The European Union reached a compromise with Hungary and Poland that will allow the economic bloc to move forward with a massive budget and stimulus plan.
The budget and stimulus have been stalled since November, when representatives from Hungary and Poland blocked the approval of the seven-year budget and $2.2 trillion trans-European stimulus package, according to Euractiv — even though Poland and Hungary both stood to benefit from the package’s economic redistribution. Poland and Hungary are slated to receive 2 and 4 times as much funding per capita, respectively, compared to Western European states such as Germany.
“Deal on the #MFF and Recovery Package #NGEU,” European Council President Charles Michel tweeted after the successful negotiations. “Now we can start with the implementation and build back our economies. Our landmark recovery package will drive forward our green & digital transitions.”
Deal on the #MFF and Recovery Package #NGEU
Now we can start with the implementation and build back our economies.
Our landmark recovery package will drive forward our green & digital transitions. #EUCO
— Charles Michel (@eucopresident) December 10, 2020
At issue, rather than funding, was a measure in the budget that created “a specific mechanism to protect [the EU’s] budget against breaches of the rule of law.”
Hungary’s Viktor Orban and Poland’s Andrzej Duda have been criticized a number of times by the European Court of Justice, the highest court of the EU, for their implementing of policies that have gradually undermined the liberal democratic fibers of their respective constitutions.
Hungary particularly has taken steps toward cementing what Orban called “illiberal democracy,” which critics have called an “electoral autocracy,” according to the New York Times. Orban’s government passed a constitution in 2011 that broadly expanded the prime minister’s authority, packed the Constitutional Court with loyalists, and muzzled the country’s free press. In 2018, hundreds of private news outlets in Hungary were simultaneously “donated” to a central holding company run by people close to Orban, largely recognized as a “broadside against pluralism under the increasingly autocratic Mr. Orban.”
The rule of law language is a watered-down version of the previous measure but will still be legally binding — though critics of the compromise fear that the drawn-out process of outlining the specifics of how the mechanism will work could postpone any real action against violations by months or years.
Others in the European Parliament nevertheless hailed the compromise as a success.
“This is an important win for the rule of law and the E.U.,” tweeted Petri Sarvamaa, a member of Parliament representing Finland. “The Parliament or the Council did not give up to threats.”
Despite the tensions created by the bill, the recovery package “represents an important milestone in European economic policy integration,” according to the European Central Bank.
“It will result in the issuance of sizeable supranational debt over the coming years, and its establishment has signalled a political readiness to design a common fiscal tool when the need arises,” the bank added. “This innovation, while a one-off, could also imply lessons for Economic and Monetary Union, which still lacks a permanent fiscal capacity at supranational level for macroeconomic stabilisation in deep crises.”
Until now, the EU as a bloc has largely avoided supranational debt — borrowing nothing in 2019 and only 5 billion euros in 2018, according to Reuters. But over the next three years, the EU’s 54 billion euros in outstanding debt could balloon to more than 800 billion euros if the entire stimulus package is funded by the bond market, making the bloc’s deficit larger than many of its member states’ individual debts.
