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3 December 2020

How the EU’s budget feud with Hungary is sparking demands for radical reform

Faced with the intransigence of Viktor Orbán, MEPs are debating whether to abolish the principle of unanimity. 

By Ido Vock and Sebastian Shehadi

Hungary and Poland’s recent veto of the EU’s proposed €1trn budget illustrates a recurring truth about EU institutions: that the consensus-based functioning of the world’s second-largest economy can be undermined by just one or two hostile governments. The old joke about Brussels politics from the satirical 1990s British TV show The Day Today – a correspondent bluffing that a minister “didn’t like the deal, but had to go along with it” – no longer applies. 

In a recent op-ed published in the German newspaper Die Zeit, a group of Hungarian MEPs described their prime minister, Viktor Orban, as the “Trojan horse of Europe”. The analogy is apt. As a condition of accession to the EU, prospective member states are required to conform to a number of conditions, including stringent demands on democratisation. Yet after a country has joined the Union, vanishingly few safeguards are available to Brussels to ensure the new member state remains a functioning democracy.

“Once countries are in the club, the ‘carrot’ of accession is no longer available to Brussels,” said Pepijn Bergsen, Research Fellow at Chatham House, a think tank. In Budapest, Orban’s ruling Fidesz party has used its crushing parliamentary majority to rewrite the rules of the political system, most recently entrenching its power with a set of proposed constitutional amendments that will make it more difficult for opposition candidates to be elected.

These tensions escalated with the ongoing EU budget discussions. There is much disagreement over the newly proposed “rule of law” clause, which would make access to EU funds conditional on certain anti-corruption requirements. It has already been watered down from its original form, yet even this weaker mechanism was rejected by leaders in Poland and Hungary, who characterise it as an infringement on their sovereignty and an unacceptable Brussels overreach.

Their objection is delaying the approval of a €750bn Covid-19 recovery fund and the €1trn budget, thereby impacting all EU citizens and delaying the distribution of funds governments say are urgently needed to kickstart the economic recovery after coronavirus – not least in Hungary and Poland themselves. “Hungary desperately needs EU funding,” said Klara Dobrev, a Hungarian MEP who serves as vice-president of the European Parliament.

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[See also: How Orban’s deepening power in Hungary is breaking the EU]

The standoff is likely to be resolved one of three ways, and may not favour supporters of the rule of law clause. First, the EU could give in to Orban and either dilute the rule of law mechanism with a face-saving fudge, or maintain it while granting a different concession to the holdouts, such as dropping infringement procedures against Hungary and Poland.

Second, the 25 member states that voted in favour could bypass the blackmailers entirely, excluding them from the recovery fund through a parallel mechanism, an option floated by France.

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Finally, Hungary and Poland could back down, submitting themselves to a mechanism that would limit the power of their current ruling parties and undermine a significant basis of the cases they make to their electorates about being a bulwark against Brussels-led infringements on national sovereignty.

Irrespective of how this dispute ends, however, it has added new urgency to existing anxieties around the functioning of the EU. As the EU prepares for the exit of its second-largest member state, the UK, from the single market in just a month’s time, some MEPs are warning that Europe could stumble without reform.

Most worryingly, pro-Europeans fear that if the EU proves itself inflexible and reform continues to be held up, it will be unable to respond to new challenges, including Britain as a potentially more nimble competitor and an unreliable US. “The challenges ahead of us, whether in security, migration or climate change, will not be able to be faced on a national level … We have to make the decision-making process quicker but also more democratic,” Dobrev said.

Top of the list for pro-European MEPs is abolishing the unanimity principle. Many EU decisions require the approval of every member state – meaning one or two refusenik leaders can hold up reforms for the entire bloc of nearly half a billion people. “We need to get rid of unanimity, everyone agrees about that,” said Irène Tolleret, a French MEP for En Marche. “If we want to admit new member states, we will have to agree that we cannot manage at 30 [member states] in the same way as we did when we were six.”

Others want the EU to interact more with cities and regions and less with the national governments of member states. Leading these calls have been the mayors of the Visegrad capitals of Prague, Budapest, Bratislava and Warsaw. Their elected leaders are liberal and pro-European, in a region where liberal Europeanism can sometimes seem in short supply. This year, the four cities co-signed a position paper arguing that direct EU funding for cities would play a key role in Europe’s post-coronavirus recovery and the transition away from fossil fuels. “We would like to strengthen the role of direct funding from the European Union to cities and regions to circumvent regional envelopes,” said Zdenek Hrib, the mayor of Prague.

Jávor said Budapest would use direct funding to develop green infrastructure, including improving insulation, which he says could reduce household energy use by up to 70 per cent. “We would also like to use EU funds for the decarbonisation of transport by investing in projects such as new tram lines and the electrification of public transport.”

Another option is for Europe to take a greater role in coordinating large-scale transnational infrastructure projects, such as wind farms and railways. “Only if the EU is given proper resources will we be relieved from the logic of national budgets, where every seven years member states arrive asking how much they are putting in and getting out of the pot,” one federalist MEP bemoaned.

None of the changes is likely to come soon. The EU famously moves slowly. Abolishing unanimity would itself require unanimity, while national governments are not raring to give more money to their political opponents on the local level. But at one of the most significant junctures in the EU’s history, some believe the momentum is with them, after French President Emmanuel Macron successfully spearheaded the recovery fund, the first time member states have accepted the principle of common debt.

“This game with the Hungarian and Polish Prime Ministers is about much more than simply money. It is about how we see our countries in ten, 20 or 50 years,” Dobrev said.

[See also: Prague’s Pirate Party mayor on his war with illiberal politics]