This month, it was announced that Hungary was waiving its veto power within the EU, which threatened to block 18 billion euros in loans to Ukraine. During the same period, it had already come out that four parliamentarians had been expelled from the European Parliament’s Social Democrat group over suspicions of corruption. If Europe is showing anything now, it is that anno 2022, you can no longer get away with old-fashioned and corrupt cronyism, Johan Barnard, head of International Public Affairs at APG contends.
In September 2022, the European Commission proposed to freeze €7.5 billion in EU subsidies to Hungary. The reason: concerns at the Commission about corruption and procurement by the Hungarian government. To avoid an automatic 70 per cent cut in the outstanding amount, it was important for Hungary to get its 'recovery plan' stamp of approval from Brussels before the year end. In addition, Hungary risked missing out on €5.8 billion from the EU’s Covid recovery fund. To claim money from this fund, member states must show in a recovery plan how they will spend it. But in Hungary’s case, this includes conditions on strengthening the rule of law. The deadline given to Hungary for approval of its plan by the other member states in the Council of Ministers was 19 December. After that date, large amounts earmarked for Hungary could no longer be frozen.
It had been clear for several months that a decision had to be made on the conflict between Hungary and the rest of the EU. However, the other EU countries put off that decision for a long time and, with the deadline approaching, the pressure increased. Under this pressure, the Hungarian government made a mistake in my view. At Ecofin, the meeting of European finance ministers, Hungary blocked through its veto power two decisions that require unanimity: a decision on EUR 18 billion of loans to Ukraine and a decision on the implementation of a global deal on a minimum corporate tax rate. With these two “hostages”, Hungary hoped to force a better deal at the level of government leaders, compared to the EC proposal to freeze €7.5 billion.
However, the other 26 member states - including Poland, which has blocked sanctions against Hungary with some regularity in recent years - did not allow themselves to be blackmailed. On Friday, December 9, a legal solution was found so that 26 member states could still go ahead with support for Ukraine. Normally, such loans are guaranteed from the EU budget. However, this requires a unanimous decision of the member states. To get around this, the other 26 member states chose to issue such a guarantee from their individual member state budgets. In that case, only a majority in favor and, of course, the consent of each member state providing a guarantee is needed. As a result, Hungary could only block its own very limited portion of the total aid to Ukraine. The vast bulk of the aid came from the other 26 member states. Thus, Hungarian Prime Minister Orbán’s main “hostage” was freed. The issue of the minimum tariff can be resolved in a similar way. For procedural reasons, it does take more time, but it is possible.
So, on Monday, December 12, Hungary actually stood empty-handed. Moreover, by attempting to block financial aid to Ukraine, it had now also irritated big brother Poland. After all, Poland favors a hard line against Russia. Orbán had little choice but to abandon his blockade attempts. The ministers of the other member states then decided to offer Orban a small way out, by blocking just a little less budget money (6.3 billion euros) than originally proposed. They also approved the Hungarian “recovery plan” so that there would be no lapses from it. The condition is for Hungary to implement a long list of demands aimed at improving the rule of law. This effectively keeps the pressure on Hungary almost entirely, but gives it a small portion of the money to save face. With Hungary’s public finances in bad shape, Orbán desperately needs that money, so he will have to speed up that improvement in the Hungarian rule of law.
All in all, quite a complicated story, which has led to many different conclusions in the European press about who “won”. But I’m sticking with the European Commission, the European Parliament and the 26 member states. And above all, Europe as a whole won, because in order to maintain a strong European Union there must be fair competition and a good investment climate in all member states. Without the rule of law, this will not happen.
At the same time as the Hungarian issue, attention in Brussels is being claimed by the spectacular Belgian corruption investigation in the European Parliament. It seems that the Greek Social Democratic Vice President (one of 14) of the European Parliament, Eva Kaili, has allowed herself to be bribed by Qatar. The fact that a big riot has arisen over this is justified, of course. It is scandalous; let there be no misunderstanding about that. At the same time, we have to put it in perspective. Kaili's fall is fast and deep, and for now it seems to be a spectacular incident rather than a real pattern. Moreover, the Belgian investigative authorities and the leadership of the European Parliament have worked together quickly and effectively to get to the bottom of it.
The EU’s response to Orbán’s blockade attempts and the cooperation between the Belgian judiciary and the Parliament show: anno 2022, you can’t get away with old-fashioned and corrupt cronyism in Europe anymore. As far as I am concerned, this is good news to go into the Christmas season with, in the hope that significant improvements are coming.