Hungary and Poland have plunged Europe into another untimely crisis by vetoing the budget as they look to water down the rule-of-law mechanism governing the distribution of EU funds.
By Edit Inotai and Claudia Ciobanu
Hungary and Poland blocked the €1.82 trillion budget-and-recovery package during a meeting of EU ambassadors (COREPER) on Monday, saying they could not agree to a new mechanism which would allow for the withholding of EU funds if certain rule-of-law conditions are not being met by the country in question.
Paradoxically, however, that rule-of-law mechanism can be approved despite opposition from the two central European countries, because only a qualified majority of EU members is needed to get it passed and there was enough support for the mechanism during the COREPER meeting. It is likely, therefore, that the two countries are looking for the EU to dilute the effectiveness of the mechanism as a compromise solution.
What Hungarian Prime Minister Viktor Orban and Polish Prime Minister Mateusz Morawiecki are actually blocking – as a way to force the rest of the EU to drop the rule-of-law mechanism – is the adoption of the next EU budget and the so-called Own Resources Decision, which is needed for the EU to borrow money for its new 750-billion-euro recovery fund designed to mitigate the effects of the pandemic.
The two leaders are apparently hoping that during Thursday’s videoconference meeting of EU heads of state and government or sometime later this rule-of-law mechanism will eventually be dropped or altered to achieve unanimity on the vital seven-year budget and recovery fund.
Not exactly out of the blue
Poland and Hungary’s blocking of the budget did not come as a huge surprise, as both countries had been ramping up their rhetoric since the European Parliament reached a provisional agreement with the Council of the EU on November 5 over the form of the mechanism that can suspend budget payments to a member state violating the rule of law.
In Poland, a veto on the budget deal to get rid of the rule-of-law conditionality has been heavily advocated since the summer by hardline Justice Minister (and Prosecutor General) Zbigniew Ziobro, the head of one of two smaller parties in the Law and Justice (PiS) governing coalition. In the run-up to the COREPER meeting on Monday, Ziobro organised a press conference at which he again pushed for a Polish veto.
“This is not about the rule of law, that is just a pretext,” Ziobro said during the press conference. “This is about institutional, political enslavement – a radical reduction of sovereignty.”
United Poland, Ziobro’s party, issued a statement on November 10 that said: “The German proposal (including rule-of-law conditionality) is nothing more than an attempt to radically limit the sovereignty of Poland and Hungary, as well as of other countries that might in the future have the courage to show independence from the main centre of power in Brussels.”
Ziobro, who bears personal responsibility for many of the justice reforms taken by the conservative-nationalist government that might in future be considered problematic by Brussels, has for months been attacking the “more moderate” position of Morawiecki, who had signalled he was not in favor of a veto. In the summer, it appeared that PiS leader Jaroslaw Kaczynski was supporting Morawiecki’s softer line, but things appear to have changed as crisis engulfed the governing coalition over the past few months. Without Ziobro’s 18 MPs, PiS does not have the parliamentary majority it needs to govern.
Piotr Muller, spokesperson for the Polish government, said on Monday that the effect of the step taken by Poland and Hungary was “the suspension of procedures for the entire package: the decision about own resources, a precondition for the next budget and recovery fund, as well as the arbitrary regulation on (rule-of-law) conditionality.”
Yet experts commenting on the outcome of the COREPER meeting have been pointing out that what Muller said was not quite accurate. In fact, the rule-of-law conditionality can pass regardless of the two countries’ opposition and would be applied to the common budget even in the case of the new EU budget for 2021-2027 not being approved – in that case, the current MFF (multiannual financial framework) divisions apply until a new deal is agreed.
“The new RoL [rule-of-law] mechanism will apply to all EU spending, hence also to the carried over MFF,” Silvia Merler, a political economist and head of research at Algebris Policy & Research Forum, tweeted on Monday. “Cohesion & CAP (Common Agricultural Policy) money for Hungary and Poland will now be scrutinised on RoL grounds.”
Merler further explained that EU countries can still go ahead with the recovery package, by turning it into an intergovernmental treaty separate from the EU budget, even if that comes with technical complications. If that were to happen, the expert thinks, “Hungary and Poland would have failed in blocking the RRF (recovery fund) for other countries, would not get any RRF money themselves, AND would get hassled anyway on RoL on the only money they would be getting, ie. the regular MFF cash.”
“Doesn’t look like a great deal to me,” Merler concluded.
During the summer, the Polish government was enthusiastically praising the planned EU budget-and-recovery package, of which it was set to become one of the biggest beneficiaries with at least 124 billion euros in grants over the next seven years. Today, the country now finds itself as one of the worst hit by the pandemic and, potentially, losing vital recovery funds from a decision of its own making.
“Whoever is against the principle of the rule of law is against Europe. I expect a clear position on this from all the parties. The opponents of our fundamental values should no longer be protected by anyone,” Donald Tusk, a former Polish prime minister and arch-rival of the PiS party, said on Monday. The European People’s Party is a European political party with Christian-democratic, conservative and liberal-conservative member parties, including Orban’s Fidesz.
Similarly, in Hungary, the prime minister and government officials had over the last few weeks repeatedly alluded to blocking the budget should the rule-of-law conditionality remain as a precondition for EU funds. On Monday, Orban informed European Commission President von der Leyen and German Chancellor Angela Merkel, who currently holds the rotating EU presidency, that: “There is no deal until there is a deal about everything.”
The Hungarian government puts all the blame for the crisis on all European institutions, but mainly the European Parliament, which it once praised as the only democratically elected institution of the EU. However, since the Hungarian government’s hopes about a conservative reordering at the 2019 European elections had failed to materialise, the parliament is no longer seen as an ally but rather a foe.
Justice Minister Judit Varga wrote in a Facebook post that, “the responsibility lies with those who have allowed ideological debates to take the rescue package hostage and violated the July agreement of the heads of state and government. Hungary has complied all along with the EU treaties and the July deal. The future of Hungary can only be decided by the Hungarian people.”
Hungary’s opposition parties unanimously condemned the veto. Katalin Cseh, an MEP of the centrist-liberal Momentum party, called it a crime of historic proportions that the prime minister should block hundreds of billions of forints that are badly needed by the Hungarian people. “The rule-of-law conditionality is needed to prevent corrupt governments from stealing this money,” she added.
The opposition Democratic Coalition issued a statement accusing the government of betraying Hungary. “If government-allied businessmen cannot get EU funds, apparently local municipalities or the Hungarian people should not receive them either. As the saying goes, kill your neighbour’s cow too!”
An interesting analysis of the situation was published by Tibor Navracsics, Hungary’s previous European commissioner and a former justice minister of the Fidesz government. He argued in an opinion piece for the news site Index that there have been debates with European institutions before, but the overall direction of the integration has never been questioned.
“Now, a point has been reached, where there is no common ground to settle the disagreements. If Hungary and Poland veto the common budget, they will push the EU into an unprecedented fiscal crisis… The present conflict is no longer about money, but about identity and national sovereignty,” Navracsics wrote, likening the situation to the game of “who blinks first”, which could lead either to a complete success or total catastrophe.
Less pessimistic is former liberal MEP and Foreign State Secretary István Szentiványi, who said in an interview that the game is not over yet; most probably Hungary and Poland cannot veto the EU budget, because the German presidency will be wise enough not to put it up for a vote this week.
“It is all part of the Brussels megaphone diplomacy,” he said, arguing that it would not be in the interests of the Hungarian government to anger those governments – especially in Southern Europe – which desperately need EU money and which have not been among the harshest critics of Hungary to date.