How can the EU apply the conditionality of the rule of law without the final beneficiaries paying the price? This is the aim of the concept of ‘smart conditionality’, which was discussed by experts and MEPs from the Committee on Budgets and Committee on Budgetary Control at a public hearing, on Tuesday 13 May.
The Parliament intends to influence the European Commission with an own-initiative report on the implementation of the rule of law conditionality regime, presented by Jean-Marc Germain (S&D, French) and Monika Hohlmeier (EPP, German). Indeed, the Commission has made it known, from autumn 2024, that the EU’s next long-term budget would establish an even closer link between financial support and respect for the rule of law (see EUROPE 13520/4).
There are two main obstacles to ‘smart conditionality’: it must not render null and void the measures undertaken with conditionality and the funds it would direct towards final beneficiaries must not be captured by the government of the Member State concerned. Daniel Freund (Greens/EFA, German) pointed out that “the more the funds are redirected, the less effective the sanction part is”, while Monika Hohlmeier wondered, as she had at a previous hearing on conditionality on 7 April (see EUROPE 13618/23), “how to implement a genuine smart conditionality mechanism when, as in Hungary, virtually everything is in the hands of the government”.
Kim Lane Scheppele, a professor at Princeton University, has identified three ways of funding final beneficiaries while bypassing Member State governments: - by funding pan-European civil society organisations to “support national organisations working in their field”; - by funding researchers through universities in other Member States; - by going through cohesion to finance municipalities.
Another way of bypassing the governments in question would be to go through the European Investment Bank (EIB), which would have to be given the legal option of “granting subsidies” in addition to loans, according to Lucia Serena Rossi of the University of Bologna.
According to her, the decision to freeze funds and grant them to other entities in the same State should be taken by “an ad hoc executive agency under the supervision of the Parliament and the European Commission” and not by the Commission alone.
In Hungary, the only Member State currently subject to the conditionality regulation (see EUROPE 13551/14), the solutions proposed could come up against the Sovereign Protection Authority, which prohibits foreign funds. “This authority can block any fund that does not meet with the government’s approval”, said Ms Scheppele. MEPs also wondered how to fund towns and regions that might be run by the political party of the government in power.
Before resorting to new solutions, the Committee of the Regions (CoR) has asked the Commission to ensure compliance with Article 5(2) of the ‘conditionality’ regulation, which states that the Member States concerned must “continue to implement programmes aimed at final beneficiaries”. A “confidential reporting mechanism” would make it possible “to alert the Commission when these obligations are not being met”, according to the CoR.
The Commission has clarified that, as it stands, “the very concept of ‘smart conditionality’ does not appear in the ‘conditionality’ regulation”, but that the institution is obliged to “propose proportionate measures”. (Original version in French by Florent Servia)