Europe’s Faustian Union

The EU’s budget deal shows that the club has long given up on rule of law in its member states.

German Chancellor Angela Merkel and French President Emmanuel Macron arrive for a joint press conference at the end of the European summit at the European Union headquarters in Brussels on July 21.
German Chancellor Angela Merkel and French President Emmanuel Macron arrive for a joint press conference at the end of the European summit at the European Union headquarters in Brussels on July 21. John Thys/AFP/Getty Images

On Tuesday last week, European Union leaders agreed to a pandemic recovery deal that marks a historic step forward for European integration. By Friday, cronies of Hungary’s autocratic prime minister, Viktor Orban, had effectively shut down the largest remaining independent news website in Hungary. The timing was not a coincidence.

The EU pandemic recovery deal, which includes large-scale collective borrowing and offers grants to states hit hard by the pandemic, contains much for Europhiles to praise. As the French economist Shahin Vallée wrote in the Guardian, “common debt, common expenditure and the possibility of common taxation—which all seemed out of reach over the last decade—were accepted this week unanimously.”

But the deal also comes with a dark underbelly. Although it included some vague, watered-down language about plans to condition EU funds on respect for the rule of law, its main message to autocrats and aspiring autocrats in the bloc was one of appeasement: The EU would continue to hand them billions of euros in subsidies and not stand up to them for the time being. In short, the deal delivered a more deeply integrated EU, but one that still provides a comfortable home for hybrid authoritarian regimes.

Coming into the summit, there had been talk of explicitly linking the 750 billion euro ($880 billion) “Next Generation EU” recovery fund and the 1.074 trillion euro ($1.26 trillion) EU budget for 2021-2027 to a so-called rule of law conditionality that would explicitly authorize the EU to suspend funding to governments with “generalised deficiencies” in the rule of law. Netherlands Prime Minister Mark Rutte—a leader of the so-called Frugal Four group of member states that resisted large pandemic-related bailouts and demanded that recipients commit to economic reforms—insisted that rule of law conditionality for EU funding was one of his government’s red lines. In turn, Orban complained that “the Dutch guy” was blocking the budget deal and speculated that he must “hate me or Hungary.” Meanwhile, French President Emmanuel Macron declared that EU money should not flow to rogue regimes, insisting on a new maxim: “no rule of law, zero euros.

It turned out that they were not serious. The final text of the deal does require states to introduce economic reforms to access the recovery fund, but it barely mentions rule of law. The deal simply kicks the issue down the road by noting that “a regime of conditionality to protect the budget and Next Generation EU will be introduced” at some point in the future.

To be fair, the deal did at least open a small window for action: The European Council has spent the past two years blocking outright a proposal for a rule of law conditionality mechanism, and the deal did indicate that leaders may eventually give their blessing to a watered-down version of that proposal. But whether the EU will actually introduce a robust system tying its funding to respect for democratic values­—much less whether that system will ever lead to the actual suspension of funds—remains to be seen.

No one should be surprised that EU members backed down on rule of law. Southern members struggling most with the economic consequences of the pandemic were desperate for financial assistance. German Chancellor Angela Merkel and Macron were determined to prevent a north-south split within the union and to show that, after initial missteps, the EU could deliver an effective response to the crisis. There was huge pressure to reach an agreement quickly, but that deal had to be agreed by unanimity in the European Council. And it is no surprise that Orban and the increasingly authoritarian government of Poland would have vetoed any plan they believed might lead to the suspension of their EU funds.

It would thus be unfair to view the pandemic rescue package as a new Faustian pact with the EU’s pet autocrats, because in truth the union traded its democratic soul to them long ago. EU leaders’ real failures in defending the rule of law didn’t occur at last week’s summit but over the past several years, when they persistently looked the other way as Hungary and Poland made a mockery of the EU’s values. In a sense, the whole debate last week about the conditionality mechanism was a distraction. It offered yet another example of what the Middlesex University professor Laurent Pech has called the EU “new-instrument creation cycle,” in which Brussels excuses its failure to respond to democratic backsliding by member governments with the false claim that it lacks adequate tools for doing so and then calls for the introduction of new tools. As the old saying goes, a bad workman always blames his tools.

