A constitutional crisis neatly averted

The European Union sees itself as embodying certain fundamental liberal values and the concept of the rule of law. In both Hungary and Poland there have been attacks on the independence of the courts and the media and an alarming lurch towards autocracy. The EU, not surprisingly, sees this as a threat to its core values and wants to bring them in line.

Polish & Hungarian Flags – Photo by PawelCzech from FreeImages

Some commentators have attempted to trivialise the Polish and Hungarian attitude on the grounds that from about 1918 to 1989 both countries were ruled by dictators, Nazis or Communists. This is true but irrelevant. Almost every other Member State has experienced dictatorship but has come through it and learned to embrace basic democratic value. Poland and Hungary have been undermining these liberal values to a blatant extent. Neither country has been willing to put its constitutional house in order and bow to pressure from the EU to behave as adults. In the worst case scenario they risk being expelled from the EU – which would destroy their economies.

Why is this so important just now? Because the EU wants to adopt a €1.8 trillion budget plus recovery package. The EU has also made it clear that only those Member States that respect the rule of law will be able to benefit from the recovery package. BUT: Hungary and Poland could impose a veto on the vote in Council.

“ …the steam-roller is unknown in that country… ”

Those are the words of Baedeker’s ‘Austria-Hungary’ (1905), complaining about the state of roads in the former Habsburg empire. Baedeker could not have foreseen that a century later a human steam-roller – Viktor Orbán – would appear in Hungary. He originally came to power as a result of widespread disgust at the corruption of the preceding Socialist and Liberal governments. But as George Soros has pointed out in an article on the Project Syndicate website, Orbán – like Putin – has constructed an elaborate kleptocratic system to rob Hungary blind.

It is worth pointing out that Hungary’s electoral law is as absurd as ours. Orbán’s party Fidesz (the name comes from Fiatal Demokraták Szövetsége or Alliance of Young Democrats, believe it or not) won 91 out of 106 first-past-the-post seats. In addition 93 seats are elected by PR – but not as a corrective to the distorting effect of FPTP. Result: Fidesz has a majority of 67, despite being rejected by a majority of voters. Tut, tut: couldn’t happen here…

The European Anti-Fraud Office (OLAF), the EU’s body which investigates fraud against the EU budget, recently published its annual report which showed that in 2019 Hungary heads the league table for corruption.  Transparency International estimates that half of all public procurement projects and 90% of major infrastructure projects in Hungary are financed by EU money. Thanks to his substantial majority in Parliament Orbán has been able to rig the system so that loyal businessmen and members of his family have benefited disproportionately from this money. 

Istvan Janos Toth of the Corruption Research Center of Budapest (CRCB) has analysed this system of crony capitalism. The share of public contracts awarded to Orbán’s inner circle has been steadily increasing since 2011. Often there is only one tenderer (how unlike the UK…).  The rise of  Lörinc Meszaros is particularly spectacular. He was a gas fitter from Orbán’s home town of Felcsut. In the space of a few years he became Hungary’s second richest man.  Thanks to business dealings with Meszaros, Orbán’s son-in-law Istvan Tiborcz is now worth €111 million.

‘Polonia semper fidelis’

Poland is moving in the same direction as Hungary. The government, led by the Law and Justice party (PiS), has come under fire from European institutions for its control of state radio and television – which lavishes praise on the government while rubbishing the opposition. Poland’s government moved to take control of most of the country’s regional newspapers on 7 December when state-controlled oil refiner PKN-Orlen announced it was buying the Polska Press publisher from Germany’s Verlagsgruppe Passau. ‘This has nothing to do with the development of the refining company,’ tweeted Borys Budka, leader of the opposition Civic Platform party. ‘They are using the money of Poles to build another propaganda machine’. The government has used state-owned and controlled companies to support a wide array of government policies.

In 2020 Poland was 62nd out of 180 countries in the World Press Freedom Index prepared by the NGO, Reporters Without Borders, down from 18th in 2015, the year the PiS took power. Media control is seen as helping PiS hang on to power. The fairness of this summer’s presidential election – won by PiS ally Andrzej Duda – was marred by ‘the lack of impartiality in the public media’, the Organisation for Security and Cooperation in Europe (OSCE) wrote in its post-election assessment.


Both Hungary and Poland have been banging on about ‘family values’ and clamping down on abortion and on LGBT rights – with unintentionally hilarious consequences for Hungary. There have been gleeful reports in the international press about a member of Fidesz taking part in a gay orgy in Brussels (bizarrely just round the corner from police HQ). Jozef Szajer MEP attempted to escape by shinning down the drainpipe but was caught and pleaded diplomatic immunity. He was a close ally of Orbán and an author of a new Hungarian constitution that Fidesz drew up after returning to power in 2010 which effectively banned same-sex marriage, and set the tone for a raft of legal changes that have eroded the rights of sexual minorities. He has now resigned from Fidesz. Orbán told Magyar Nemzet (a pro-régime rag which once attacked Billy Elliot as ‘gay propaganda’) ‘what our fellow member József Szájer has done does not fit into the values of our political community’.

