Since the beginning of the current legislative period, there has rarely been a political itinerary in the run-up to Christmas of such huge importance to the credibility of the European Union’s actions in enforcing the rule of law.
This Wednesday, the European Commission is to return a highly anticipated opinion on the progress of the Hungarian government of Viktor Orbán in making good on the 17 commitments it has made to increase the independence of the judiciary and tackle corruption in the country. This is the prerequisite for the unblocking of 7.5 billion euros under the cohesion fund that the EU institution proposed to freeze in September under the ‘rule of law conditionality’ regulation (see EUROPE 13024/9).
The member states that are net contributors to the EU budget fought hard to push through this tool during the negotiations on the multi-annual financial framework 2021-2027 that took place in July 2020 (see EUROPE 12532/2). After months of hibernation over a legal row, the Court of Justice of the EU finally approved this instrument when, in mid-February, it rejected the case brought by Poland and Hungary, which clearly saw themselves as its targets (see EUROPE 12892/1).
This ups the political ante. If the Commission is too indulgent and finds that the Hungarian authorities have made the required efforts, this is likely to be greeted with incomprehension by the pro-European majority of the European Parliament, which brought it before the Court of Justice of the EU over its inaction in this area (see EUROPE 12823/6), and academic experts who consider that Budapest’s efforts are purely cosmetic. In a recent note, two lecturers from the University of Princeton and the Central European University argued that the new Hungarian authority tasked with auditing European funds and its counterpart for monitoring the ‘anti-corruption’ programme remain under the control of the political powers that be (https://aeur.eu/f/4cb ).
If the ‘von der Leyen’ Commission is too lenient, the ‘rule of law conditionality’ regulation will be seen almost universally as dead in the water.
It is more likely that it will find the efforts made by Budapest inadequate and European taxpayers’ money still at risk of being misused. According to rumours following Tuesday’s preparatory meeting for the session of the College, the European Commissioners are expected to maintain the status of the procedure launched under the ‘rule of law conditionality’ regulation and, on the basis of an analysis of the Hungarian measures taken up to and including 19 November, to confirm its proposal to suspend 7.5 billion euros in European funding.
At the same time, the Commission was supposed to approve the Hungarian recovery plan with an envelope of 5.8 billion euros in subsidies under the Next Generation EU recovery plan. On this point, time is of the essence: Hungary will lose 70% of the European subsidies allocated to relaunch the economy post-Covid if its plan is not adopted by the Council of the EU by the end of 2022. Today’s discussion of the Hungarian recovery plan is expected to be a bit more straightforward than when the Polish plan was approved in September. That episode ended in a rare vote of the College in which Executive Vice-Presidents Vestager and Timmermans, plus Commissioners Reynders and Jourová, who are competent in matters of justice and rule of law, voted against the Commission’s green light (see EUROPE 12963/3).
In the case of the Hungarian plan, the 17 measures demanded by the Commission in September have been included in the form of 21 ‘milestones’ in the plan. There are also four milestones related to judicial reforms, to be met by March 2023, plus a further two on audit matters. But unlike the other 26 recovery plans, President von der Leyen will not be travelling to Budapest to hand over the Commission evaluation document to Viktor Orbán in person, her spokesperson announced on Tuesday. And no European funds will be paid out until Budapest has complied with all 27 milestones of the recovery plan.
The dossier will then be put before the Council of the EU, where the member states must take position by no later than Monday 19 December in the framework of the procedure under the ‘rule of law conditionality’ regulation and the same again for the Hungarian recovery plan, by the end of December.
Significantly, any decision connected to the ‘rule of law conditionality’ regulation must be taken by a qualified majority of EU countries. This rules out the possibility of any one state vetoing the decision. Although Poland has already announced that it will be backing Hungary, the states that come to Budapest’s defence will have to explain why they care more about the sovereignty of a state that rails against a Marxist Brussels nebula than about how their taxpayers’ money is spent elsewhere in the EU. That is the time to show that trampling the fundamental values of the EU underfoot cannot go unpunished when there are binding instruments to uphold them.
The three Benelux countries are very much of this mindset. In their joint declaration adopted on Tuesday, they state that they fully support the Commission in its roles of guardian of the treaties and administrator of the EU budget. “The conditionality mechanism is a vital tool in protecting the EU budget and the financial interests of the EU from violations of the principles of the rule of law. We expect the Commission to carry out in-depth evaluations and closely monitor the situation and effects on the protection of the financial interests of the EU”, they stress (our translation).
However, a strategy of going all out is not without its risks for the EU institutions. If it comes down too severely on Hungary, the 'Orbán' government will step up the narrative of itself as a victim of ‘Brussels’ and could raise the stakes by blocking other dossiers which require its approval. One such is the proposed directive transposing the ‘OECD’ agreement on minimum taxation of multinational companies into EU law, which Budapest is blocking until its recovery plan receives the blessing of the Council. Hungary is also refusing to participate in the macro-financial assistance programme of 18 billion euros to Ukraine for 2023 via European loan guaranteed by the EU budget. A purely political posture from a country that would rather offer Ukraine bilateral loans while it is borrowing at an interest rate of more than 8% over 10 years.
In this perilous political itinerary, the ‘Ecofin’ Council on Tuesday 6 December looks like it might be the point at which all these storylines converge. If it does not have the time to carry out its own analysis, the Council could postpone its decisions to a subsequent meeting of the European finance ministers, Monday 12 December having been mentioned as a possibility. In the meantime, the Hungarian authorities could tip the odds in their own favour by highlighting the measures taken since 19 November to comply with the Commission’s demands. Mr Orbán has written to the Czech Prime Minister, Petr Fiala, to plead his case.
Finally, in the event that the blockage cannot be broken, the Hungarian Prime Minister is within his rights to call for the dossier to be included on the agenda of the European Council of Thursday 15 and Friday 16 December under the ‘rule of law conditionality’ regulation. This would take it to 3 days before the cut-off date of 19 December.
Mathieu Bion