EU: Use Budget to Uphold Democracy

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European Union flags flutter outside the EU Commission headquarters in Brussels, Belgium, October 28, 2015.

© 2015 Reuters

(Brussels) – The European Union should urgently equip itself with a robust tool tying member states’ access to EU funds to respect for core membership obligations, Human Rights Watch said today. Germany, which holds the EU’s rotating presidency until December 2020, and other EU countries should ensure that a functioning system is established to prevent rights-abusing governments in the EU from exploiting their access to the EU’s budget while flouting the rule of law.

“Without an effective checks-and-balance system, EU funding can be misused and subject to fraud or corruption by rights-abusing governments,” said Lotte Leicht, EU director at Human Rights Watch. “EU member states should finally act on a 2018 proposal by the EU Commission and create a credible tool to condition funds on respect for the rule of law.”

On July 21, 2020, EU leaders reached an agreement on the EU’s seven-year budget for the EU and the Covid-19 economic recovery plan. They also agreed to establish a process to protect the budget from breaches of core EU principles. But details of the plan, based on the 2018 proposal by the European Commission, remain open to negotiation among EU member states.

In its 2018 proposal, the European Commission recommended a means to suspend, reduce, or restrict access to EU funding proportionate to breaches identified, subject to approval by EU states. Key issues that will be addressed during the upcoming negotiations include the majority required for member states to approve or reject the Commission’s proposed decisions under the system and the scope of violations that could trigger action.

The number of votes required to trigger the process at the EU Council should be designed to prevent a small number of rights-violating governments from shielding one another or from rejecting well-founded EU Commission decisions that a government’s breaches of EU values are sufficiently serious to warrant a cut or suspension of funding, Human Rights Watch said. EU member states should back the EU Commission’s proposal that the EU Council could only reject decisions to cut funds by a qualified majority. This would provide sufficient safeguards against disproportionate decisions, while protecting the process from political bargains.

The process should ensure that a broad range of breaches to EU’s democratic values could lead the European Commission to recommend cutting funds to EU member states. These should include attacks on the independence of the judiciary, as well as state interference in the media and civil society. The process should also seek to ensure that EU funding cannot be used to promote intolerance or discriminatory policies, including against women’s rights and the rights of LGBT people and other minorities.

The process should be carried out in a way that will avoid punishing EU citizens for the actions of their governments by negatively affecting their economic and social rights, Human Rights Watch said. The Commission should conduct human rights impact assessments to determine the risk of individuals’ rights being harmed by any decision and should divert rather than cut funding as required to ensure that beneficiaries’ rights are not affected.

In August 2020, Hungarian officials threatened to withhold their country’s support to the EU budget if the plan to link EU funding and rule of law is not withdrawn.

Hungary is among the largest per capita recipients of EU funding, and Poland is the largest overall net recipient. But both countries are also the only two facing scrutiny under the Article 7 procedure – the EU treaty provision dealing with governments that flout EU values, which can ultimately lead to the suspension of their voting rights in the Council.

The Hungarian government imposed severe restrictions on the work and access to funding of independent nongovernmental organizations, and seriously curtailed media pluralism. The government forced a critical university out of the country and continues to restrict academic freedom in other institutions. The Polish government undermined the independence of the judiciary to the point at which some EU countries may refrain to extradite suspects. Elected officials have ramped up smear attacks against women’s rights and LGBT people, at odds with the EU principles of tolerance and nondiscrimination.

On August 26, key political groups in the European Parliament wrote a letter to German Chancellor Angela Merkel, as the leader of the country currently holding the EU’s presidency, and the European Commission’s chief, Ursula von der Leyen, repeating calls for a strong conditionality system that maintains the “reverse qualified majority” rule at the Council. According to that rule, states opposing proposals to cut funding should gather a majority to overturn the Commission’s decisions.

In her State of the Union Address delivered on September 16, the EU Commission’s President Ursula von der Leyen reaffirmed the importance the Commission attaches to rule of law and committed to ensure that money from the EU budget will be “protected against any kind of fraud, corruption and conflict of interest.”

Chancellor Merkel and leaders of other EU member states should reject Hungary’s blackmail and commit to securing a system setting strong rule of law conditions in the EU budget, translating rhetoric about upholding the rule of law into support for an effective process.

“Authoritarian tendencies in Hungary and Poland do not represent what the European treaties had promised, nor the policies European taxpayers agreed to pay for,” Leicht said. “Merkel and other EU leaders should stand up for the EU core values and ensure that those attacking them face real consequences.”