A reformed EU: Will the bloc’s budget lead to real results?

A reformed EU: Will the bloc’s budget lead to real results?
The Recovery and Resilience Facility will make €672.5 billion in loans and grants available to support reforms and investments undertaken by Member States. Credit: Jennifer Jacquemart / EC - Audiovisual Service

This article is part of an article series about Europe’s Recovery and Resilience Facility. It has been enabled thanks to the kind support of Recover Portugal.

MEPs have lamented the “stark deterioration” of judicial independence across certain EU members states, in a report backed by members of the European Parliament’s Civil Liberties committee.

The text, which received the backing of MEPs on Thursday (4 June), homes in on the Commission’s 2020 Rule of Law report and highlights the EU executive’s “failure to promptly and legal react” to rule of law abuses in the EU.

The motion further states that the Commission should include clearer recommendations in future reports for how it will seek to ensure compliance with the rule of law in respect of the conditionality mechanism contained in the bloc’s new long-term budget.

For its part, the Commission appears determined that the rule of law conditionality mechanism in its 2021-2027 budget can be put into good effect in clamping down on corruption in the EU. But with certain abuses not only confined to the traditional outliers of Poland and Hungary, how effective is the mechanism likely to be?

The Commission’s Vice-President for Justice, Vera Jourova, said recently that the EU executive would not wait around for a forthcoming decision from the European Court of Justice on the bloc’s long-term €1.8 trillion budget, where judges will rule on the legality of the conditionality mechanism contained within the agreement.

The clause effectively ties the dispensation of EU funds to the compliance with the rule of law across EU nations. Should any abuses against the rule of law be identified by the Commission, then governments in question may be blocked from receiving the funds, following backing from the EU council.

Ivana Maletic, Member of Court of Auditors (ECA) – responsible for the Opinion on the EU’s Recovery and Resilience Fund (RRF), recently raised her concerns on the issue. Speaking at an online event hosted by EURACTIV, she said that should certain member states be found to have abuses rule of law standards, then it is “fair and just they [they] don’t benefit from the funds.”

“Also, there is a huge risk that countries will not actually use it (the fund) in a proper and legal way,” she added, also noting that the scope and the objectives of the RRF are so broad as to create potential overlaps with other EU funding instruments.

“This increases the risk of double funding and competition between different programs,” she said, adding that this creates the need for EU member states to spend funds quickly.

Meanwhile, the conditionality mechanism is currently before the European Court of Justice (ECJ) in Luxembourg, where judges will decide whether or not it is in line with EU treaties.

Breaches and weak implementation

Hungary and Poland, who have long come under the ire of the Commission for alleged breaches of the independence of the judiciary, had filed a challenge to the ECJ on the mechanism. The countries believe that the EU already has sufficient legal mechanisms in place to deal with abuses against the rule of law, including Article 7 of the Lisbon treaty – under which both nations are currently being investigated, as well as claims that certain EU bodies, including the European Anti-Fraud Office (OLAF), and the new European Public Prosecutor (EPPO) are responsible for dealing with the misuse of EU funds and fraud across member states.

However, neither Poland nor Hungary opted to become members of the EPPO, which has been given powers to prosecute those proven to have misspent EU funds.

But while the text backed by EU nations and MEPs notes that the bloc is unable to apply the conditionality mechanism while a decision from the European Court of Justice is pending, the Commission’s Jourova is hellbent on ensuring that the provision of EU funds in the near future will remain conditional on compliance with the rule of law, telling Bloomberg recently that a decision from the ECJ next year would be “too late.”

Regardless, the Commission may have its work cut out, not only with the traditional rebels of Poland and Hungary, but also in often-overlooked EU member states that have gone under the radar in terms of certain rule of law abuses.

The European Commission’s 2020 Rule of Law report notes that challenges are widespread. There are concerns over the composition of the Supreme Judicial Council and the Inspectorate to the Supreme Judicial in Bulgaria, recent judicial reforms in Romania, low administrative capacities in Croatia, and the independence and integrity of the justice system in Slovakia.

Rule of law resilience test

Moreover, the coronavirus has presented a ‘stress test’ for rule of law resilience across the EU, as many member states have granted special emergency powers under constitutional provisions that can pose particular challenges for the rule of law.

The wider concerns about the robustness of the rule of law across the EU have also caught the attention of observers in Brussels.

“What’s happening particularly in Poland and Hungary is very serious,” Camino Mortera-Martinez, senior research fellow at the Centre for European Reform, told The Brussels Times, “But we must be careful not to overlook other member states.”

“We’ve got Romania with high levels of corruption cases and a lot of fear with regards to how EU funds will be spent,” she said. “Then there’s the concerns over the Czech Republic and how Prime Minister Babis spends EU cultural funds, as well as problems in Cyprus and Malta.”

“If one looks closely, there are problems pretty much everywhere,” she added.

Such abuses of judicial integrity are also found in Western European nations. One case in question includes concerns in Portugal, currently leading the Presidency of the EU Council, where the electronic system of allocation of cases in courts has come under scrutiny.

The Commission’s Rule of Law findings note that allegations of breaches of the allocation system surfaced in 2020, when top judges were indicted in a case of “high level corruption, including peddling and money laundering,” resulting in the High Council for the Judiciary applying disciplinary sanctions to two of the judges involved.

An ongoing investigation into concerns over the electronic allocation of cases continues. The High Council states that the case may have led to a lack of confidence in citizens’ ‘perception of justice’ in Portugal.

This is not the first time Portugal has been in the spotlight for financial system failure. Back in 2014, the Banco Espírito Santo (BES) scandal led to substantial losses in the billions for both domestic and foreign investors, with the Portuguese central bank having to eventually intervene to impose a restructuring.

With worries over the rule of law abounding across the EU, it is clear to see why the European Commission is keen to ensuring a timely approval of the conditionality mechanism by the ECJ.

Nevertheless, should the court eventually decide that the conditionality clause is perfectly in line with EU treaties, there are those that believe the mechanism to be insufficient anyway, particularly in dealing with abuses emanating from Hungary and Poland.

“The Hungarian government forcefully denies any problems detected by the Commission,” Zsolt Darvas, Senior Fellow at the think tank Bruegel, told The Brussels Times. “They believe that the Rule of Law report is biased and politically motivated.”

For Darvas, the issue hinges on positions adopted by governments in Poland and Hungary. Should those governments remain in place for the foreseeable future, then the conditinality mechanism is unlikely to convince them to adopt reform in pursuance of rule of law standards.

“In my view if the current governments remain in Hungary and Poland, even a negative decision on their complaints to the European Court of Justice concerning conditionality will not change their positions,” Darvas said.

“They even they will be prepared to sacrifice money, rather than to suffer the political consequences of admitting that there are problems in their countries.”

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