Poland and Hungary hold hostage the EU’s budget package

THE FACT

This week a new hot topic made its way in the news between the evolving numbers of the current second wave of the Covid-19 pandemic and the consequences of the recent US elections: on Monday 16th Nov. during the meeting of the Council of Ministers Polonia and Hungary put their veto on the EU’s budget to manifest their opposition to the Rule of Law conditionality for the future funding transfers from to the EU to its MS. This veto vote de facto holds hostage the EU’s budget since the unanimity is necessary for it to be approved. The two States reconfirmed their position during the brief video conference on Thursday 19th Nov. among the EU leaders, after that also Slovenia expressed its disagreement with the conditionality on the Rule of Law (even if it did not put its veto). The event becomes even more relevant since the EU’s budget includes the Recovery Fund, which can make the difference in the management of the Covid-19 crisis in many States of the Union, including Hungary and Poland themselves.

But let’s take a few steps back to understand better what happened and analyse the reasons behind this move by the two Eastern European Countries.

THE EU’S BUDGET

Before the summer break, in July, European leaders reached an agreement on the EU’s budget for the next seven years: €1.8 trillion is the amount the EU can spend over the period 2021-2027. This amount comprehends €750 billion for the Coronavirus Recovery Fund, known as the Next Generation EU, and the remaining €1.074 trillion represents the EU Multi-annual Financial Framework, the actual EU’s long-term budget.

THE RULE OF LAW CONDITIONALITY, POLAND AND HUNGARY POSITIONS VS EU

On Mon. 16th Nov. the EU Council and Parliament with the necessary qualified majority agreed to make future funding transfers from the EU to its MSs conditional upon the respect of the Rule of Law in the MSs themselves, meaning on the adherence to democratic values, human rights and independence of the judiciary systems in each MSs (and both the two Eastern European Countries have often be accused and are investigated by the European Commission in these regards).

At this point, Poland and Hungary, not being able to stop the communitarian decision on the Rule of Law conditionality, which it’s seen by the two Countries as an unfair ideological move targeted against them by Bruxelles mining their sovereignty, put their veto on the EU’s budget. Poland and Hungary did so not to express their disagreement on the EU’s budget deal itself agreed in July - as stated by Balazs Hidveghi, a Hungarian MEP from the ruling Fidesz party - but just to manifest their opposition to the Rule of Law conditionality not having other means to do so. According to the Hungarian MEP the Rule of Law concept is not clearly defined and he says “it’s an ideological sort of subjective matter that the one side of the arena has been misusing, but then that is not to be linked to any functioning of the EU”.

However, we must notice that opposition politicians in Hungary are keen to point out that this view is not shared by everyone in the Country, on the contrary Katalin Cseh, another Hungarian MEP from the Momentum Movement, reports that “over 70 percent of Hungarians support the Rule of Law conditionality”. In fact, Hungarians businesses and local authorities indeed need the funding transfers from the EU’s budget to support the economy in the Country harshly hit by the Covid-19 crisis. The Hungarian opposition is trying to show to the EU that the Government of Orban does not represent the whole Country.

EU’s leaders stay firm against Hungary and Poland following the line that EU membership comes with terms and conditions, as highlighted by Alberto Alemanno, EU Law Professor at HEC Paris. To be a member of the EU, a State needs to respect the Rule of Law, those underlying democratic values that hold together and are at the very foundation of the EU itself (as stated in Art. 2 of the TEU).

RULE OF LAW IN POLAND AND HUNGARY

Poland and Hungary reacted so strongly to the Rule of Law conditionality since both Countries have been accused of many violations of the Rule of Law in the past years and also nowadays they are a theatre of social and political turmoil (as explained here in our blog). These violations of the Rule of Law put in danger the very membership of these Countries in the EU since they are deeply unacceptable and disrespectful in regards to the populations of the two Countries and the other EU MS.

WHAT WILL HAPPEN NOW

The EU’s leaders of the remaining 25 MSs stay firm on the Rule of Law conditionality, even if it’s unlikely that this mechanism will solve all the Rule of Law problems in the Union, but it would be a start in the right direction. The MSs leaders hope to be able to find a compromise soon since the urgent need of the EU’s funding support to face the current Covid-19 crisis hitting the Countries of the Union. EU officials have considered proposing a political declaration that the Rule of Law mechanism will not target specific Countries of the Union and will respect the MSs’ sovereignty, but Hungary and Poland push for the introduction of a unanimity clause to the Rule of Law mechanism. Nevertheless, it’s clear that if this would be the case, then States accused of breaking the Rule of Law – as Hungary and Poland themselves - might use their veto power to stop the entire mechanism making it ineffective.

In the unlikely scenario in which the above mentioned compromise were not found, then at least the Recovery Fund might be transformed in an intergovernmental agreement but, non considering the long proceedings that would then be necessary, part of the funding would remained blocked by the veto of Hungary and Poland, as explained by the INSPI Institute. Without a budget deal in early December, the EU would have to adopt an emergency spending programme for 2021, a so-called provisional twelfths annual budget, extending the 2020 spending ceilings but only allowing money to flow to some areas as subsidies for farmers, EU civil servant salaries and humanitarian aid. However, large economic resources would be blocked in absence of a budget deal, damaging the overall growth of the Union and the MSs more in need as Hungary and Poland themselves, which are among the main beneficiaries of EU’s funding support. Moreover, we must notice that since the Rule of Law conditionality has been voted by a qualified majority then it would be valid also for the provisional twelfths annual budget making Poland and Hungary’s veto ineffective.