermore, the Von der Leyen Commission has to demand Hungary’s adherence to the core values of the EU enshrined in Article 2 of the Treaty on European Union. The Commission should employ more targeted legal arguments — like it has in the case of Polish judiciary overhaul — so that the EU Court of Justice will have more opportunities to interpret EU Treaties in an effective manner.
Finally, the Commission should also bring more infringement actions, with applications for interim measures, related to the Article 7 procedure, given that violations of press freedom and media pluralism are among the major concerns listed under its scope. Despite the continuing decline in media pluralism, the Commission is still assessing a complaint over state aid for Hungary’s broadcast sector submitted in 2016! And the Court of Justice should prioritise these infringement actions to prevent further harm by governments before its rulings are issued.
Europe must not leave the Orbán-Kaczynksi blackmail unanswered. It is time for the EU institutions to stand up for the European people, who support tying EU funds to the rule of law, and not let anti-European autocrats push the EU into a serious financial and political crisis.