A European Compromise Not Worth Making

At the meeting of the European Council on Thursday, the governments of Poland and Hungary lifted their veto of the EU’s seven-year Multiannual Financial Framework (MFF) and the post-pandemic recovery package, known as New Generation EU (NGEU), jointly worth over $2.2 trillion. The veto was a retaliation for an EU regulation, supported by a qualified majority of member states, which would apply conditionality to the disbursement of EU funds. Specifically, the new rules would empower the European Commission to turn off the spigot if a recipient country found itself in breach of basic principles of rule of law.

The prospect was not merely theoretical, as both the Polish and Hungarian governments have attracted justified criticisms for packing the courts, attacks on civil society and independent media, and (in Hungary’s case) for dramatically tilting the electoral process in favor of the incumbent party.

Earlier this week, I predicted

“…that the coming days will see a lowest-common-denominator compromise. It will be hailed as a breakthrough and a triumph of European unity. Substantively, however, such a compromise is bound to leave Hungary’s and Poland’s authoritarianism unchecked. Worse yet, it will encourage the two governments—and, prospectively, other governments across Europe—to build authoritarian fiefdoms at European taxpayers’ expense, the long-term prospects for the European project be damned.”

Alas, that is exactly what happened. The most recent “compromise” consists of diluting the conditionality through a promise of the European Commission to develop, jointly with member states and over an unspecified timeline, a “methodology” to assess breaches of rule of law. Until such “methodology” is in place — and until all legal challenges to the regulation are over — the conditionality will not be used.

In other words, the EU has just capitulated to two governments that are not only net recipients of EU funds, but also depend on European largesse to maintain their domestic networks of patronage and solidify their holds on power. No matter how badly they behave, they can rest assured that the flow of European money into their budgets is safe.

Of course, their earlier veto of the MFF and NGEU was a bluff — neither Viktor Orbán in Hungary nor the Law and Justice party in Poland could have seriously envisaged cutting themselves off the EU budget. The remaining member states, furthermore, had all the leverage. The EU-25 could have easily set up its own budget, through the mechanism of so-called enhanced cooperation, leaving Poland and Hungary with just breadcrumbs.

At first sight, the complete capitulation of Western leaders, most significantly of Germany’s Angela Merkel, seems baffling. After all, when it wants to, the EU can be intransigent, as the British government is currently learning the hard way. Besides the ideological commitment to the chimera of European unity, which sees differentiated integration within the EU as an affront, there are more cynical explanations: complacency and economic interests.

German businesses, which have a significant presence in Central Europe, are content with the status quo and want to avoid the disruption that an open political confrontation of Hungarian and Polish governments would risk entailing. Thus, if Thursday’s “compromise” suggests anything, it is that Ms. Merkel, the putative leader of the free world, does not see the future of democracy in Central Europe as sufficiently important so as to inflict any discomfort on her country’s car manufacturers.

That is extremely short-sighted. The unqualified commitment to send big checks to post-communist kleptocrats over the next seven years is bound to provoke a popular backlash in countries that do follow the rules and underwrite the entire European project — such as the Netherlands or indeed Germany. Nobody should be surprised if yesterday’s display of European unity end up coming at a large cost not too far down the road.