Three EU exits from Poland and Hungary 'hostage crisis'

However, it is widely-perceived as a full-blown veto in a political sense, with EU member states and institutions already mobilised to seek potential pathways out of the deadlock that may seriously delay both the urgently-needed corona recovery package and the next long-term budget.

Poland and Hungary submitted their veto after Coreper approved the rule-of-law conditionality mechanism that will tie the disbursement of EU funds to the quality of rule of law, allowing the suspension of funds if the principle of rule of law is breached in a member state.

However, while the rule of law mechanism could be passed with qualified majority, the MFF and the so-called 'own resources' decision required for the corona recovery package require a consent of the member states.

Extortion?

Poland's and Hungary's main goal is most likely to extort further concessions from the Council that may render the rule of law conditionality mechanism merely symbolic or even non-existent.

In spite of the Monday confirmation in Coreper, negotiations on the draft regulation can be any time reopened in the council in case of political necessity, or if the German council presidency so decides.

With a council meeting scheduled for Tuesday and a virtual meeting of the EU head of states and governments due on Thursday, the European Union is in crisis mode.

However, EU institutions and member states have hardly more than two fully-fledged and one half-baked strategic option to solve this institutional crisis - that may have more far reaching consequences for the EU than Brexit.

First, in a defeatist scenario, member states can revert to the rule-of-law conditionality deal and further soften the regulation to please Warsaw and Budapest.

That move will definitely inflame the conflict with the European Parliament.

However, whether the parliament would be ready to keep its word and also block the whole budget deal to prevent a watering down of rule of law protection, is at least questionable - especially in light of the increasingly-visible rebellion of southern MEPs whose countries desperately need fast access to the corona funds.

Bending to Poland and Hungary would be a huge loss of face for the whole EU establishment and would prove that the EU's autocratising member states were successful in taking the Union as hostage.

Furthermore, it would encourage rogue member states to use veto threats whenever they can in order to blackmail the community.

Second, with a bold move the council and the European parliament could officially approve the rule of law conditionality regulation as soon as possible.

If the regulation anyhow comes into force and it will be an inescapable part of any future budgets, the Hungarian and Polish veto simply loses its reason d'etre.

Blocking the budget deal for an unforeseeable time, and thus their own access to the corona recovery fund, will not make sense anymore.

Poland and Hungary might file an action for annulment lawsuit to the European Court of Justice, and the German presidency and member states should also encourage Budapest and Warsaw to take legal steps instead of maintaining a political blockade.

That would allow Viktor Orbán and Mateusz Morawiecki to save their faces and withdraw while most likely the ECJ is going to rule that the regulation does not infringe on member states' treaty rights.

Third, the Next Generation EU corona fund could be theoretically established outside of the EU treaties, in form of an intergovernmental deal, without the consent of Poland and Hungary, and probably also excluding them.

However, that would not solve the problem of the MFF and would deal a serious blow to the integrity of the EU.

In this case, the EU's whole budget structure would be built on loopholes, with the old MFF remaining in force in the lack of a new long-term budget.

While this is not necessarily the way how EU institutions prefer to operate, the option can pose a useful threat posture to push Poland and Hungary to accept the previous point.

Long-brewing cause

With an eye on the solutions, it is also important not to deceive ourselves about the causes. The EU's recent institutional crisis was not induced by the commission's rule of law conditionality proposal.

The crisis is the undeniable, logical consequence of 10 years of EU politics that underplayed and failed to properly address the threat posed by autocratising member states and always gave priority to challenges other than the protection of democracy and rule of law in the European Union.

If EU institutions and member states bend in the current situation, extortion by vetos and institutional crises will be the earmarks of the EU's new political reality.