The truth is that the EU has plenty of tools at its disposal, but that for political reasons it simply refuses to make robust use of them. Consider first the European Commission. As the Princeton University professor Kim Lane Scheppele and I have argued, the commission already has the authority under the EU’s structural funds regulations to suspend money to member states if they don’t follow the union’s rules and norms. But it has refused to do this. The commission could also make much more robust use of its standard law-enforcement tool—infringement proceedings before the European Court of Justice—to defend democratic values. But the current commission has brought no new infringement proceedings against the Orban government relating to the Treaty on European Union’s Article 2 values and has slow-pedaled existing infringements against the Polish government, even as Polish authorities openly defy European Court of Justice rulings against it. The commission has also refused to use other powerful tools in its arsenal, such as its power to investigate and sanction violations of EU competition law, which could provide a basis for legal action against the Orban regime’s manipulation of media markets.

The passivity of the commission should come as no surprise, given that its president, Ursula von der Leyen, depended on votes from the governing parties in Poland and Hungary to become president and that—as a politician from Germany’s center-right Christian Democratic Union (CDU)—she is herself a member of the same European political party (the European People’s Party, or EPP) as Orban. When she came to office, she promised to take the heat out of political clashes with the regimes in Poland and Hungary. Since then she has failed to crack down on those governments, even putting a political ally of Orban, Oliver Varhelyi, in charge of the EU enlargement policy. In that role, he is in charge of promoting in candidate states the very democratic values his political boss has systematically undermined in Hungary.

If the commission has failed in its duties as guardian of the EU’s values, the failure of national leaders in the European Council to react to the rise of authoritarian governments in their ranks is even more inexcusable. Many apologists claim that the council is paralyzed by the fact that, under Article 7 of the EU treaty, sanctions require a unanimous vote among member governments, and that Poland and Hungary have pledged to veto sanctions against each other. There is a kernel of truth to this (even if there might be a way to prevent those two states from shielding each other from sanctions). But the surrender to autocracy by the council is about far more than a supposed Polish-Hungarian mutual protection pact. The council has consistently refused to take a vote on even the first stage of Article 7, which would require the support of only four-fifths of the member states to declare the risk of a serious breach of EU values.

Indeed, the council’s real problems run far deeper. First, there are strong norms of deference between leaders in the council—particularly when it comes to what are seen as domestic political affairs. Clearly, northern Frugals make an exception when it comes to their willingness to intervene and impose economic conditions on southern states, but more generally governments avoid openly criticizing one another or trying to enforce EU legal obligations against one another. Second, the governments of Poland and even more so of Hungary can count on other allies in the council. States with their own problems with kleptocracy or democratic backsliding including Bulgaria, the Czech Republic, and Malta understand that any tool that can be used against Hungary or Poland might one day be used against them. Other governments that are exemplars of democracy and the rule of law may side with Hungary or Poland for purely partisan reasons. Orban’s party, Fidesz, remains a member of the EPP, and Merkel’s CDU has been a crucial player in blocking his expulsion from the party. Indeed, shortly before the EU summit, CDU leaders hosted leaders of Orban’s party in Berlin, reaffirming their alliance and stating that they aimed to restore a “sensible tone” in discussions about the Hungarian regime within the EPP.

The erosion of the rule of law and of democracy itself in Hungary and Poland is not the fault of the EU, and ultimately it will be up to Hungarians and Poles to mobilize for functioning liberal democracy. But EU funding is crucial to sustaining these regimes and the patronage networks that support them, and the new recovery package promises to keep that money flowing to them, at least for now.

The fight is not over, and defenders of the rule of law in the European Parliament are promising to strengthen the rule-of-law conditions in the deal. One wise move might be for the parliament to demand that the council adopt the commission’s 2018 proposal on rule of law conditionality before they approve the new EU budget. But even if that new tool is introduced, it may simply end up sitting on the shelf, alongside all of the EU’s other unused tools. Ultimately, EU leaders in the commission and council will only use the EU’s enormous political and economic leverage—and its ample tools for defending democracy—if more of them decide that it is in their interest to do so. Until then, the EU’s “authoritarian equilibrium” will endure, and the authoritarian rot will likely spread to other member states.

R. Daniel Kelemen is Professor of Political Science and Law and Jean Monnet Chair in European Union Politics at Rutgers University.

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