“The EU must not back down now”. Hungary and Poland’s veto of the EU budget

Interview

Hungary and Poland are blocking the agreement on the new EU budget in a bid to stop EU payments being linked to the principle of the rule of law. In our interview, Piotr Buras of ECFR Warsaw and Lucas Guttenberg of the Jacques Delors Centre at Berlin’s Hertie School urge the EU not to give in at this key point in time.

Low angle of colorful glass panels under blue sky

This interview is part of our dossier on the Rule of Law in the EU.

 

Dr. Christine Pütz: Hungary and Poland are blocking agreement on the new EU budget because they object to the idea of linking EU payments to the principle of the rule of law. This link, the so-called conditionality of the EU budget, was decided upon earlier this month as a compromise between the Council Presidency, the European Commission and the European Parliament in the framework of trilogue talks. The Polish-Hungarian veto is now blocking the entire forthcoming budget of the European Union. What do they hope to achieve by this?

Piotr Buras: Morawiecki and Orbán want to uncouple the EU budget and the rule of law principle. They are now proposing treaty reform, but are well aware that there is no prospect of this and that it will not resolve the dispute. The European Parliament has already given a good deal of ground to Poland and Hungary in this compromise. The two countries now feel that they have the upper hand.

Hungary and Poland’s governments are calling it blackmail. They claim that this principle of the rule of law is being used to force not just the rule of law, but also liberal values, for instance regarding homosexuality or migration, upon them by the back door. Is this claim incorrect?

Lucas Guttenberg: it is complete nonsense. The rule of law mechanism has a very narrow scope. It relates explicitly to infringements of the rule of law clearly described in the text and applies only to rule of law infringements that are connected to the use of EU funds. The compromise makes provision for sanctions to be triggered by even the risk of an effect on the use of EU funds. The background is this: if, for instance, we have no independence of the judiciary in the country, then we cannot rely on any misuse of EU money being detected through normal channels. But obviously, the mechanism is not applicable to all rule of law infringements, let alone to anything completely unrelated, such as migration policy. Orbán is lying when he says that this rule of law mechanism has anything at all to do with migration policy.

It is not about a specific interest of a certain country, but a fundamental principle underpinning the entire European Union, in other words the rule of law.

Why is Hungary and Poland’s veto also being described as blackmail against the other EU Member States? How does this veto differ from the standard ones that come into play when the EU has to make unanimous decisions? Orbán and Morawiecki are presenting their veto as standard procedure and refer to the fact that when the EU budget was being negotiated at the July Summit, the Netherlands also threatened one.

Piotr Buras: There are fundamental differences between this veto and others. If a country has a certain interest, then of course it can try all possible means, including a veto, to persuade the other countries to make concessions. In this case, however, it is firstly not about a specific interest of a certain country, but a fundamental principle on which the entire European Union is based, namely the rule of law. It is about whether the EU has options available to it to penalise infringements that jeopardise the EU as a whole. This is a systemic question and not one of interests. There is a very important difference. And secondly, this case is about the entire EU budget being blocked and thereby jeopardising a higher interest of the EU as a whole.

Lucas Guttenberg: And thirdly, there is also a procedural argument: there already was an agreement and Poland and Hungary approved it! It is quite standard for each party to take its own interests into account in unanimous decisions. Every country does that. Hungary and Poland came out of that agreement extremely well, in terms of both financial allocations and the rule of law mechanism. Back in July, significant concessions were made to Hungary and Poland, which is what allowed the two countries to approve the conclusions of the European Council. It is not acceptable for them now to be putting the entire agreement back on the table at the eleventh hour, in order to get as much as they can out of it for themselves. That is a qualitative difference between a veto or threat of veto during negotiations. That is why people are calling it blackmail.

Orbán and Morawiecki approved the Summit agreement in the summer, which states that there will be a conditionality regime to protect the EU budget. Subsequently, the EU Council Presidency had to move towards the Parliament’s position, because the Parliament had to approve the agreement as well. What came out of that in the form of a compromise, however, still fits within the framework that was agreed in the summer: there will be a rule of law mechanism that is linked to the budget and can be triggered by a qualified majority of the Council. Poland and Hungary were even able to block a reverse qualified majority, which would have meant that there had to be a qualified majority to prevent the mechanism from being triggered. Now, the mechanism can be triggered simply if a qualified majority votes in favour. At some point, everybody needs to get down from their high horses and recognise that everybody else has interests as well and we can only agree on a compromise. That is the EU’s compromise logic. Hungary and Poland have not done badly out of it. If everybody behaved like those two, there would never be any results.

