Rule of law conditionality in EU spending: Time to pull the plug on illiberalism

Illiberal leaders in Poland and Hungary are using Covid-19 to consolidate their powers and violate EU values. Could the Union’s budget be used as leverage to force them to comply with the rule of law?

As the world is embedded in ‘the fight of a generation’ against Covid-19, authoritarian leaders around the world are using this crisis as an opportunity to consolidate their power and Europe is no exception. The Commission recently repurposed 37 billion euros in structural aid funds, designed to help poorer Member States with the virus crisis. However, the flagrant violations of EU values by Poland and Hungary have revived questions on whether structural aid funds could be used as leverage to force illiberal States to comply with the rule of law.

The UN, the Council of Europe, and the EU have indeed raised concerns on the recent measures taken by these two countries. In Hungary, Prime Minister Orbán can now to rule by decree since he successfully passed a law allowing the emergency suspension of parliament for an unlimited period of time. The government subsequently used its powers to cut tax income for opposition-led cities in the name of its new Coronavirus fund; income that in turn was allocated to municipalities where Fidesz has the majority. In Poland, the government’s decision to go ahead with elections (through ballots sent by post) on 10 May, despite the lockdown which prevented the opposition from campaigning was also heavily criticised. Although elections were finally postponed, the PiS party nonetheless used the lockdown to push its reform of the judiciary and enact controversial laws restricting abortion and sex education. This would normally have prompted public protests, but these could not take place due to the current circumstances.

In recent years, the European Union has increased attempts to bring these countries back in line, but for the most part these have been unsuccessful. On 17 April, the European Parliament strongly condemned these new measures as being ‘totally incompatible with European values’ and urgently called the Commission to make use of all available EU tools and sanctions ‘including budgetary ones’ to address these persistent breaches.

Given the fact that Poland and Hungary are the biggest beneficiaries of European funds, the idea of a ‘rule of law conditionality in EU spending’ has been circulating within the Union for several years. Firstly, because Union subsidies should not help facilitate autocratic drifts. Secondly, because in the absence of sufficient institutional guarantees, there is nothing to ensure that the funds are subject to sound and efficient financial management. Indeed, without media freedom, corruption cannot be exposed, and, without independent courts, it cannot be condemned.

In May 2018, the Commission introduced a proposal for a regulation that would allow the Union to suspend, reduce, or restrict access to European funds in proportion to the nature, scale, and gravity of failures relating to the rule of law. Its aim is not the protection of the rule of law per se, but the protection of the budget from inefficient financial management that stems from a lack of respect for the rule of law. It could nevertheless have a tremendous impact given the reliance of Poland and Hungary on European funds.

More specifically, it would allow the EU to finally enforce its values. Given the lack of results from the nuclear option of Article 7 of the Treaty on European Union (TEU), the proposed regulation would provide the EU with a more manageable political tool. Indeed, the adoption of this mechanism only requires a qualified majority in the Council instead of the laborious nuclear unanimity.

Although this proposition holds many promises, we should proceed with caution. Indeed, targeted States could retaliate by refusing to engage in important EU decision-making procedures which could paralyse the Union. For instance, they could block the adoption of the budget, which requires the agreement of all Member States. But more importantly, the EU must ensure that its measures do not end up harming disadvantaged persons living in targeted regions instead of their leaders. Public dissatisfaction could indeed fuel Euroscepticism and populism which would cause the EU’s efforts to backfire.

The rule of law is an essential element of the European project and the situation in Poland and Hungary raises serious and long-term risks for cooperation amongst Member States. The current health crisis shows how far the democratic backslide in Poland and Hungary has gone. Fidesz’s current management of tax receipts is a textbook example of why democracy is necessary for sound and efficient financial control. In the face of such blatant ‘power grabs’, the EU must implement measures to make sure its budget does not facilitate authoritarian shifts in its Member States.

The case for Rule of Law conditionality in EU spending offers a new avenue to tackle these challenges. However, we must not limit ourselves to an instrument-based view of the situation. EU law can provide us with tools to act, but these tools cannot be effective in the absence of peer pressure and political will. The fight against Covid-19 is a serious one. But the Union should address the equally serious illiberal plague that is slowly contaminating Europe.


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