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EU Funds Tied to Respect for the Rule of Law

Deal Will Defend Democracy, Protect EU budget

European Union flags are waving in front of the headquarters of the European Commission in Brussels. August 5, 2020. © 2020 Laurie Dieffembacq (Sipa via AP Images)

Last week the EU Council – represented by Germany as current chair of the bloc – the Parliament and the Commission, reached a landmark agreement on the details of a new mechanism that makes EU funding conditional on respect for the rule of law.

This means governments that dismantle their judiciary and erode institutional checks and balance could lose money. This is, in itself, a breakthrough.

The Council and the Parliament agreed to broaden the scope of the mechanism compared to the version Germany had proposed in September that was narrowly focused on fraud and corruption. Now, threats to judicial independence and lack of effective remedies could also lead to funds being cut.

A weakness in the deal is that a qualified majority of EU governments has to approve any sanctions based on failure to respect rule of law, making it easier for a minority of governments – most likely those disregarding democracy – to block a proposal. An individual government would be able to force a discussion among EU heads of state, potentially unduly delaying decisions. Combined, these measures could make the procedure less efficient and effective.

When proposed in 2018, the idea to tie EU funds to respect for the rule of law was seen as a game-changer in defending EU values. What’s on the table now is the bare minimum. Whether it will work depends on leadership and resolve on the part of the Commission and member states who care about the rule of law.

The November 5 agreement now goes back for discussion among all 27 EU member states. It’s disappointing that Germany's EU presidency – which put the rule of law at the top of its priorities – could not seal a better deal. Reports of new threats by the Hungarian Prime Minister to veto the budget altogether if there is any rule of law conditionality make it clear that watering down the proposal would never be a successful option.

This is also a wake-up call for those who hoped that conditionality could be the silver bullet to stop democratic backsliding in the EU. Pursuing in-depth scrutiny and holding would-be autocratic leaders in the EU to account is needed more than ever. It’s time to put Article 7 proceedings – the treaty mechanism to deal with governments putting the Union’s values at risk – back at the center and to move to its next steps.

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