EU conditionality mechanism to penalise Hungary

Portrait of Orbán Viktor
Viktor Orbán, P of Hungary; photo by European People’s Party, licensed under CC Attribution 2.0 Generic license.

Why has the EU conditionality mechanism been initiated?

For years Orbán and the Polish Law and Justice party (PiS) have been challenged in the courts by the EU over reforms they brought in. These changes limit the independence of the judiciary, the media and civil society and curtail the rights of migrants, women, LGBTQ and minorities. Both the Hungarian and Polish governments cast themselves as the protectors of traditional Christian values. The EU has now initiated the conditionality mechanism.

Homophobic referendum in Hungary

Parallel to the national election in Hungary people were asked to vote in a referendum, which under the mantle of ‘child protection’ would have made homophobia an elected government policy criminalising talking about LGBTQ to children. It equated all non heterosexuals to paedophiles. Thankfully, so many votes were invalid (with some voters displaying artistic talents in the drawings through which they expressed their opinions) that the referendum was declared void.

Timing of the announcement by the Commission

The timing of the announcement on Hungary by Ursula von der Leyen shows that the EU, like me, had hoped that the 3 April national elections would get the alliance of opposition parties into government. When, sadly, Orbán Victor was re-elected with a large majority, the EU realised that it was time to act to curb the corruption and further erosion of democracy in Hungary. Orbán’s election campaign was full of criticism of the EU and even contained thin allusions to a possible ‘Huxit’.

Legal mechanism ready

The EU has already had the legal mechanism since 2020. It allows the commission to impose financial sanctions on member states for rule-of-law breaches, especially if they impact on the financial interests of the EU. When the EU adopted its seven year budget in 2020, it also adopted the new mechanism. However, facing the danger of Poland and Hungary blocking the budget decisions, and the vital European Recovery Fund, the tool was not implemented.

The EU declared that before implementation the EU Court of Justice needed to rule on the legality of the mechanism. In February, the Court ruled that the mechanism was in full compliance with EU law. However, the Commission decided to wait until after the Hungarian national elections to issue the letter initiating the conditionality mechanism. They feared that they would be accused of interfering with the elections on 3 April.

The charges brought against Hungary

Daniel Hegedüs says:

“Among other things, the charges include systemic irregularities in public procurement, the non-pursuit of prolific high-level corruption, and the lack of cooperation with the European Anti-Fraud Office. While welcome, the timing is far from ideal: an escalating political conflict between the commission and Hungary may threaten EU decision-making related to the Kremlin’s war of aggression and sanctions against Russia.”

The Hungarian government’s reaction to the initiation of the conditional mechanism is to deny that the EU would deprive Hungary of ‘funds in the coming period’. In order to put potential and current investors’ minds at rest, the government also points to the length of the procedure. This is said to take around half a year and there is an extensive consultation process.

Budapest will get the chance to propose measures to challenge Brussels’ concerns. This attitude seems to contradict the statements of von der Leyen, who told MEPs that “we are at the moment being not able to find common ground and to conclude [on the anti-corruption question].”

Cut in EU funding to Hungary

A cut in EU funding comes at a bad time for the Hungarian government. They gave generous benefits to potential voters, including extra money to pensioners and young families. The pandemic also hit Hungary hard and the country is in dire need of the Recovery Fund. The  government is in denial and the finance ministry stresses the onus on the Commission to demonstrate a clear link between the rule of law and the EU budget. This condition was affirmed by the bloc’s highest court in February.

Unfortunately, the proposed mechanism will not have an immediate effect on Hungary. The final decision on proposed sanctions lies with the member states. The second stumbling block is that during the current horrific Russian aggression against Ukraine, Hungary, with its decades-long Russian friendly policy, might decide to block further sanctions on Russia which require unanimity in the Council.

What Orbán might do

Orbán might refrain from blocking Russia-related EU decisions to avoid full isolation within the EU. However, in this case, Hungary might still lose access to certain EU funds, which its economy urgently needs in the midst of the current financial crisis caused by skyrocketing inflation, energy prices, and public debt. Furthermore, throigh the conditionality mechanism Orbán would demonstrate weakness, an unusually difficult sell for him in the domestic political context where he has framed himself as ‘a freedom fighter’, battling for Hungarian interests and independence from Brussels, ever since returning to power in 2010.

Hungary, Poland and Russia

On the other hand, the Hungarian regime might threaten the EU with sabotaging further sanctions on Russia. However, that might trigger a final, far-reaching split in the Polish-Hungarian illiberal tandem. Hungary and Poland have a long-standing unofficial alliance which was strained for the first time by WWII. Is this war going to lead to another split with the countries being on opposing sides? That would have consequences both for the EU and the V4 countries. EU moves to penalise Poland for its illiberal legislation have not yet been made, perhaps because everyone recognises the greater burden that Poland is bearing with the influx of refugees from Ukraine.

But, with regard to Hungary, I personally am very disappointed that Hungarians seem to have forgotten what Russia did to the country in 1956.

EU needs to protect itself from rogue governments

There are still many open questions about the impact this new mechanism will have. But the EU has no option but to attempt to keep member states adhering to common values. There might even have to be treaty change to ensure that member states cannot regress after having complied with the admission conditions. Democracy is a constant process and it needs protection from rogue governments.