The European Commission’s Latest Move Against Hungary Is Risky but Right

For friends of the rule of law in EU institutions and member states, April 27 was a big day. The European Commission finally approved a letter officially notifying the Hungarian government that Brussels had triggered the so-called conditionality regulation against the country due to systemic deficiencies of the rule of law that threaten the EU’s financial interests.

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.

A Political Comedy

The boldness of the European Commission’s decision stands in obvious contrast to its behavior since December 2020. The more than year-long limbo of the implementation of the EU’s new conditionality regulation resembles a political comedy.

The legal mechanism allows the commission to impose financial sanctions on member states in case where rule-of-law breaches affect, or seriously risk affecting, the financial interests of the EU. The regulation was adopted together with the EU’s seven-year budget at the end of 2020. However, implementation of the regulation was suspended—as many argue, through a clear breach of EU law—to alleviate the Hungarian-Polish blockade of the budget talks and the post-pandemic European Recovery Fund. The EU’s two rule-of-law sinners had threatened to veto the seven-year financial package in order to get rid of the conditionality regulation.

According to the compromise forged in the European Council in December 2020 to greenlight the budget and the Recovery Fund, the commission refrained from triggering the mechanism until the EU Court of Justice ruled on the legality of the regulation at the request of Hungary and Poland.

Although the council cannot suspend the legal effect and implementation of regulations, the European Commission accepted that compromise and waited for the court’s decision. At last, in February, the court ruled that the conditionality regulation is in full compliance with EU law and dismissed all the Hungarian and Polish complaints. However, the commission still refused to officially trigger the mechanism, this time with the argument that it wanted to avoid accusations of interfering in the Hungarian general elections scheduled for April 3.

The commission’s its newly found boldness on the part of the 'guardian of the treaties' should be taken with a grain of salt.

The commission’s new decision may end this period of dillydallying, but its newly found boldness on the part of the “guardian of the treaties” should be taken with a grain of salt.

First, any sanctions against the Hungarian government may only come in six to nine months, and based on the conditionality regulation the commission can only propose potential sanctions. The decision-making power lies in the hands of the council and thus ultimately with the member states.

Second, the decision was made at a rather inopportune moment. The Russian aggression against Ukraine offers Hungarian Prime Minister Viktor Orbán enormous leverage over the EU.

Orbán has pursued a rather Russia-friendly foreign policy over the past 12 years and has recently faced condemnation over his government’s non-supportive stance toward Ukraine. Over the past couple of years, Hungary vetoed joint EU foreign policy positions in dozens of cases, even if it never dared to veto sanctions imposed on Russia. However, if Orbán perceives potential EU sanctions as a substantial political threat, that line might be crossed this time. He might be able to block any further sanctions on Russia, as these require unanimity in the European Council.

No Good Option

Triggering the conditionality mechanism against Hungary indeed threatens EU decision-making amid the worst security crisis on the European continent in decades. However, it is the appropriate move and it follows the right strategy.

After over a decade of appeasing Orbán, it is high time to stand up and restore some of the EU’s democratic credibility. The commission is taking some risk with the move, but it also poses Orbán a strategic choice where the Hungarian leader has only bad options.

On the one hand, 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, 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.

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.

Poland is the sole strategic ally of Hungary within the EU. The two countries have a mutual protection pact and have shielded each other from potential EU sanctions under the Article 7 procedure for several years. According to this mechanism, the EU can impose sanctions on a member state that is in serious breach of the EU’s fundamental values—but only by unanimous agreement of the European Council. By protecting each other, Budapest and Warsaw practically rendered the Article 7 procedure toothless and obsolete.

However, over the past two months deep ruptures in the Polish-Hungarian tandem have become undeniable. Hungary’s Central European neighbors, especially Poland, are particularly frustrated by its wartime balancing game between the Kremlin and the West.

The only Central European country that refuses to provide military aid to Ukraine, Hungary also will not allow the transit of such aid through its territory. Government-friendly media constantly relativize Russian war crimes and spread Russia-friendly narratives, while the government categorically refuses sanctions against Russia’s energy sector.

These Hungarian positions have put the freeze on Polish-Hungarian relations, starting an ice age that might persist for a long time. The ideological friendship of the past seven years between Orbán and Poland’s de facto leader, Jarosław Kaczyński, might have come to an end. However, the fundamentals of the partnership still remain. Budapest and Warsaw are dependent on each other to avert potential EU sanctions imposed due to breaches of the rule of law.

Would Poland be ready to support the suspension of Hungary’s voting rights under Article 7, if Orbán vetoes EU sanctions against Russia? This would be a difficult dilemma and a real political nightmare for the Polish governing party, Law and Justice. However, its previous strategic partnership with Orbán’s Russia-friendly Fidesz is becoming a serious liability in Polish domestic politics.

Will Orbán get cold feet and concede a tactical defeat by accepting financial sanctions imposed under the conditionality regulation to avoid a strategic one—a complete fallout with Poland and a potential suspension of the country’s voting rights? This might be the background logic in the European Commission’s strategy. It may happen that a qualified majority of member states will not only understand this logic, but also politically embrace it in the council.

If a majority of countries refuse to support the commission’s action against Hungary, yielding to Budapest’s threats to veto Russia-targeted sanctions, that may result in an embarrassing political defeat for the commission in a few months’ time. At least if the war in Ukraine is still raging.

Triggering the conditionality regulation might become a real game of Russian roulette between Hungary and the commission. But it puts pressure on Orbán’s illiberal regime at the right time, when the autocratic leader has only bad options.

The original version article was published by Transitions on April 29, 2021, under the headline “Risky but Right.”