In the EU-s big rule-of-law runoff, everybody is a winner, but Orbán just a bit more
By: Zsolt Kerner
Tags: Hungary, European Union, Orbán Viktor, Angela Merkel, Rule Of Law

Seems like the Germans are only interested in rule-of-law when it doesn’t interfere with business. For Orbán, not losing EU funds before the election in 2022 is more important than anything else.

This post is a revised translation originally published by me in 24.hu, the leading independent news site in Hungary.

The German-lead EU finally reached an agreement with Hungary and Poland on unblocking the union’s seven-year budget and the huge economic relief fund dubbed Next Generation EU. The main source of the two countries’ objections to the funds had nothing to do with the budget itself, more with the conditionality mechanism developed alongside the Multiannual Financial Framework and the NextGenEU fund. This rule-of-law conditionality was designed to withhold funds from certain member states accused of not obeying the fundamental values of the European Union.

Just to be clear: the Hungarian and Polish governments never had any issues with the EU budget or the relief fund itself, only with the rule-of-law conditionality. But they couldn’t stop the conditionality, as it only requires a majority in the European Council, and Hungary, even with the help of Poland, does not have a blocking minority. The seven-year budget is a different game, it has to be approved by all member states (as well as the legal framework for the new resources responsible for covering the NextGenEU fund), so even the smallest countries can threaten the whole EU with a veto.

For a while it seemed like the EU will stand its ground this time, adopting the conditionality and finding a way to do the relief fund with only 25 member states sans Hungary and Poland (kind of like they did with the ESM when Greece was in trouble). But then news started leaking about converging positions between Germany (acting as the rotating presidency of the European Council) and the two renegade countries.

The essence of this compromise is that the Hungarians and the Poles will go with the rule-of-law conditionality as it stands after agreed upon by the trilogue (the Commission, the Parliament and the rotating Presidency), but the Germans will make sure they don’t have to deal with it for a little while.

There are several interesting things in this compromise:

The rule-of-law mechanism is adopted as it is, not a single comma changed in it, as it was an important demand from the northern member states and the European Parliament.

But the Council adopted a declaration about how it can be used. It states — according to the demands of Orbán Viktor — that the mechanism can’t be used to police family policies (I.e.: gender) and migration. It wasn’t a big prize, as it was never designed to concern these as issues, but this was the position of the Hungarian government’s internal communications. This declaration also states that the mechanism can only be used when rule-of-law issues concern the EU-budget. This is kind of the same as it was before, but Orbán’s goal is clearly to define corruption in the strictest, narrowest way possible, so the mechanism has a narrower scope.

But the most important thing is that the mechanism itself will be in effect iced until around 2022. The declaration allows the Hungarian and Polish governments to start an action for annulment before the Court of Justice (basically to ask the court if its legal), and the conditionality will only be finalised after the ECJ says that its OK. This takes around 1–3 years by the previous cases, so the mechanism will definitely only be finalised after the parliamentary elections in Hungary, which will be held in april 2020.

This declaration in itself is an interesting legal phenomenon, since only the mechanism itself is EU-law. The declaration by the Council is more like a political agreement in which the Commission, the administrative arm of the EU, tells the Council how it will apply the law. It is an interesting circumvention of not changing a single comma in the law itself, but lessening the scope by administering it more narrowly.

But the more important question is, as always: who won this round?

Basically everybody, but the Hungarian prime minister just a bit more.

Even last week, when Polish deputy PM Jaroslaw Gowin started speaking about dropping the veto, it seemed like Orban had finally maneuvered himself into a losing position. But the poles didn’t drop the veto, it was only a sign of the internal struggles of the ruling coalition in Poland.

(There are three main parties in the Polish government, one big and two smaller ones, each on the two political sides of the Law and Justice. United Poland is hard right, challenging Mateusz Morawiecki’s premiership, while Agreement is more to the center. The main governing party can’t let any of them leave the ruling coalition because the margin of majority is so small.)

When the council decided about the budget and the conditionality mechanism at the end of the summer, Orban had asked the German chancellor Angela Merkel about putting it off until the 2022 elections, but Merkel declined. So it is a big political win for Orbán to finally achieve. In practice, it is a much smaller one, since the mechanism only concerns the 2021–28 budget and the relief fund, and Hungary can only expect real money at the end of 2021 from the latter and 2022 from the former. It also takes around six months to start the mechanism, so there was never really a chance for Hungary to lose EU funds until the election. Orbán’s concerns were more in the dimension of political communications.

But with this declaration, Hungary can spend the EU relief funds on an economy broken by coronavirus restrictions while Orbán doesn’t have to care about the rule-of-law threats from the EU until the elections.

You can also consider this as a win on the side of the European Union. There is still a rule-of-law mechanism adopted, which was unimaginable a year ago. The NextGenEU fund in its current form is also a historic achievement both for its size and the fact that member states finally take responsibility for each other’s debts which makes the EU an ever closer financial union.

What can we learn from all this?

There are two main conclusions concerning Hungary: