Wednesday

8th Feb 2023

Analysis

EU Commission letters to Poland, Hungary: too little, too late?

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The EU Commission has made a first move in the battle that could result in financial sanctions against Hungary and Poland over rule-of-law issues.

However, the preliminary step irritated those who argued for quicker action by the bloc against the two countries that have been at loggerheads with the EU for years.

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The EU executive sent letters to Hungary and Poland warning that concerns over judicial independence, ineffective prosecution of corruption, and deficiencies in public procurement could pose a risk to the EU's financial interests, and could eventually lead to financial penalties.

The letters, seen by EUobserver, were sent on Friday (18 November) and signed by the commission director-general for budget Gert-Jan Koopman.

The move is not, however, the triggering of the so-called 'conditionality mechanism', a new rule agreed by legislators last December, that allows for financial penalties if rule-of-law issues threaten the EU's financial interest.

It is a preliminary step before launching the formal procedure.

Warsaw and Budapest have two months to respond, which means it would take more months before the formal process.

Poland and Hungary in March challenged the mechanism at the European Court of Justice (ECJ). The advocate general's opinion is expected on 2 December, with the ruling coming early next year.

The commission has been under pressure from some member states, plus the European Parliament, to trigger the conditionality mechanism, which came into force in January.

The parliament has even launched a process to sue the EU executive for failing to act on the issue.

The commission, in a parallel procedure, have withheld approval of the Covid-19 economic recovery plans of Poland and Hungary because of concerns over corruption and judicial independence.

Cronyism 'remains unaddressed'

The issues spelled out in the letters are a list of the most pressing concerns that have been part of the legal battle between the commission and Warsaw and Budapest over the past few years.

With regards to Hungary, the commission raises the issue of of systemic deficiencies and weaknesses in public procurement, risks of conflict of interests, ineffective investigation, prosecution or sanctioning of lawbreaking, and deficiencies in the judicial independence.

Hungary's prime minister Viktor Orbán and his government have been accused of channeling EU funds to his allies, and family.

"Risks related to cronyism, favouritism and nepotism in high-level public administration or those arising from the interface between businesses and political actors remain unaddressed," the letter said.

The commission raises, for instance, the lack of transparency in tendering of projects, the creation of private foundations to which public assets have been transferred, and the conflict of interests concerning the possible sale of Budapest Airport.

In the case of Poland, the commission asks about the effectiveness and impartiality of prosecution, the controversial Constitutional Tribunal's recent ruling challenging the primacy of EU law and its effects, and judicial independence.

The commission said recent Polish court rulings "put at risk the application of union primary law and secondary legislation relevant to the protection of the financial interests" of the EU.

"Both letters reveal how comprehensive the EU Commission's knowledge of the rule of law deficiencies in Poland and Hungary is," German Green MEP Daniel Freund, who was one of the negotiators on the mechanism's rules said.

"Systemic problems are addressed that cannot be denied," he said, adding that full-scale reforms are needed to remedy them.

"Neither Hungary nor Poland seems to have the political will to take countermeasures," Freund said, adding that the serious deficiencies should "make it impossible" for the commission to approve the disbursement of Covid-19 funds for the two countries this year.

'Past breaking point'

Laurent Pech, professor of European Law at the Middlesex University London, said that - on the positive side - the commission asked the right questions in its letters.

"One would assume the commission already knows the answer to those questions," he quipped.

But on the negative side, the letters prolong the process, and give more time to the commission to "justify the lack of formal notification", Pech added.

"It is a delaying tactic," the professor warned, adding that it is not a compulsory, under the rules, to actually send this letter of inquiry before launching the official procedure.

"It can be viewed more as a 'facade action' rather than meaningful action," he said.

Pech expected that by the time the Warsaw and Budapest governments answer, and those responses are analysed by the commission, the ECJ will most likely rule on the regulation itself.

Pech said more infringements and more court-imposed fines should be used against Poland and Hungary for failing to respect EU rules, and for ignoring ECJ rulings.

He said the commission under the leadership of president Ursula von der Leyen still falls short of its promise of not compromising on rule-of-law issues.

"We have seen more meaningful action, such as the daily penalties asked by the commission, but still overall, we can be very critical of the lack of prompt and meaningful action on multiple fronts," he said.

"It is past the breakdown points in both countries," Pech said.

"Hungary is no longer a democracy, and Poland has just constitutionalised the systemic breaking of EU rule of law requirements. It is not the time for informal letters, but at least we are getting something," Pech said.

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