Chronicling Hungary and Poland’s crises
On Monday, 16 November 2020, the Permanent Representatives Committee of the 27 EU member states confirmed, by qualified majority, the compromise reached the previous week between the Council and the European Parliament (EP) on the Multiannual Financial Framework for 2021-2027 (MFF 2021-2027) and NextGenerationEU - the European recovery plan. Both include a mechanism linking funds to compliance with the rule of law.
When the time came to vote on the own resources decision (which implies the possibility for the EU to issue debt on the financial markets), the permanent representatives to the EU did not reach the necessary unanimity because of reservations expressed by Hungary and Poland, as a spokesperson of the German Presidency reported: reservations about the whole package, but not about the substance of the agreement. The Hungarian government spokesman justified the veto by arguing that they could not approve the package in its present form because it was contrary to the conclusions of the extraordinary Council of July 20, a position also shared by the Polish government, and, although less explicitly, the Slovenian government too.
The other member states stressed that the rule of law mechanism was already "an integral part" of the agreement reached by the heads of government at the July Council. Hungary and Poland both denied this, and claim that, at the time, it was agreed that sanctions could only be decided unanimously. An analysis of the conclusions does not support this interpretation. However, it can be stated that the agreement on the conditionality mechanism of the MFF and the recovery plan between the European Parliament and the Council of the European Union on 5 November strengthens the mechanism: on the one hand, by introducing a list of what are considered breaches of the rule of law; and on the other, by determining that the Council must decide on their activation by qualified majority.
At the meeting of the foreign ministers on 17 November 2020, the situation was not unblocked. We are therefore faced with a scenario in which the MFF, which provides for the blocking of resources for member states that fail to comply with the rule of law, is blocked by two member states with obvious problems in complying with the rule of law.
The emergency brought about by the need to approve the package so that European aid to alleviate the economic and social crisis caused by Covid-19 can be unblocked is evident. The veto is likely to cause a delay in its launch, but it is unlikely to derail it completely and a solution will undoubtedly be found in the coming days or weeks.
In fact, keeping in mind the differences within the current situation, several member states have taken advantage of their veto power in budget negotiations to increase their gains in these negotiations or to interconnect them with parallel negotiations. The best known is perhaps the British threat to veto the southward enlargement of the EU, which took place at the meeting of the European Council at Fontainebleau in 1984. The threat was raised as a result of a correction mechanism not being established for member states that bore an excessive budgetary burden in relation to their relative prosperity - as a solution the British rebate was designed.
Of course, today we are talking about an issue with a very different dimension to the traditional tug-of-war over budget items, but both in these situations and now, the possibility of reaching an agreement depends on the skill of the EU Presidency, which is currently held by Germany. It must, as an honest broker, strive to reach an agreement. An agreement that, as in previous negotiations, allows all governments and EU institutions to sell the final agreement as their victory. The German presidency on Tuesday expressed its confidence in resolving the deadlock: "There is so much money at stake, which so many member states need and are waiting for, that a solution is not only required, but we need it quickly," said the German foreign minister, adding: "I am sure we will be able to do it.
Given the apparent confrontation between Hungary and Poland with the rest of the EU, it should not be forgotten that the agreement is already a compromise, between the EP and the Council negotiators; and between the latter, as several member states, such as the Netherlands, would have preferred an even tougher mechanism. In this sense, the final compromise has to be sufficient for some but not be too much for the others. The Hungarian and Polish positions are also nuanced: while Viktor Orbán's government has been very decisive in this respect for years, the Polish government's position is more nuanced.
In general terms, the current situation opens up three scenarios:
1) If the second wave of the pandemic hits Poland and Hungary very hard, and in view of its economic and social consequences, both countries (which are among the main beneficiaries of the MFF and the reconstruction plan) would also have an interest in closing the agreement as soon as possible. Therefore, according to a first estimate, they are only trying to take advantage of the situation to reap some gains, at the European level, as protectors of the national cause, and at the domestic level, in the eyes of public opinion. According to some initial polls, 57% of Poles supported the veto, while 20% were against blocking the EU budget. At the same time, Poland's ruling conservative party, Law and Justice (PiS), has the support of 30% of voters. Its veto would represent, in this sense, an attempt to divert public attention from its handling of the Covid-19 crisis and the recent large demonstrations against it.
Part of the opposition in Poland has also taken a stand against the veto. Former presidential candidate and mayor of Warsaw, Rafał Trzaskowski, commented that vetoing the budget, "of which Poland is one of the major beneficiaries", is "simply an attempt at suicide". The reaction of the economy also seems to punish the decision. The Hungarian forint and the Polish złoty fell against the euro following news of the possible delay in EU fiscal support.
In this context, their opposition could disappear after a declaration of intent from the EU institutions on the clauses guaranteeing a proportionate, balanced and equitable use of the rule of law mechanism, which both governments can sell as a victory even if the package remains unchanged.
2) It can be assumed that the opposition of the two countries to the mechanism would be more solid and firm, and that both are determined to use their veto power for a more significant change. In this scenario, it can be considered that the socio-economic consequences of the pandemic are increasingly evident and there is no time for member states to delay or even postpone negotiations. Already in March and April 2020, with the numbers of infected people on the rise, many heads of state and government preferred to soften references to compliance with the rule of law in exchange for reaching an agreement. On the other hand, Hungary and Poland consider that the mechanism is a violation of their sovereignty and that, once the package is approved, they cannot receive the funds either because of the complaints from a large number of member states about their violations of the rule of law and the possible activation of the mechanism. In this situation, the starting point would be the Council agreement of July, but at present it seems impossible to go back to the compromise reached between the Council and the EP on 5 November 2020.
3) The Presidency can link the agreement on the financial package to other issues, thus reconciling the positions of Hungary and Poland. Both states have long demanded the completion of the procedure under Article 7 of the EU Treaty. The necessary majority in the Council is lacking to move forward with it and to condemn Hungary for a violation of the rule of law, or even to establish that this danger exists. In view of the weakness and failure of the mechanism, some member states already considered the suspension of the aforementioned article as an option, although they argued that the conditions for this were not yet in place.
Given the current situation, it may be an option to cut with a procedure that has no future in order to achieve a more decisive mechanism for the same purpose. However, last September, the EP adopted a resolution in which it proposed to urge the Council to reactivate the sanctioning process against Poland provided for in Article 7 for jeopardising the rule of law.
To conclude, a remote meeting of the Heads of Government and State was held on 19 November 2020, and although an agreement is not expected so quickly, the one that materializes will be among those described above. But negotiation does not only mean an increase or reduction of budget items, it is also linked to the basic principles of the Union. In this sense, the EU must not allow itself to be blackmailed and allow taxpayers' money to reach member states that limit the independence of the judiciary or the freedom of the press. In the words of the Prime Minister of the Netherlands to the Parliament: "The EU cannot survive in the long term if it is not also a community of values, and the commitment to the rule of law is the minimum".
This article was first published on the blog of the Fundación Giménez Abad.