A paper from the Institut Jacques Delors and CEPS commissioned by the European Parliament’s Committee on Budgets (BUDG) on Friday 5 May examines the Rule of law conditionality mechanism in the EU budget, as Hungary adopts a reform of its judicial system to unlock EU funds (see EUROPE 13175/22, EUROPE 13083/27).
This mechanism, which allows the European Union to take action in case of violations of the principles of the Rule of law affecting the financial management of the budget and the financial interests of the EU, entered into force on 1 January 2021 (see EUROPE 12624/11).
As this instrument is still new, the study aims to analyse how it can be used as an alternative or in combination with other tools and mechanisms to protect the EU’s financial interests.
The study aims to “deconstruct this image” of the mechanism as a kind of new “nuclear option, as it is often portrayed in academic literature and the press”. In other words, treating this mechanism as a means of last resort and only in the case of major and systemic threats to the Rule of law “risks converting it into a toxic instrument, with a very high threshold of application and considerable political costs attached”, say the authors of the study.
The authors also map out the various tools that already exist to protect the EU’s financial interests, known as ‘other layers of protection’, and describe their scope and effectiveness through the presentation of real-life case studies of their use.
From the study’s point of view, the most relevant levels of protection are those applied to EU funds managed by national authorities (Cohesion Funds, Home Funds and Common Agricultural Policy funds, Recovery and Resilience Facility (RRF)) and protecting the EU budget against actions or omissions by public authorities.
“The conditionality mechanism can be used as an alternative to the other layers of protection when there is a risk to the EU budget not (or insufficiently) covered by existing provisions. It can also be deployed alongside or after the adoption of other provisions, if the Commission concludes that cumulative application will protect the EU budget more effectively”, the study describes.
The authors of the study therefore stress that the Rule of law conditionality mechanism is not always the most effective solution, especially when a rapid response is required.
As a new tool to protect the EU’s financial interests, it therefore works alongside others and can be used to support the Commission’s ongoing monitoring of the Rule of law in the 27 Member States.
To see the study from Institut Jacques Delors and CEPS : https://aeur.eu/f/6qs (Original version in French by Pauline Denys)