How the EU should turn the tables on Hungary and Poland

The EU should counter blackmail attempts by the governments in Warsaw and Budapest with calm determination. As long as Poland and Hungary maintain their vetoes, there should not be any agreements on new EU spending programmes, from which these two countries benefit the most.

Hungary and Poland are currently blocking the adoption of the EU financial package for the next seven years because they object to the new rule-of-law mechanism. If they stick to their veto, they will cause considerable political and economic damage – for the entire European Union as well as for themselves. How should the EU deal with that?

The EU should keep its calm. It must not allow itself to be blackmailed any further. Indeed, it has enough instruments at its disposal to counter the threats by Orban and Kaczynski.

In recent months, the negotiations were marked by a determination that Europe will stick together in this pandemic. All sides made significant concessions to facilitate the historic summit agreement in July, which cleared the way for the Recovery Instrument to help the most affected countries. The European Parliament and the other member states went a long way to get Hungary and Poland on board: The original proposal on the rule of law mechanism was substantially watered down and both countries received generous allocations from the Recovery Instrument despite their relatively mild economic slump in the first half of the year.

At the time, Hungary and Poland agreed to the overall package and thus also expressly agreed to a “conditionality regime to protect the budget”. It was clear that the details would have to be negotiated further. But not only Poland and Hungary had strong opinions on this matter. The European Parliament and a number of member states had a very clear, opposing position. The result of these negotiations was a classic EU compromise that made no one truly happy. Yet one thing is certain now: there is a broad political consensus in the EU that EU funds should only be made available to countries in which an independent judiciary and functioning anti-corruption authorities guarantee that they are used properly. It was not only western European countries that insisted on this – others like Slovakia and Romania did as well.

If Hungary and Poland – now supported by the Slovenian prime minister who a few weeks ago congratulated Trump on election night – wish to put the whole package into question, in spite of the compromise that 24 other countries and the Parliament are willing to make, they are playing with fire. The governments in Warsaw and Budapest want to make their citizens believe that a long-term blockade of the package would cost them nothing, or even could bring financial benefits. They argue that they can easily live with the old multiannual financial framework (MFF). But this is a dangerous fallacy in the middle of the second wave of the pandemic.

Practically all regular EU spending programmes will end in December. Poland and Hungary have received net pay-outs from these pots of €63.1bn and €27.3bn respectively over the last six years – more than any other EU country. The programmes for the next seven years are currently being renegotiated. It is true that as long as the vetoes are maintained, the old MFF ceilings would formally continue to apply. However, without new spending programmes not a single new cent could be budgeted.

Here the German Council presidency and the European Parliament should be very clear: The EU budget deal is an overall package. As long as two countries hold the entire package hostage, there can be no agreements or final votes on individual spending programmes. Poland and Hungary are abusing the package logic for their blackmail attempt – and it is precisely this logic that should now be turned against them.

The decision to freeze negotiations on spending programmes would not be a retaliatory measure against Poland and Hungary, but rather the result of a fundamental negotiation rule: Nothing is agreed until everything is agreed. It would be also show that the EU is handling the impasse in a measured way. Although it may be tempting, now is not the moment for cobbled-together solutions or half-baked alternative measures. This is the time for calm determination in order to get a solid agreement across the finish line – exactly as it stands now. At the same time, such a step would send an important signal to the electorates in both countries that the actions of their governments will have palpable economic costs.

Budapest and Warsaw should not be under the illusion that only the large recipient countries of corona aid are particularly affected by their veto. The opulent rebates for Germany, the Netherlands or Sweden are also victims of their intransigence. Poland and Hungary are about to turn everyone in the EU against them. A short look in EU history books should be enough to understand how unpromising such strategies have been in the past.

Orban and the Polish Law and Justice government have climbed a very high tree. In order to come down and to save face, they may need a little assistance. However, in substance there can be no further concessions from the other member states and the European Parliament. The rule-of-law mechanism will be adopted, and both governments know that.

However, if both want to remain sitting on the tree for good, there is no choice but to cut the tree down. The rest of Europe cannot wait forever. The economic situation is simply too dire for that. It would take great efforts to make the Recovery Instrument a reality, even against the will of Hungary and Poland. But past events show us that where there is political will, there is usually a way. In this case, the regular EU spending programmes could also be approved by a majority of the member states and changed in such a way that Poland and Hungary would be left behind. Hungary and Poland surely know that the majority for this would be certain if they continued to antagonise the rest of the EU.

Despite this, the political and economic damage of failing to reach an agreement would be immense. Europe has benefited enormously from its unity over the summer, not least in the form of very low financing costs for many member states, reflecting increased confidence in the resilience of the European project. This unity would be gone. The rest of the EU would recover from this in the medium term. But the experience that in a moment of deep crisis, Poland and Hungary were more interested in domestic political chestbeating than in European cohesion would leave a permanent mark in the collective memory. And in the EU, we always see each other twice.

This commentary was originally published in German by Zeit Online and in Polish by Gazeta Wyborcza.

Lucas Guttenberg is deputy director of Jacques Delors Centre at the Hertie School.