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The EU's rule of law budget deal saved Angela Merkel’s political legacy ǀ View

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By Daniel Hegedüs
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The agreement reached at Thursday’s European Summit on the EU’s contested rule of law conditionality regulation put an end to the Hungarian-Polish blockade of the EU’s historic €1.8 trillion budget deal.

The deal is not only a Christmas gift for those - mostly Southern European - governments that have been desperately waiting for fast access to the EU’s corona recovery funds, but also for the German EU Council presidency and Chancellor Angela Merkel herself.

The reputation of German EU diplomacy and Merkel’s political legacy were both at stake: the first was threatened by a potential prolongation of the veto, while the second by further appeasement of Europe’s wannabe autocrats, Hungarian prime minister Viktor Orbán and Poland’s Jarosław Kaczynski.

Since November, the Polish and Hungarian blockade obviously changed the political mood throughout Europe. The bloc of the EU25 remained surprisingly solid, while the determined position of the Netherlands, the Nordic countries, and the European Parliament pushed Berlin to give up its initial conciliatory approach toward Warsaw and Budapest.

This political shift, as well as the credible threat posed by a potential inter-governmental coronavirus recovery package excluding Poland and Hungary and the internal clashes in the Polish governing coalition, resulted in the de facto withdrawal of the two defeated illiberal governments on Tuesday.

Their main goal was either to get rid of the rule of law conditionality mechanism or to water it down significantly, but they failed spectacularly. The recent European Summit deal just put the icing on the cake, allowing Orbán and Morawiecki a retreat without losing face in their domestic arena.

The EUCO conclusion largely refrained from offering any substantial concessions to Poland or Hungary. The draft regulation will not be renegotiated. It will be passed in the Council and the European Parliament immediately, together with the other outstanding parts of the budget deal.

In practical terms, EU leaders only delay the application of the rule of law conditionality regulation and slightly narrowed down its scope. According to the language, the European Commission will develop and adopt a set of guidelines that will specify and elucidate the rules of the mechanism. However, as long as the guidelines are not published, the Commission will refrain from proposing any measures under the regulation.

Furthermore, if any member state decides to file an action for annulment request against the rule of conditionality mechanism before the Court of Justice of the European Union (CJEU), the finalisation of the guidelines will be postponed until the CJEU decides whether the regulation is in line with European law.

The EUCO deal will not nullify Merkel’s decade-long support for Orbán. Due to her favour towards Hungary, she shares considerable responsibility in the EU’s recent institutional crisis. However, her political legacy won’t be tarnished by a final great act of appeasing EU autocrats.
Daniel Hegedüs
Fellow, German Marshall Fund of the United States

Poland and Hungary will both file such a lawsuit for sure and with an eye on the ordinary lengths of CJEU procedures, this may result in further one or two unmolested years for Orbán and Kaczynski, covering also the period until Hungary’s next general elections in 2022.

That is unless one of the defendants in the case - the co-legislator European Parliament or a potentially intervening European Commission - decides to request an expedited procedure. If the CJEU approves the request, the concerns related to the suspension of the mechanism can be largely sorted out.

Although the language of the conclusion is largely restrictive, it does not imply anything that would have not been already stated in the text of the regulation. Obviously, EU leaders put heavy political pressure on the European Commission to follow this restrictive approach if the Guardian of the Treaties wishes to summon the qualified majority in the Council necessary to sanction deviating member states.

According to the leaders’ interpretation, breaches of the rule of law can only be sanctioned if the impact on the EU’s financial interest is sufficiently direct and duly established, which is largely in line with the regulation’s text.

Polish and Hungarian media leaked that alleged references to the mechanism’s non-application in case of sexual minorities and migration-related issues may also be part of the conclusion, but this scenario ultimately failed to materialise. It would have been a huge political gift for the Polish and Hungarian governments indeed, which could have been exploited in their domestic communication, but that embarrassment was dully avoided.

Overall, it is fair to say that the threat posed by the intergovernmental coronavirus recovery package worked spectacularly, bending the will of the Polish and Hungarian governments much sooner than anyone has realistically expected.

Inevitably, it is a lesson for all EU member states and institutions that they need to build up proper hard political and economic leverage when facing the challenge posed by autocratic member states, like contemporary Hungary and Poland.

Considering the trade-off between time, the urgent need to get access to the coronavirus recovery funds and substance, the deal represents a fairly well-balanced, realistic compromise which makes it much more likely that everyone can live with it. Although there will be critical voices from the European Parliament, no one can really consider blocking the budget package further. The deal is simply too good for that.

Although the deal is much more a result of the unswerving positions of the Netherlands and the European Parliament than the German presidency’s negotiation skills, the success is an extremely important face-saving measure for Berlin.

The start of the presidency was largely overshadowed by the inexplicably soft Council Presidency proposal on the rule of law conditionality mechanism that largely favoured Poland and Hungary. It was a strategic failure by Orbán and Morawiecki that they refused that language. Today, they left the playing field with much smaller gains.

However, the presidency’s proposal raised the suspicion that Merkel is ready to please the Central and Eastern Europeans in the rule of law debate practically at all costs.

The EUCO deal will not nullify Merkel’s decade-long support for Orbán. Due to her favour towards Hungary, she shares considerable responsibility in the EU’s recent institutional crisis. However, her political legacy won’t be tarnished by a final great act of appeasing EU autocrats.

Ironically enough, it happened under the German Council presidency that EU member states for the first time stood up together and drew the line in the sand for Merkel’s pet autocrat.

  • Daniel Hegedüs is Fellow for Central Europe at the German Marshall Fund of the United States

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