The seven-year financial framework and the recovery budget of the European Union have been taken hostage by a bitter dispute over the rule of law. The European Parliament (EP) asserts itself as a guardian of EU values, imposing its requirements at last on the spending machinery of the Union. The declaration by the four leaders of major political groups in the EP could not be clearer: they are challenging the Council, where representatives of the Member States sit, focusing on their own national interests, and where the German presidency is trying to steer the process towards a compromise. But that is exactly what infuriates the majority in the EP: the endless and increasingly unprincipled compromise in which the values of the community eventually get lost.

This is the most unfortunate situation, since the multiannual financial framework (MFF) is already behind schedule, and the recovery budget (Next Generation EU) is an absolutely vital tool against the Covid-19 recession, which is bound to deepen as a consequence of further lockdowns. But the tough line of the EP became absolutely inevitable for two reasons. First, the Commission, and the incumbent President in particular, have been seen utterly wimpish regarding the rule of law question until now, especially concerning the situation in Hungary and Poland. The second reason is the perceived duplicity of the German government, which happens to hold the presidency of the Council, at a time when many crucial decisions have to be taken.

Germany in the dock


The sad and highly inconvenient truth is that very few among those concerned with the rule of law believe that the German government is acting in good faith. It has been just too well documented how keen and successful Viktor Orbán has been to please German business, but also the leaders of CDU and CSU in order to secure the support of Berlin and Munich, ever since he left the liberal camp for the European People’s Party (EPP), and especially in the last decade. And he has been granted protection in exchange of economic and political favours (e.g. to Audi, Deutsche Telekom, Bayerische Landesbank, etc.).

The Bavarian CSU has played a pivotal role in whitewashing Orbán’s autocratic rule, and only pushed him back in cases when he was going to the wildest extremes like discussing the need to re-introduce death penalty or to introduce voter registration. Orbán has also pleased his German allies by championing fiscal austerity, in contrast with the previous period when Hungary struggled with excessive deficits. And under the dominance of CDU-CSU, the EPP has provided cover for Orbán and also failed to kick him out, despite outrage and divisive disputes. While recognising the dismantling of the rule of law in an EU Member State, they protected him in order to avoid losing a member delivering around a dozen votes in every EP-legislation.

Ursula von der Leyen, who, as former CDU-defence minister, knows a lot about the deals of the German defence industry with Orbán, had to recognise that under the current circumstances the EU can talk the talk but cannot walk the walk, even if they wanted. Hence, for the sake of consistency, it does not make sense to talk the talk either. As a consequence, the first issue of the Rule of Law Report by the Commission was vacuous and filled with euphemisms.

Needless to say, there have been many in Germany who did not behave like Angela Merkel or the previous CSU-chairman Edmund Stoiber, and expressed preference for forceful action. Von der Leyen may also remember that when she was still a social affairs minister in the German government, her colleague, the late Guido Westerwelle, was already pressing the alarm button. However, critical voices were usually silenced by Merkel, who probably knows that Orbán is a son of a bitch, but he is her son of a bitch. A recent interview with Uwe Corsepius (Merkel’s EU sherpa) did not help to dispel the smell of complicity.

The end of a bluff


While we take note of the repelling behaviour of some powerful players in this drama, we should not forget that this debate went off track quite some time ago. From the very start, the charade around rule of law conditionality was a way not to tackle democratic backsliding in Hungary (and subsequently in Poland) and to defer EU action in this field.

In January 2012, the Commission already launched three infringement procedures with urgency (on media, judiciary and central bank independence), which was unprecedented. The EP subsequently adopted the Tavares Report on the threats to the rule of law, but the Council remained silent. Article 7 was the talk in the town, but not for too long. Perhaps not all were indifferent, but those who wanted to do something, came up with the idea of conditionality of EU funds that was supposed to help forcing a misguided government to give up actions that endanger democracy and the rule of law.

The problems with this twist were at least threefold. First, it assumed that one of the most fundamental values of the Union can be protected with an instrument that still has to be invented, and nobody knows how it would work. Second, it made an effective mechanism de facto unadoptable since the link to the MFF gives the power of veto to the country in question. And third, the shift of discourse reversed the problem, because instead of protecting the rights of citizens in the country in focus, the mission was redefined as protecting the money of taxpayers (especially in net contributors of the MFF). This new approach implied that if the EU money was not subject of abuse, the Union would have no issue with the breakdown of rule of law and the decline of democracy.