The European Parliament and the German Presidency of the Council should now be quite clear that with effect from 1 January, not a single euro can be earmarked for spending until there is agreement on the entire package.

Piotr Buras: This procedural question is extremely important. If you can imagine how it works: first of all, the Heads of State and Government agree unanimously on a certain process, in other words that this regulation will be approved by a qualified majority at the end of the trilogue. Then, negotiations are conducted in trilogue between Council, Commission and Parliament, which reach a compromise, as is standard in the EU. This compromise is backed by 25 countries, Poland and Hungary are outvoted. And this is what was provided for by this process, which both of those countries agreed to. But now they are saying that they don’t like the compromise and are therefore blocking the entire budget. That is blackmail. Of course they are allowed to have reservations, they are allowed to criticise the compromise and they are also allowed to claim that the compromise runs counter to the treaties. They can go down the legal road to the European Court of Justice (ECJ) as soon as the regulation enters into force. But they cannot hold the entire EU hostage in a matter that is formally entirely different, as from a formal point of view, they are two completely different matters.

Piotr Buras

Piotr Buras

Piotr Buras is the head of the Warsaw office of the European Council on Foreign Relations. His topics of focus include Germany’s EU and foreign policy, Poland in the EU, and EU politics. Buras is a journalist, author and expert on German and European politics. Between 2008 and 2012 he worked as a columnist and Berlin correspondent for Gazeta Wyborcza, the biggest Polish daily newspaper. He started his professional career in the late 1990s at the Center for International Relations in Warsaw, one of the first Polish think-tanks. He continued his career at the Institute for German Studies at the University of Birmingham and at the University of Wroclaw (Poland). He was also a visiting fellow at the Stiftung Wissenschaft und Politik in Berlin. His recent book Moslems and the Other Germans. The Reinvention of the Berlin Republic was published in Polish in 2011.

How should the EU now respond to Hungary and Poland’s veto? After all, it is hugely important to all Member States for the budget to be signed off as soon as possible. A few days ago, you published a joint article featuring several suggestions. What do these look like?

Lucas Guttenberg: The basic assumption we are working on is that the EU has considerably more leverage than Orbán and Morawiecki would currently have us believe. The package logic they are using to block the majority-approved rule of law mechanism by blocking two other elements of the package that must be agreed unanimously may come back to bite them very soon. This is because part of the package concerns the spending programme that particularly benefits Poland and Hungary. The European Parliament and the German Presidency of the Council should now be absolutely clear that as of 1 January, not a single euro can be earmarked for spending until there is agreement on the entire package. Our assumption is that it will hurt both governments, particularly the Hungarian government, very quickly if there is nothing more to distribute. We consider that is by far the best leverage the EU can bring into play. There is therefore no need to search frantically for alternative solutions, but just allow things to calm down for now.

Piotr Buras: It is also very important at this point in time to send a message to the Polish and Hungarian people. Their governments want them to believe that blocking the EU budget will not result in any damage to them. Obviously, this is just a bluff. The Polish government has gone so far as to say that Poland would get more money under the old budgetary plan than it would with the new Multiannual Financial Framework. The German Presidency and the other Member States now need to send out a very clear message that this is simply not true. The Member States should now be quite firm: no agreement on a new spending programme until there is agreement on the entire new budget.

This is an absolutely pivotal moment for the entire EU. It must not back down now.

Other countries, particularly in southern Europe, that have been particularly hard hit by the Covid-19 pandemic, urgently need money from the Recovery Fund. Is there not a danger that these countries might decide to accommodate Poland and Hungary in exchange for a quick solution?

Lucas Guttenberg: I am very interested to see how this turns out. No money is going to be paid out of the Recovery Fund before July in any event. There is a certain amount of preliminary work to be done before the money can be paid out. That work can continue irrespective of an agreement, so there doesn’t need to be a compromise tomorrow for the money to be paid out promptly.

