You would be forgiven for thinking that the only thing that matters right now for the European Union is Brexit and how the United Kingdom will trade and relate to the world’s third-largest trading market in the coming years. Sure, it’s important, more for the Brits than for the Europeans in the grand scheme of things, but the 27 members of the EU are also wrangling over money and a budget of almost €2 trillion (Dh8.9 trillion) for the next seven years — and how Hungary and Poland are holding the entire process up.
With rightwing governments in power in Budapest under Viktor Orban and Warsaw under Mateusz Morawiecki, the EU Commission and most European Council members are concerned that the democratic principles which are a cornerstone for the bloc are being undermined.
Over the summer, when the EU members were hammering out a coronavirus economic recovery plan and a new five-year budget, they purposely linked elements to ensuring democratic principles are upheld — measures that targeted both Hungary and Poland. In retaliation, both Budapest and Warsaw have threatened to veto the new budget. It’s a standoff that has been years in the making, festering in Brussels for almost as long as that Brexit affair.
Tempers are running high. In one sign, senior members of the European People’s Party threatened to kick Orban’s party out of their group in the European Parliament if he continues to block the EU’s budget and recovery package. The EPP had already suspended Fidesz members in March March 2019 when the Hungarian government harshly criticised leading EPP figures. Now those suspended Fidesz members would be expelled.
But there are other far more pressing issues than petty party politics. Money matters most.
Both Hungary and Poland are net recipients of European development cash — money that has helped transform their domestic economics since the end of Communism, and money too that has helped the authoritarian governments there thrive.
Warsaw and Budapest are now working in lockstep to ensure the other 25 members and the Commission are frustrated in their efforts to thwart right-wing policies that undermine the ideals of pan-European liberalism. It’s not just the British who turn to phrases such as an attack on sovereignty. In recent months, since the budget was cobbled together, Hungary and Poland say the rule-of-law provision is an attack on their sovereignty.
Back in July, when EU leaders met to hammer out the €1.8 trillion budget, they agreed unanimously to tie rule-of-law conditions to the disbursement of EU funds. Back then, both Warsaw and Budapest agreed to the idea of attaching the conditions, but their leaders insisted the move hadn’t changed their ability to block sanctions.
Until now, unanimity was needed and the two countries effectively had each other’s backs. The new rules would allow funding to be cut with the approval of a qualified majority of EU governments. In response, Hungary and Poland have vowed to veto the entire EU spending plan.
Erosion of cornerstone principles
The European Parliament has been calling for sanctions against both countries for some two years, pointing to attacks on freedom of the press there, a rollback in women’s rights, anti-refugee sentiment and the politisation of judicial appointments as evidence of the erosion of the cornerstone principles.
Yes, the EU has powers to sanction or suspend member states that fail to adhere to the club rules but that has proven difficult to enforce. With the need for a new EU budget and a coronavirus package, EU council members followed the leads of French President Emmanuel Macron and German Chancellor Angela Merkel in pushing for the rule-of-law clause. Tying aid to funding has been seen as a more effective way to prod governments to adhere to common standards, but it took the economic crisis caused by the pandemic to bring matters to a head.
The financially conservative richer member states, such as Germany and the Netherlands, agreed to borrowing and spending measures they had long opposed before the crisis. They are in effect lending their stellar credit rating to the EU so it can raise the funds needed for continentwide economic recovery. They see the rule-of-law conditions as a must for protecting their taxpayers from the misuse of funds by governments they don’t fully trust.
The two countries, which are the only ones in the EU formally being investigated for potential rule-of-law violations, are jointly due to receive at least €180 billion from the budget. They may lose out on stimulus funding and the EU Commission is saying it could penalise the holdouts under an emergency budget starting next year. Other nations would get priority.
As things stand now, Hungary and Poland have both threatened to veto the new budget. That, however, won’t mean the EU will suddenly stop functioning because it’s run out of cash. No, there is a provision that allows it to operate on a month-by-month emergency budget basis from January. Yes it would be messy and yes, it would provoke other member states to become more actively engaged in the talks. That may not necessarily end well for both east-European states given that the worst of the pandemic will be behind the member states and they will want to focus on rebuilding their economy. And that needs an agreed budget.
As always, the entire EU system is based on compromise, finding a way forward through talks and threats. And one way forward might be for the other 25 to come with a new coronavirus restructuring programme, cutting out Hungary and Poland, then agreeing to a smaller EU administration budget for the 27 that does not include development funds. Hey, don’t forget this is an organisation that operates with 27 members, nine different currencies and 24 official EU languages. So, two budgets shouldn’t be too much of an issue.
Mick O’Reilly is the Gulf News Foreign Correspondent based in Europe