Substituting the real tool with a paper tiger was not against the taste of the Juncker Commission, which was a master of proxy policies. They also decided that Hungary was too small to be a problem, and only focused on Poland, following the 2015 elections and the rapid adoption of the Orbán-method in a country which is four times larger. Meanwhile, the EP adopted another report, but some Council presidencies wanted to speak about it (for example Finland), while others did not (for example Croatia).

The only thing that remained on the table was the mirage of rule of law conditionality. Like a mantra, this was also added to the language coming out of the July European Council marathon. But the moment of truth, however rarely it comes in EU politics, had to arrive in this case, revealing that EU affairs ministers and other bigwigs actually outsmarted themselves and manoeuvred the bloc into a situation where financing the recovery and protecting the rule of law appears as a trade-off, comparable to Sophie’s Choice, Alan J. Pakula’s dramatic movie featuring Meryl Streep.

Back to Copenhagen


Due to this collective failure, in Hungary the European Union continues to tolerate an autocratic regime which has developed the habit of controlling practically everything: media, judiciary, electoral commission, and sometimes even the political opposition. But the problem is more than just tolerance. Oobservers often conclude that it is precisely the EU who built up Orbán and other pop-up populists. His entourage are helping themselves out of the coffers of the EU. OLAF, the anti-fraud office of the EU, investigated dozens of cases in Hungary, while the national prosecutor only followed up a few.

The EU does not fund those who promote the values of the EU, but those who confront them are endlessly funded. This is a paradox that needs to be resolved urgently. However, if it was up to the “rule of law conditionality” alone, since this would only be functional with a delay, Orbán could be re-elected easily once more in spring 2022.

In reality, the EU could do a lot more to stamp out corruption, enforce sound financial management and protect the integrity of the EU funds, without waisting more time. The total suspension of cohesion funding to the Czech Republic in 2012 is a case study to learn from.

It became a bon mot in Brussels that if Hungary would not be a member and would apply today for EU membership, the answer would be no. It needs to be added that this does not only mean that Hungary is not any longer a democracy according to most outside observers, but also that the economic system has also been deformed and, due to the government’s control, it is arguably not a market economy any longer. Secondly, the deformation is not confined to one country, but the inaction resulted in spreading to Poland first, but more lately to other countries as well, like Slovenia, which is an internal problem of identity and political cohesion within the EU, but also an issue for the external policies, especially in the context of enlargement. The credibility of the political criteria of Copenhagen suffer greatly when EU negotiators cannot prove to Serbians or others in the Western Balkans that these values and standards are taken seriously within the bloc.

A key value requires more tools


Irrespective of how the deadlock over the recovery budget and the rule of law conditionality will be solved, the problem will remain with us and will have to be taken more seriously than in the past years. One key lesson is that if the rule of law is so important on the EU agenda, and especially for the wider progressive family, the fight for it cannot be reduced to a single instrument. There is need for a long-term strategy and a wider toolkit.

Besides the rule of law conditionality, it would be important to strengthen the concept and the competencies of the European prosecutor (as was also advocated for in this study ). When introducing new budgetary chapters (for example for green transition), it is also possible to change the management system of the EU funds, and enhance the role of municipalities as opposed to national governments in implementation. Shared management can be reformed if this method clearly does not work, and more funds can be implemented through direct or assisted management.

Excluding Polish municipalities which had declared themselves gay-free from EU funding was already a good move. But the EU could also provide more direct support to the fight against fake news, and combat false government propaganda, which was once tried vis-à- vis a malicious Hungarian campaign. Blacklisting the beneficiaries of abusive practices that have been identified by OLAF is another idea that could be further developed. In Hungary and Poland, but also in other countries, the EU needs to do a lot more not only through law enforcement (protracted infringement procedures), but by helping civil society that is promoting the values of the EU and by supporting the media which promotes the agenda of pluralism, human rights and social progress.

The fact that over three quarter of European citizens want to see a connection between rule of law requirements and EU spending should be a serious warning to those who have been playing around with this subject instead of working for real EU safeguards. And the finding that more than 7 out of 10 Hungarians also agree with this conditionality should also be noticed. We know the EU alone will not bring us salvation, but the majority still expects the EU to be part of the solution. Right now, and when witnessing the rule of law deadlock, too many believe that the EU has been part of the problem.