Piotr Buras: Our proposal does not aim at taking money away from Poland or Hungary, but to encourage them to climb down. If the EU remains tough in the negotiations over the coming days, there will be absolutely no need to resort to the spending programme option. At the moment, it all has to be about going for an agreement and a degree of stubbornness on the part of the EU Council Presidency and the other member states is going to be vital in this. They must not back down for fear that the Hungarian and Polish governments have the greater leverage. If it came down to it, the Recovery Fund could be agreed by other means – enhanced cooperation within the EU or an intergovernmental agreement excluding Hungary and Poland, for instance.

Lucas Guttenberg: I would also like to make the point that with every hour Hungary and Poland are turning the others against them with their block, the others become less inclined to help them. Indeed, in Slovakian and Romanian quarters there appears to be no sympathy for them. The only person backing the two governments is the Slovenian Head of Government, incidentally the only EU Head of Government to have congratulated Trump on his alleged victory immediately after the US elections. An ongoing stalemate will simply strengthen the collective political resolve of the other countries. And so I am not worried that the greater leverage lies with Warsaw and Budapest rather than In Brussels.

Piotr Buras: I would like to make one clear warning: at the moment, there is one option under discussion that will certainly play into Orbán’s hands. It is the option of postponing the implementation of the rule of law mechanism, which the European Commission could decide on its own without the approval of the European Parliament. The Commission would unilaterally undertake not to put the mechanism into use once it is approved, until such time as the ECJ has issued a final ruling on its compatibility with the treaties. We consider that this would be a fatal mistake. It would waste two years during which Orbán would get his hands on EU money and effectively use it to prop up his autocratic regime. Orbán will be standing in parliamentary elections in two years’ time and urgently needs the money from the EU budget and the Recovery Fund. The same applies to Poland. This is a genuinely pivotal moment for the entire EU. It must not back down now, but a moratorium of this kind would be backing down.

At the end of the day, it is not about instruments, but the political will of the rest of the EU.

Lucas Guttenberg

Lucas Guttenberg

Lucas Guttenberg is a Senior Research Fellow and Deputy Head of Research at Jacques Delors Institut – Berlin. He leads the team working on EMU, the Single market, social Europe and digitalisation. His own research focuses mainly on institutional developments in EMU, a matter he had also covered as economist in the European Central Bank’s EU Institutions and Fora Division. Prior to joining JDI, he worked as an advisor to the ECB’s Permanent Representative in Washington, DC. Lucas holds a BA from SciencesPo Paris and an MPP from Harvard Kennedy School, where he was a McCloy Fellow.

The EU has traditionally operated on a logic of compromises, as we have already discussed. Do you anticipate that the EU’s ability to reach compromises will become more difficult in the future, thereby jeopardising the very way the EU works?

Lucas Guttenberg: The general observation is that once a country is in the EU, there are few options to push through certain standards, such as the rule of law. We generally rely on the courts, which is not enough in the long term. That is why it was so important for us to have had this discussion now. There is an imbalance when countries are flouting the basic values of the EU whilst receiving a huge amount of money from the EU. A loophole has been revealed here. We have to be honest and say that it is not a mechanism of this kind that will deter governments like the ones currently in power in Hungary and Poland. At the end of the day, it is not about instruments, but the political will of the rest of the EU. And there’s not enough of that in evidence at the moment. We need a clear stance from the rest of the EU, to show that there are certain things that will not be tolerated. Only then will we be able to enforce this with the existing instruments.

Piotr Buras: I do not think that much will ultimately change in the EU compromise logic. That is qualitatively a completely different discussion. This discussion is about a fundamental conflict between two autocratic countries and the rest of the EU over the principles underlying the EU. Obviously, compromise logic is not going to work in this situation!

One final question: what can we expect from the next Summit of the Heads of State or Government on 10 and 11 December?

Lucas Guttenberg: I hope that the next two weeks will be used to send out clear messages that will persuade Hungary and Poland to change tack. My principal expectation is still that there will be agreement at this Summit.

Many thanks for the interview!


Piotr Buras is Director of the Warsaw office of the European think tank European Council of Foreign Relations (ECFR).

Lucas Guttenberg is deputy Director of the Jacques Delors Centres at the Berliner Hertie School.

The interview was conducted by Dr. Christine Pütz, Senior Programme Officer European Union at the Heinrich Böll Foundation in Berlin.

You can find the original German version on boell.de (published on 30 November 2020).