The Price of the Corona Bailout Did European Leaders Cave to Hungary and Poland to Reach a Deal?

Despite undermining the rule of law in their countries, the leaders of Poland and Hungary were spared when the EU pushed through its landmark coronavirus recovery package. Now, it’s up to the European Parliament to decide whether it wants to increase the pressure.
Hungarian Prime Minister Viktor Orbán

Hungarian Prime Minister Viktor Orbán

Foto:

Gabriel Kuchta / Getty Images

Márta Pardavi has spent the last 10 years fighting for human rights in Hungary. There’s one paramount thing that she has learned in this time: that you have to keep going, no matter how great the pressure from the government.

Pardavi, 45, works for the Hungarian Helsinki Committee, a non-governmental organization. She has witnessed Prime Minister Viktor Orbán send loyalists to the country’s Constitutional Court, seen him gag independent media and drive Central European University, an institution founded by the billionaire George Soros, out of Budapest. Her own organization has also come under pressure. In 2017, Orbán passed a law making the work of NGOs more difficult. Pro-government media defame activists like Pardavi as enemies of the state.

Pardavi is a passionate European, but she is bitterly disappointed about how little the EU has undertaken to stop the disintegration of democracy in Hungary. "These attacks on freedom of opinion and culture, on the rule of law and civil society, aren’t happening just any place. They are happening right in the middle of Europe,” she says.

When European leaders began meeting a week ago Friday to approve the next budget for the block and COVID-19 economic recovery aid, Pardavi was on vacation. But she still followed the negotiations on her phone. She has been at a loss ever since the outcome of that summit became public. On the one hand, she sees it as progress that rule of law is finally an issue on the agenda. On the other, she is also asking herself how serious the EU member states really are about the possibility of slapping sanctions on autocrats like Orbán or Poland’s Jaroslaw Kaczynski, the man really pulling the strings in the background.

The EU’s special summit lasted 90 hours, but it was a missed opportunity for German Chancellor Angela Merkel and her European counterparts to attach a clause on the rule of law as a condition for the disbursement of the EU funds that the European Commission had proposed.

"The summit participants glossed over the issue of rule of law with a compromise formulation,” said Lucas Guttenberg, the deputy director of the Berlin office of the Jacques Delors Center, a think tank. That appears to be the price Angela Merkel was willing to pay to push through the coronavirus recovery fund and the EU’s next multi-year budget.

DER SPIEGEL 31/2020

The article you are reading originally appeared in German in issue 31/2020 (July 25, 2020) of DER SPIEGEL.

Days earlier, Merkel had uttered strong words in the European Parliament. "European democracy, like any democracy, thrives on public, critical debate,” she said. "A democracy in which opposition voices are unwanted, a democracy in which social or cultural and religious diversity are unwanted, is no democracy at all.”

But she wasn’t able to push through a mechanism defending European values and linking compliance to them to the disbursement of EU aid. The summit’s final communiqué instead contains sentences that can be seen by both sides as giving them what they want. No wonder officials in Brussels and in Europe’s capitals have been spending the past few days trying to figure out what their bosses agreed on early Tuesday morning. Is the compromise strong enough to put any serious pressure on Orbán or Kaczyński?

The answer varies, depending who is looking at it. And that could be precisely why all the parties ultimately agreed to it.

The summit's closing statement says little in concrete terms, which is a victory for Orbán. It states that there will be a regulation to protect the rule of law in the future, but says nothing about when it will go into effect or what it might look like. It also requests that the Commission address the issue.

A Difficult Document

At the request of Council President Charles Michel, Merkel personally handled negotiations with Orbán. She was assisted in this by Latvian Prime Minister Krišjānis Kariņš, whose prudent statements on the rule of law had been noticed by Michel at a dinner that Saturday.

After the summit, Merkel also gave the decisive hint of how she intends to proceed with the issue. The Council, the powerful body representing the leaders of the EU member states, has been sitting on a draft regulation which describes the rule of law mechanism in all its details since 2018. Merkel’s ambassador to the EU, Michel Clauss, said at a Wednesday morning meeting with his counterparts that work on the document should now be taken up again as quickly as possible.

The 13-page document has it all. It states that appropriate measures must be taken if a shortcoming in the rule of law in a member state threatens the interests of the Union. It then includes a list of examples that seem to have been extracted directly from the current day-to-day political situation in Hungary or Poland, like "endangering the independence of (the) judiciary.”

The Council could adopt this regulation by a qualified majority, meaning with the votes of 55 percent of EU member states representing at least 65 percent of the population. This means that Hungary and Poland alone wouldn’t have the power to stop it. That would be good news, because it means the rule-of-law mechanism Merkel wasn’t able to push through at the summit would then have a second chance.

Jaroslaw Kaczyński is the man pulling the strings in Poland.

Jaroslaw Kaczyński is the man pulling the strings in Poland.

Foto: Alexey Vivitsky / picture alliance / dpa

One problem is that the 2018 draft will likely have to be changed in at least one crucial place as a result of the mega-summit’s outcome. The summit document can be read in a way that suggests different conditions for the termination of funds than those envisaged in the original document. Unlike the 2018 draft regulation, the new document says that there would be no automatic cessation of payments if an EU member breaks rules. Instead, a qualified majority would be required in the Council to halt payments - a mechanism that could prove more favorable to Orbán.

This is actually precisely what the Germans wanted to prevent, because creating majorities on the Council wouldn’t always be easy. As such, a second interpretation made the rounds the day after the summit suggesting that the sentence about the qualified majority was merely an indication of how the regulation should be adopted.

