After four long days of negotiations, the European Union concluded last week’s summit with a historic deal. It was an agreement to alter the character of the EU, writes Oliver Hartwich.

Last week the EU’s leaders not only signed the organisation’s budget of just over a trillion euros for the next seven years. They also established a €750 billion post-pandemic recovery fund. That made it a €1.8 trillion package.

Given these sums, no wonder it was the second-longest summit in EU history. Only the EU’s enlargement summit in Nice back in December 2000 was longer – by 25 minutes, since you asked. It took that long to calibrate the balance between grants and loans towards individual countries.

As this column explained last month (Nothing stops the march of European integration), the recovery fund changes the financial nature of the EU. The EU has never been able to borrow before. By having EU-issued bonds, guaranteed by the member states, the EU moves a step towards a pooling of national debt.

However, the financial aspects of the EU’s deal are not the only important results of the summit. What might weigh even heavier are the political implications. There is now a question about how serious the EU is about its own proclaimed values.

For roughly the past decade, the EU had to deal with authoritarian and anti-democratic tendencies in a few of its member states. In particular, two countries have caused the EU Commission grief: Poland and Hungary. In both these countries, populist right-wing governments have interfered with democratic procedures, civil liberties and the judiciary.

On the one hand, the EU’s self-proclaimed values make it tricky to deal with such behaviour at the member state level. Human dignity, freedom, democracy, equality, the rule of law and human rights are what the EU is all about – or at least what the EU says it is all about.

On the other hand, Brussels can initiate the so-called Article 7 procedures to punish any transgression of its values. This procedure began against Hungary, for example, in late 2018.

The goal of Article 7 is to check whether a member state has violated EU Treaty Law and could lead to sanctions. However, almost two years on, and despite much debate and many interventions from the European Parliament and the European Commission (for a list of actions, see here), no such sanctions are in sight.

With the new financial package, there would have been an opportunity to give the toothless EU tiger a dental prosthesis. It could have paid funds to member states dependent on their ongoing compliance with the rule of law. But it did not.

Seen from the outside, one might wonder why it should be hard for an organisation like the EU to include a democracy or rule of law criterion into its operations. Such basic principles should not be controversial among advanced European democracies.

However, after what happened with Poland and Hungary it is entirely understandable why the rule of law clause became such a contentious issue at last week’s EU summit.

That both the Polish and the Hungarian governments worked hard to remove the clause also shows they know they are the most likely countries affected by it.

If only the EU was a community of values, it would have underlined its commitment to the rule of law in last week’s budget. It did not.

True, the EU summit eventually agreed on a clause. But it was such a soft one it has no practical relevance. It proposes that future sanctions must be backed by at least 15 EU member states (out of 27) representing no less than 65 percent of the EU’s population. That Hungary’s Prime Minister Viktor Orbán and his Polish counterpart Mateusz Morawiecki could both agree to this compromise demonstrates such a quorum is unlikely to ever be met.

The European Parliament is less happy with the deal. In a resolution last week, 465 Members of the European Parliament (MEPs) threatened to withhold agreement to the EU’s finances if protecting democracy and the rule of law cannot be strengthened.

In theory, this could ruin the entire a €1.8 trillion package. But the problem for the MEPs is that they must vote on the whole deal agreed to by national governments, not on individual aspects.
For the European Parliament, the result is a Catch-22 situation. If it now makes a lot of noise about democratic values and the rule of law, the Parliament cannot easily backtrack without losing its credibility. But if Parliament insists on those values, the financial assistance package to member states will not go ahead and governments would have to negotiate again.

But four days may not be enough to find a solution that all 27 EU member states, both the democratic and not-so-democratic ones, can agree on.

Then again, Hungary’s Prime Minister Viktor Orbán said in a doorstep media conference at the summit, “the fight for freedom and the fight for the rule of law is the same thing in Central Europe. So, if someone is not going to accept it, please leave the community. It is a community of values.”

If only the EU was a community of values, it would have underlined its commitment to the rule of law in last week’s budget. It did not.

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