Pressures, Then Compromise Over the EU COVID Relief Fund

After months of delay over Rule of Law Requirements, the €1.8 Trillion seven year-budget proposal (2021-2027) is closer to approval as Poland and Hungary withdraw their veto after deal.

With this week’s final summit before year-end, a frustrated EU Commission President Ursula Von der Leyen suggests she will propose passage of the seven-year budget by only 25 of the 27 bloc countries, i.e., without Hungary and Poland.

The continued veto by Prime Ministers Viktor Orbán of Hungary and Mateusz Morawiecki of Poland comes in response to the “rule of law mechanism” in the rescue package that would deny budget distributions to anti-democratic behaviour by EU member governments. The firm stance of Commission President Von der Leyen in conjunction with EU Council President Charles Michel has marked a dramatic departure from previous, far softer EU efforts to modify the repeated challenges to core European values from these increasingly authoritarian leaders. Still, the urgency of pandemic relief has brought other European leaders, led by German Chancellor Angela Merkel, to press for a solution:  “Compromise must be reached by all parties involved,” Merkel said.

A possible solution may have been reached Wednesday, however, as EU members discussed a compromise that puts loose limits on when sanctions can be triggered for violations of the EU’s laws and standards,  EU diplomats told Bloomberg News, allowing the legal fundamentals of the budget to remain whilst also allowing Hungary and Poland to withdraw their veto and ‘save face’ politically.

In related news: In a letter sent to Von der Leyen on Monday, 249 mayors of Polish and Hungarian municipalities have asked for ways to access the COVID Relief fund if the vote is carried out without participation by both vetoing nations. The municipalities have attested to full transparency, accountability and alignment with EU law, as well as condemning the veto by Orbán and Morawiecki. 

The mayors would like “to create a Recovery and Resilience Fund for Polish and Hungarian municipalities so that they can drive forward a sustainable and socially just economic recovery.” The letter said.  

Biting the Hand That Feeds

EU frustrations over threats to the rule of law are hardly new: Poland’s Morawiecki and the ruling Law and Justice Party (PiS) have been warned on multiple occasions over democratic “backsliding,” especially in its judicial system, criticised in Brussels as too closely tied to the state. 

The situation is even more extreme in Hungary, where since coming to power in 2010, Prime Minister Orbán has rewritten the national constitution, reshaped the judiciary system and funded nationalist and religious groups over others, whilst those critical of Orbán find themselves with less, for example, his denying opposition mayors sizeable tax receipts for “new virus funding”. 

Both countries’ governments have tried to discredit the EU and spread anti-western sentiment, even though EU funding is responsible for much of their prosperity. Between 2015-2017, EU money has represented over 60 percent of infrastructure spending within Poland and 55 percent in Hungary.

The European People’s Party (EPP), the largest block in the European Parliament, suspended Orbán last year over repeated human rights violations – including a takeover of the media and threats to academic freedom and an independent judiciary. Attempts were made to bring Orbán back into the fold by monitoring authoritarian practices in Hungary. In Poland, thousands of women took to the streets in 2016 and again this year against restrictive abortion laws, indicating pressure for a return of more liberal social forces within the country. 

“Cracks in the EU Foundation”

However, tensions have grown since Tuesday’s decision of the European Court of Justice in Luxembourg against Poland’s judicial reforms – reforms which “risk that cracks will appear in the EU’s foundations,” warned Danish representative Maria Wolff.

Lawyers representing five EU member states – Belgium, Denmark, Finland, the Netherlands and Sweden – have asked the court to order Poland to reverse these reforms, which they see as an attempt to “take a hold of” the judiciary system. Polish authorities protested: “The Polish system needs to be reformed,” countered representative Anna Dalkowska. “It does not function well. And the reform must be continued.” 

While Poland and Hungary argue they are being unfairly targeted, their continued veto could result in exclusion from the full COVID Relief funds, with severe consequences on both countries. 

The rule of law mechanism is also a stumbling block to Serbian integration into the bloc, without  “swift and successful reforms,” said the EU executive. This comes as Serbian President, Aleksandar Vucic pushes for closer ties and eventual EU membership, even though he is seen by many in Brussels as an accessory to the backsliding of democracy in the Balkan region. 

With the end of Germany’s six-month Presidency of the Council of the European Union next month, the implementation of the budget will be overseen by Portugal, a country whose Prime Minister Costa has criticised the rule of law mechanism, according to the Portuguese daily Publico.

Poland and Hungary have put the EU in a difficult position, threatening progress not only of the COVID Relief fund, but of further EU integration and the strengthening of its institutions. The two vetoing nations argue their position as a fight for sovereignty, while they continue to take advantage of the full benefits of EU membership: 

“We’re on the right side of history,” claimed PiS leader and former prime minister Jaroslaw Kaczynski, “and those who want to take away our sovereignty based on their own whims are headed for a fall,”  

Most MEPs have welcomed the firmer stance of Commission President Von der Leyen, and voted in October overwhelmingly (521 to 152 ) to support the mechanism. “The very future identity of the EU as democratic peace project” is at stake, said Slovak MEP Michal Simecka, who had sponsored the proposal. Without real consequences, he told the EU Observer, Poland and Hungary’s increasing shift towards a ‘soft dictatorship’ threatens the very purpose and meaning of the European Union: 

“The image of my youth of the EU as a guardian of democracy is now being shattered.”  

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Daniel Harper
Daniel Harper is a British multimedia journalist. After graduating in International Politics and History he studied International Journalism MA at City, University of London. Writing about culture, society and human stories. Instagram: @simonpaulphotos

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