The latter would not impress Hungary and Poland, which are keen to have another sentence in the summit statement they can use to their own advantage. "The European Council will revert rapidly to the matter,” it says of the rule of law mechanism. Poland and Hungary view that sentence as a confirmation of the principle of unanimity – that no matter what happens with the rule of law, they could ultimately torpedo it in the European Council, where they have veto power.

The Commission and the current German Council Presidency, on the other hand, are focusing on the word "revert,” arguing that leaders of the EU member states are to continue discussing the rule of law mechanism, but should under no circumstances decide on it.

Complicated hair-splitting? Welcome to the EU!

The Hard Work Is Yet to Come

The German Council Presidency, which the country holds until the end of the year, plans to push ahead with the 2018 regulation. Uwe Corsepius, who is in charge of EU policy at Merkel’s Chancellery, made this clear in a conference call last Thursday with his senior counterparts in the German government ministries. But diplomats believe there is a problem with the timing.

The decision making it possible for the EU to issue debt for the first time ever and launch the recovery fund, which is the core of the summit, must be ratified in the national parliaments. That also means in Hungary, and as long as this hasn’t yet happened, Orbán has leverage for torpedoing the adoption of the rule-of-law regulation. The EU can only realistically seek to push through the regulation after that point.

"We have succeeded in ensuring for the first time that a commitment to the rule of law is anchored in the multi-year financial framework,” said German Foreign Minister Heiko Maas. "However, the work of translating these political agreements into concrete legal regulations is still ahead of us.”

Past experience with Orbán suggests that the Hungarian usually knows very specifically what he is signing. After the summit, he appeared in front of the press with Polish Prime Minister Mateusz Morawiecki in what was a kind of counter-appearance to Merkel. "When we stand so close and firm together, no enemy can defeat us,” Orbán said. "Enemy” is a pretty harsh term to use in a community that just struck a hard-won deal.

EU leaders at last week's summit in Brussels: Critics say the closing statement for the crucial meeting glossed over the issue of rule of law with a compromise formulation.

EU leaders at last week's summit in Brussels: Critics say the closing statement for the crucial meeting glossed over the issue of rule of law with a compromise formulation.

Foto: Etienne Ansotte / dpa

And then there’s also the European Parliament, which must approve the budget and is critical of the compromise. The corresponding passage in the summit statement is "softly worded,” in the words of Bernd Lange, a German member of the European Parliament with the center-left Social Democratic Party (SPD). Daniel Freund, a German member of the European Parliament with the Green Party, is skeptical about the regulation’s implementation, arguing that the hurdles would be set too high if the Council has to decide on it by a qualified majority.

The European Parliament is -- at least, outwardly -- determined to anchor the sharp variant of the rule-of-law mechanism in the seven-year-budget, as a resolution adopted by the plenary in a special session last week calls for. If there are no amendments, "the chances are slim that we will approve” the budget, said Lange. Daniel Caspary, co-head of the center-right CDU/CSU grouping of Christian Democrats in the European Parliament, holds a similar view: "I can imagine parliament first saying no to the budget because of the rule-of-law issue,” he said. "It’s a given that EU leaders will have to revisit” the issue again.

Those are pretty strong words, but if there’s one thing the European Parliament has a reputation for, it’s that its words are usually a lot stronger than its actions. And like Merkel, the members of parliament will also be forced to ask themselves whether enforcement of the rule-of-law clause should trump support for coronavirus aid in the end. The pressure from governments –from Spain, for example – to push the deal through is likely to be enormous.

The ECJ Solution?

Meanwhile, Eastern Europe is already preparing for its next confrontation with the EU institutions. Poland is pushing ahead with its controversial judicial reform, which would finally place the courts under the government’s control.

Polish Justice Minister Zbigniew Ziobro already has more power than any of his European counterparts. He can initiate disciplinary proceedings against any of Poland’s approximately 10,000 judges, and, as prosecutor general, he controls all Polish public prosecutors. In February 2018, his deputy at the time said, "Judges should always be on the side of the state.”

The European Commission has already determined that Poland’s judicial reform is "incompatible with the primacy of European law.” But Kaczyński, the leader of the ruling PiS party and the man widely held to be in charge in the country, feels more unassailable than ever, not least because of his candidate Andrzej Duda’s victory in the presidential elections on July 12.

Observers worry that Kaczyński could now be heading for a showdown with the European Commission and the European Court of Justice. "If PiS gets away with the reform, there will be nothing left of the Polish constitutional state,” warns Gerald Knaus, the chairman of the European Stability Initiative (EDI), a Berlin think tank. "Then you will have Turkey-like conditions in Poland.”

Poland and Hungary have profited from EU subsidies more than most other countries. Hungary has been promised structural aid of up to 25 billion euros ($29 billion) for the years 2014 to 2020, while Poland has been allocated almost 83 billion. That hasn’t prevented the governments of either countries from agitating against Brussels and undermining democracy in their countries.

Knaus, a political adviser, believes it is crucial that further aid to be linked to compliance with democratic standards. He warns against relying on a rule-of-law mechanism like the one the EU member states discussed at the summit, arguing that it would be too easy to undermine it for the wrong political reasons.

He instead proposes that future payments should be linked to the case law in the European Court of Justice (ECJ). "For a country that has been convicted of violations of the rule of law under Article 19 of the European Treaties by Europe’s highest court and does not implement that judgment immediately, there should be an immediate suspension of EU funds.”

The judges in Luxemburg are already conducting proceedings against Poland for breaching European standards. But if Poland were to be found in violation of the law by the court, the most it could do would be to impose largely symbolic penalties on Warsaw. Knaus feels certain that cutting subsidies would hit Kaczyński or Orbán much harder.

What makes Knaus’ proposal attractive is that ECJ rulings are harder for populists to politicize than Commission decisions. The problem with the proposal is that a reform like that would also require a majority within the EU.

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