The European Union cannot afford to compromise on the rule-of-law provisions it applies to the funds it allocates to member states.
Hungary and Poland have vetoed the European Union’s proposed €1.15 trillion seven-year budget and the €750 billion European recovery fund. Although the two countries are the budget’s biggest beneficiaries, their governments are adamantly opposed to the rule-of-law conditionality that the EU has adopted at the behest of the European Parliament. They know that they are violating the rule of law in egregious ways and do not want to pay the consequences.
It is not so much an abstract concept like the rule of law that the Hungarian prime minister, Viktor Orbán, and, to a lesser extent, Poland’s de facto ruler, Jarosław Kaczyński, oppose. For them, the rule of law represents a practical limit on personal and political corruption. The veto is a desperate gamble by two serial violators.
Unprecedented step
It was also an unprecedented step, coming at a moment when Europe is suffering from a dangerous surge of Covid-19 cases, and it threw the other EU countries’ representatives into confusion. But when the shock wore off, closer analysis revealed that there is a way around the veto.
The rule-of-law regulations have been adopted. In case there is no agreement on a new budget, the old budget, which expires at the end of 2020, is extended on a yearly basis. Hungary and Poland would not receive any payments under this budget, because their governments are violating the rule of law.
Likewise, the recovery fund, called Next Generation EU, could be implemented by using an enhanced co-operation procedure, as Guy Verhofstadt has proposed. If the EU went down this road, the Orbán-Kaczyński veto could be circumvented. The question is whether the EU, with the German chancellor, Angela Merkel, perhaps leading the way, can muster the political will.
I am a committed supporter of the EU as a model of an open society built on the rule of law. Being of Hungarian Jewish origin, I am particularly concerned with the situation in Hungary, where I have been active as a philanthropist for more than 30 years.
Kleptocratic system
Orbán has constructed in Hungary an elaborate kleptocratic system to rob the country blind. The amount by which he has enriched his family and friends is difficult to estimate but many of them have become exceedingly wealthy. Orbán is now using the new wave of Covid-19 to amend the Hungarian constitution and the electoral law (once again) and to entrench himself as prime minister for life by constitutional means. That is a tragedy for the Hungarian people.
Let me give a few examples of how Orbán has robbed the Hungarian people. He has transferred vast sums of public money to a number of private foundations that he indirectly controls. By a clever constitutional trick, Orbán is now permanently removing these assets from the public domain; it would take a two-thirds majority of parliament to return them to the Hungarian people. The amounts involved add up to nearly $2.8 billion.
In a series of fraudulent transactions, companies close to Orbán purchased over 16,000 ventilators on behalf of Hungary for almost $1 billion, far exceeding the number of intensive care beds and medical personnel that could operate them. An analysis of international trade data shows that Hungary paid the most in the EU for ventilators from China, at one point paying over 50 times more than Germany.
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One of these companies also secured an order from Slovenia, whose prime minster, Janez Janša, is a close political ally of Orbán. The European Anti-Fraud Office (OLAF) needs to investigate whether the EU was defrauded. The recent contract for the Russian vaccine that will make Hungary the first European country to use it deserves to be investigated.
At the same time, Orbán is seeking to avoid accountability for these actions and taking steps to prevent a repeat of the local elections in 2019, when his Fidesz party lost control of the municipal government of Budapest and other major cities. He is going out of his way to deprive Budapest of financial resources, vetoing the city’s application to borrow money from the European Investment Bank to buy new mass-transport equipment amenable to social distancing.
Budapest is now looking at a $290 million shortfall in its budget for 2021. Similar conditions prevail in other cities with local governments that are not controlled by Fidesz.
Limited chances
Hungary’s opposition parties are bravely trying to challenge Orbán by forming a common list of candidates for the 2022 general election. But their chances of success are limited because Orbán can change the rules at short notice, as he has already done several times before. Conveniently, Orbán is planning to introduce the latest changes to the electoral law while the pandemic is raging, Budapest is under curfew and soldiers are patrolling the streets.
Moreover, Orbán exercises almost total control over the countryside, where the majority of the population lives. He controls the information they receive and voting in many villages is not secret. There is practically no way the opposition can prevail.
Only the EU can help. EU funds, for example, should be directed to local authorities, where there is still a functioning democracy in Hungary, unlike at the national level.
The EU can’t afford to compromise on the rule-of-law provisions. How it responds to the challenge posed by Orbán and Kaczyński will determine whether it survives as an open society true to the values upon which it was founded.
Republication forbidden—copyright Project Syndicate 2020: ‘Europe must stand up to Hungary and Poland‘
George Soros is chair of Soros Fund Management and the Open Society Foundations. A pioneer of the hedge-fund industry, he is the author inter alia of The Alchemy of Finance, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What it Means,The Tragedy of the European Union: Disintegration or Revival? and In Defense of Open Society .