The ‘S’ word and the last Trump

For Hungary’s Orbán and Polish PM Mateusz Morawiecki this dispute with the EU isn’t about money. It’s about the EU’s decision to tie funds – including access to the pandemic rescue package – to democratic standards. Both right-wing nationalist governments are outraged at EU charges of democratic backsliding. They see it as an attack on their sovereignty. And they are worried.

For them, the rule of law represents a practical limit on personal and political corruption. The veto is a desperate gamble by two serial violators. It was also an unprecedented step, coming at a moment when Europe is suffering from a dangerous surge of COVID-19 cases. If there is no agreement on a new budget, the old budget, which expires at the end of 2020, is extended on a yearly basis. Hungary and Poland would not receive any payments under this budget, because their governments are violating the rule of law.

Hungary’s economy is disproportionately dependent on EU money. In 2018 Budapest received €5 billion more from Brussels than it paid in, equivalent to 4% of GDP. Since Hungary is in a difficult economic position thanks to the pandemic it will remain dependent on the money from Brussels that it is trying to block. It has been estimated that the economy will not reach pre-pandemic levels until 2022 – but only if Hungary benefits from the Next Generation EU funding. A persisting recession would not suit Orbán because he has to face elections in 2022. But accepting the rule of law mechanism means signing his own death sentence.

Donald Trump’s election defeat isn’t the only sign that the populist wave is fading. The domestic situation is becoming more precarious too, with majorities in both Hungary and Poland backing EU membership (as in the UK, as opinion poll after opinion poll has demonstrated), which has helped transform their economies through funding that far exceeds what they pay in. Polish business groups including banks and employers’ associations have sent a protest letter to Morawiecki, saying the veto plan would leave Poland ‘with no partners and no money.’

If Orbán and Morawiecki think the new US Administration will help them, they can think again. Biden spent his honeymoon in 1977 on Lake Balaton and as a Senator in the 90s he was a convinced advocate of NATO membership for Warsaw and Budapest. The future Secretary of State, Antony Blinken, has closer links. His mother was originally from Hungary, his second wife is also Hungarian and his parents were generous supporters of Soros’ Central European University archives. But so what? Piotr Buras, head of the European Council on Foreign Relations in Warsaw, thinks Biden will stress the role of the EU and Germany in maintaining order in Europe and that he will use military co-operation as a lever to put pressure on Warsaw to play a more amenable role in the EU.

Resolving the dilemma

Speaking to the European Parliament, Ursula von der Leyen stressed that the EU’s insistence that the bloc’s funds can only be sent to governments that observe the rule of law would be applied only to protect EU budget funds. ‘We are talking here about the violations of the rule of law that are threatening the EU budget and only that,’ she said. ‘It is very difficult to imagine anybody in Europe who would possibly have anything against that principle.’

Instead of having a tedious and ultimately pointless debate, the plan for the summit was to go ahead with an announcement beforehand that the rest of the EU would set up a recovery fund which excludes Hungary and Poland. In short, unless they offer a clear signal that they will lift their veto over the EU’s stimulus plan, they risk losing billions of Euros in aid. A senior diplomat reminded everybody of the Commission’s preparations for alternative arrangements. ‘There are basically two options for an agreement of the 25, sans the two who don’t want the money: A tool called enhanced cooperation, or a so-called intergovernmental agreement. There’s different ways, but clearly this will become an issue,’ the diplomat added.

In the end the EU called Orbán und Morawiecki’s bluff at the December summit. In the end, it wasn’t about values; it was all about money. EU leaders reached unanimous agreement on the giant €1.8 trillion EU-budget-plus-recovery package, allowing it to come into effect next year – perhaps even on January 1. There will, for the first time, also be a link between the disbursement of EU taxpayers’ money and respect for the rule of law, but to save face the EU stated its willingness to let Orbán und Morawiecki test the new mechanism before the EU’s Court of Justice. The Court will obviously rule in favour of the EU.

‘Congratulations to Mateusz … and congratulations to myself,” Orbán told reporters, referring to Morawiecki. Orbán’s spokesman went so far as to claim to have ‘defended the European Constitution’, adding that ‘we did not allow them to go around it’.

Angela Merkel, the actual architect of the deal, said merely that she had ‘tried to prepare a number of things’. This is what resolving a conflict of such a magnitude that it could have blasted the EU apart sounds like, from the German chancellor’s mouth. In an initial reaction from the European Parliament, the centre-left S&D group leader, Iratxe García, said she was glad Hungary and Poland had ‘understood that the EU means both benefits and responsibilities.’

So everything is OK? Well, not entirely. The new mechanism provides a better means of protecting EU money from misuse, but it’s hardly a foolproof method of imposing democracy on the unwilling. In the best case, the cuts in subsidy are an argument for the opposition in Hungary and Poland to mobilise against their governments.

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