Hungary and Poland veto the EU budget over rule of law mechanism

Although it was widely expected, Hungary and Poland this week proceeded to block the final agreement on the EU’s next long-term budget (MFF) and Recovery Fund, worth €1.8 trillion. While the two central European countries had long threatened such an action over their refusal to accept the new rule of law mechanism agreed by Council and Parliament negotiators two weeks ago, their eventual veto was received with universal outrage by MEPs, national Governments and civil society.

The threat became reality when, in the first instance, the Polish and Hungarian EU ambassadors raised their objections to the proposed rule of law agreement and subsequently refused to give their consent to the revised process on EU own resources on Monday. While they stressed their support for the “substance” of the overall package, their targeted blockage of one aspect empowered them to hold up the entire budget and Recovery Fund. The countries’ veto resulted in a highly contentious debate in a public session of EU Affairs Ministers on Tuesday. 

Since discussions on it began, the new rule of law conditionality mechanism has triggered harsh criticism from the two countries, with Hungarian Foreign Minister Judit Varga calling the agreement “an instrument of ideological blackmail”, and Prime Minister Viktor Orbán arguing that the proposed criteria on determining a violation of the rule of law to be too vague and discretionary. Along the same lines, Poland’s Prime Minister Mateusz Morawiecki explained his refusal of the mechanism on the EU’s “misguided” interpretation of the rule of law, arguing that “everyone has a different opinion on how Poland operates and the independence of its institutions”.

Since taking power, both Hungary and Poland’s ruling parties have widely been accused of dismantling the rule of law and democratic institutions to cement their power. Despite the widespread accusation against them, both Mr. Orbán, who often styles himself as an “illiberal” democrat, and Mr. Morawiecki have repeatedly argued their ardent support for the rule of law and a strong EU rule of law mechanism.

Naturally, the irony of the two leaders’ both supporting the rule of law yet blocking a strong enforcement mechanism hasn’t gone unnoticed. Several commentators state the somewhat obvious that the two countries shouldn’t have a reason to fear the mechanism if they actually already do abide by EU values and fundamental rights, as they repeatedly say they do. 

Despite the urgent need for the funds to be distributed to mitigate the economic fallout of the COVID-19 pandemic, the veto makes an agreement in the near future very unlikely to happen, especially considering the European Parliament’s unwillingness to compromise any further on the rule of law mechanism, calling this an internal Council dispute.

At this point, an in-person emergency leaders’ summit in December or January 2021, will likely be the last resort to unlock the dispute and the badly needed funds. What is clear, however, should negotiators fail to reach an agreement before year end, the emergency 2021 budget will significantly cut EU spending programmes. Ironically, those who benefit the most from these funds are Hungary and Poland.

In the meantime, the European Council returns to political crisis management in the middle of the worst economic downturn in its history, as the livelihood of millions of Europeans depends on the swift adoption of the MFF and Recovery Fund package. It’s make-or-break time.