• + The European Council has agreed upon a €750bn COVID-19 recovery package without conditioning funds to Member States´ respect for the rule of law. 
• + Viktor Orbán threatened to veto any budget that included this condition. 
• + The European Parliament was not happy with this free-pass for authoritarian governments –  mainly Poland and Hungary. 

Why is Orbán the EU’s frenemy? 

Answer: They must act together but their principles differ greatly. 

As the pandemic rages on, Europe has finally elaborated a plan to help out its Member States. This past week, the European Council agreed to a €750bn COVID-19 recovery package. The general economic package has two elements: the regular EU budget and the new package intended to help Member States fight the recession following the global pandemic. Among the main concerns of this new pact is the handout to countries that undermine the rule of law: mainly, Poland and Hungary. These are two big winners of the funds repartition. 

The EU Parliament has been very critical of the pact reached this week by EU leaders. This package decided not to make the funds conditional to the different Member States’ respect for the rule of law. Instead, the agreement included very ambiguous terms, shaped by Merkel’s team, promising a “regime of conditionality to protect the budget” with no mention of how this would work. Viktor Orbán, Hungary’s Prime Minister, is content with this result. 

What does Orbán want? 

Answer: To avoid the conditionality of funds at any cost. 

Poland and Hungary, countries which for decades have worried the rest of the EU for their increasingly authoritarian ways, threatened to veto the agreement if it were to require higher respect for the rule of law. Viktor Orbán stated Hungary would not approve the budget if the rule of law was discussed, thus vetoing the conditionality of funds. Poland would have followed the veto. 

According to the leader, there were more pressing matters such as economic reactivation and crisis management to deal with, placing the rule of law in the back burner. This comes as no surprise, since more and more watchdogs and international organizations, including branches of the EU, find the situation of Hungarian rule of law quite gloomy, especially media oppression and lack of judicial independence. More info here.

Even though this move was viewed as a “threat” to the defense of the rule of law and democratic foundation of the regional organization, his veto threats were successful and no direct conditioning of funds became part of the recovery package. 

What does the EU want? 

Answer: To protect the democratic principles of the organization, but also to get a budget approved. 

Considering that any vote on budget issues within the Union requires unanimity, the leaders of the organization cannot act purely on will. Still, they have tried to reassure the rest of the Parliament that the deterioration of both the Hungarian and the Polish democracies have not been overseen by the Union. The president of the European Council, Charles Michel, restated the fact that this is the first time the rule of law is mentioned in any budget.

Ursula von der Leyen, President of the European Commission, has also defended the resulting pact stating there is a “clear compromise” with regards to the rule of law. However, other members such as France, the Netherlands, and Belgium, still consider this budget was a great opportunity to tie Orbán’s hands.

However, a speedy response to the coronavirus crisis is to European leadership a key factor to consider. For example, Germany, under Merkel’s leadership, was swift to switch sides regarding conditionality when vetoes came to the table. At first, the leader advocated for more conditionality and defense of the rule of law along with the funds. However, given the urgency of the situation, Merkel favored a fast agreement and implementation of the recovery package. A slow and controversial agreement could not only offer the populist leaders in both Hungary and Poland strong electoral leverage against the EU, but it also could slow down the economic recovery of the region. 

What is the EU doing? 

The EU Parliament’s relationship with Orbàn

Answer: Unwillingly accepting the budget as it is, and trying to ensure protection elsewhere. 

The Parliament members were not subtle about their dissatisfaction with the final result, which did not include direct conditioning of funds. However, there was some democratic protection included in the pact. Mainly, the pact included a procedure through which the European Council will be able to take measures against member states that breach democratic principles with 55% of member states representing 65% of Europe’s population. However, these measures were not outlined nor the action to implement them described, thus making their application uncertain. 

This is not the first time conditioning of funds has been used as a tool by the Union. The best example is Hungary’s last attempt to reform the judicial system that would have greatly undermined the independence of judges in the country under populist Viktor Orbán in 2018. This attempt was blocked by Brussels through the conditioning of funds. The European Union announced that its funds might be dependent on the recipients’ safeguarding the independence of their judiciaries and investigating corruption. Considering 4% of the Hungarian GDP comes from the EU, the amount of pressure this supra organization can apply is truly immense. Whether it is capable and willing to apply it is a different story. 

Who is winning and what about you?

Answer: Even though Orbán got his way, the battle isn’t over. 

While funds might be the most coercive force the EU can deploy over leaders, there are other checks for autocratic backsliding within the Union. Article 7 of the Treaty of Functioning of the EU (TFEU) is a mechanism in the Lisbon treaty that ensures all Member States “respect the common values of the EU.” It was intended to mitigate any anti-democratic behavior in the Member States. However, the application of this article has been highly controversial and only slightly successful. 

In 2017, the European Commission applied this article against Poland over a very controversial judicial reform. The European Parliament also voted to sanction Hungary this year under the same article. This article can be used whenever a country is considered at a  “clear risk” of breaching the fundamental values of the organization. These values are “human dignity, freedom, democracy, equality, the rule of law, and respect for human rights, including the rights of persons belonging to minorities.” However, the actual implementation of sanctions using this article involves a long two-phased process with both the European Commission and the European Parliament. 

While Orbán is content with the lack of conditioning of the COVID19 recovery package agreed upon, the EU is not blind towards the deterioration of the Hungarian democracy. From Orbán’s excessive powers during the pandemic to his overall authoritarian management of the country, leaders of the EU are unlikely to stop looking for paths to secure the rule of law within their Union. 

The rule of law is not only a founding principle of the European Union, but for democracies to survive. Whether the EU is strong enough to ensure this principle within its Member States matters for two reasons. Firstly, as seen with the case of Poland, Hungary’s authoritarian ways can spill over to other Member States along with the populism they entail. And secondly, the lack of legal certainty that accompanies the decay of the rule of law will impact markets negatively. With a market as integrated as the European one, the rule of law of one should matter to all.