Thursday

26th May 2022

Deal reached on linking EU funds to rule of law

  • Hungarian prime minister Viktor Orban opposes the rule-of-law link mechanism and Budapest has threatened to block the recovery package (Photo: Council of the European Union)

Negotiators from the European Parliament and the German EU presidency on Thursday (5 November) clinched an agreement on a mechanism that for the first time allows suspending or cutting EU funds if a member state breaches the rule of law.

The deal means MEPs and the German EU presidency have unblocked a major political hurdle to agreeing on the €1.8 trillion long-term EU budget and coronavirus recovery package, that are being dealt with in parallel talks.

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Finnish MEP Petri Sarvamaa from the centre-right European Peoples Party (EPP) and lead parliament negotiator, called the agreement "historic".

"For the first time, we have established a mechanism that enables the EU to stop funding governments that disrespect our values such as the rule of law," he said.

The mechanism, first proposed by the EU Commission in 2018, means member states that break EU rules on the rule of law in a manner which has an impact on the management of EU funds, could be sanctioned.

But it will not cover broader rule-of-law challenges, curbing of fundamental rights, or the freedom of press.

An important result for MEPs, however, is that the risk of such a breach could also trigger the commission to propose a sanction.

"For example, when the independence of national courts is undermined, there is a clear risk that judges may take arbitrary decisions or disregard cases of corruption and fraud," Sarvamaa pointed out.

Another win for the parliament is that member states will have to decide within one month of the commission's proposal to sanction the EU countries in breach.

MEPs pushed for such a time limit, to avoid an endless delay in the process without a clear decision, as is the case, they argue, with the Article 7 sanctions procedures against Hungary and Poland - begun in 2018 and 2017, respectively.

Member states will decide with a qualified majority on sanctions, which will make it more difficult to agree than the original 'reverse qualified majority' proposed by the commission.

While MEPs fought against it, the final deal includes an 'emergency brake', envisioned by the German EU presidency to quell opposition to the mechanism by, in particular, Hungary.

In case the member state under scrutiny thinks the procedure is partisan or the proposed sanction is not proportional, it can request the European Council president to take up the issue at the next summit of EU leaders.

But the process should not exceed three months following the commission's proposal.

The agreement also aims at making sure, even if EU funds are cut or suspended, final recipients, such as NGOs, researchers, could have access to EU money.

Toxic issue

The deal must also now be formally approved by member states.

Poland and Hungary are likely to voice opposition, and both have threatened to block legislation necessary to roll out the recovery package early in 2021, if the mechanism is not to their liking.

However, member states can approve the agreement with a qualified majority, overcoming any opposition from Budapest and Warsaw. Those capitals might, on the other hand, see that as a politically-hostile move.

Hungarian justice minister Judit Varga on Thursday warned that "nothing is agreed until everything is agreed".

She added that parliament should "stop the political and ideological blackmail of member states", and instead approve the budget and recovery package.

Poland and Hungary have argued that EU leaders agreed in July on a leaner link between EU funds, focusing only on their possible mismanagement, and not on rule of law.

Long struggle

The EU has long struggled to deal with curbs of judicial independence, and eroding democratic checks and balances, particularly in Hungary and Poland.

Supporters of the mechanism argue, once it enters into force in January, the commission should then be quick to utilise it.

"The rule of law in Europe is in a deep crisis. The current developments in Poland and Hungary show this in a depressing way. We must now react decisively - also with sanctions against member states," said German Green MEP Daniel Freund, who was also on the parliament's negotiating team.

"The value of this mechanism will be measured by how quickly it can be implemented," he warned.

Deal in reach on linking EU funds to rule of law

Much still depends on if the German EU presidency is willing to sign up to a strict time limit for member states to decide on possible sanctions in the new rule-of-law conditionality.

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