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Linking the European Union budget with the rule of law is a surefire way to break up the community.

The European Union's multiannual financial framework (MFF) is a legally binding regulation which sets out priority tasks for a number of years to come. Annual budgets are adopted on the basis of the MFF. The financial framework in force at the moment encompasses 2014-2020 and as such will expire at the end of this year. Negotiations on the 2021–2027 MFF are still underway. Charles Michel, the President of the European Council has scheduled a special EU summit for the 20th of February in order to discuss this issue. Michel wrote a letter to EU leaders to remind them that further discord may lead to "serious practical and political problems which might endanger the continuation of current programmes and policies and commencement of new ones". One of the disputes associated with the forthcoming MFF is between the net contributors and net beneficiaries of EU funds. This dispute is escalated by Great Britain leaving the EU, as the country was the second largest net contributor, with a net contribution of EUR 10 billion to the EU budget (as compared with more than 17 billion when it comes to Germany). France, Italy, the Netherlands, Sweden, Austria, Denmark, Finland and Ireland are also part of the 'net contributors' group. In 2018, all other EU states were net beneficiaries, which means they received more than they contributed. Poland (with a surplus of funds received over those paid into the budget amounting to EUR 11.6 billion and Hungary (EUR 5 billion) were the biggest net beneficiaries in 2018. Albeit the interests of the beneficiaries may be divergent, they have come together in an informal group known as the "Friends of Cohesion". On 1 February they met in Portugal in order to work out a common position on European cohesion funds earmarked to support the development of the poorest regions on the continent. During its previous term the European Parliament acted in a similar manner and adopted a position according to which the cohesion policy should be maintained at a satisfactory level despite Great Britain leaving the EU and despite new obligations within the scope of the climate package for example and the EU budget for 2021–2027 should amount to 1.3 per cent of the combined gross national income (GNI) of its member states (i.e. approx. EUR 1.324 billion). The proposal set forth by the European Commission called for 1.11 per cent of EU's GNI, which would translate into EUR 1.135 billion spent over 2021–2027. When Finland was overseeing EU Council's works in the second half of 2019, a different compromise at a level of 1.07 per cent of GNI was on the table. Net contributors are postulating a reduction of spending to a level of 1 per cent of GNI. This would entail drastic cuts in cohesion funds and the common agricultural policy which make up the lion's share of EU's expenditure (all in all more than two thirds of the entire budget). On February the 6th, Mateusz Morawiecki, the Polish prime minister, spoke with Ursula von der Leyen, the President of the European Commission and Charles Michel, the President of the European Council. At a subsequent press conference, he summarised the Polish position in these words: "We are sorry to see Great Britain leave the EU. This also means that there will be less funds for future goals. However, not all new goals can be pursued at the cost of policies engrained in EU treaties – the cohesion policy, the cohesion fund – which provide means for the construction of roads, railways and bridges." However, Sebastian Kurz, the chancellor of Austria, standing on the other side of the fence (net contributor's), left no doubt as to his views on the matter. In a radio interview of 1 February he said: "Austria will veto any suggestions of a multiannual financial framework which would entail a budget of more than 1 per cent of GNI". Kurz stated that other net contributors, such as Germany, the Netherlands, Denmark and Sweden will also veto any such suggestions. And in actual fact the chancellor of Germany expressed a similar view as early as in October, stating in front of the Bundestag that revoking all the special "discounts" afforded thus far to some net contributors which the European Commission is requesting, in conjunction with Brexit will mean that even subject to budget at 1 per cent of GNI, Germany's financial burden will increase. For that reason alone Germany's net surplus when it comes to EU budget contributions may even reach EUR 30 billion in 2027. EU budget's net beneficiaries, such as Poland, Hungary and the Baltic States but also France are striving for those discounts to be revoked. Germany, Austria, the Netherlands, Denmark and Sweden would like to keep them in place. However, almost two years ago another postulate surfaced, which had the backing of the European Parliament, the Council and some net contributors such as France and Germany. The said postulate called for linking EU funds with the rule of law and became the subject of ongoing negotiations. Didier Reynders, the current European Commissioner for Justice, announced further works on the proposal to implement such a mechanism coined during the Council's previous term. On 24 January, during a conference in Brussels devoted to the rule of law in Poland, Paweł Jabłoński, the Foreign Affairs deputy minister criticised this idea sating that it is "in breach of Treaties" and "cannot constitute the basis for a budget for the next seven years". "Right from the outset of this debate, the Polish government clearly stated that it has nothing against the introduction of additional criteria which further secure the EU budget – as in our opinion the EU budget has to be secured – but the said criteria have to be unambiguously defined, accurate and may not be subject to arbitrary political interpretations" – said the deputy minister. The Hungarian government which, similar to its Polish counterpart, is currently subject to Article 7 of the Treaty on European Union proceedings, openly said that it will not agree to multiannual financial frameworks burdened with a mechanism which links payment of funds with an assessment of the rule of law in a given country. As such a mechanism could be open to abuse and it puts the net beneficiaries on a unequal footing relative to net contributors. Perhaps unintentionally, but still most succinctly this was voiced by the president of France during his lecture on Poland and France in Europe given on 4 February at the Jagiellonian University: "And don't you believe it if someone tells you that Europe will give you money and still leave you with complete political autonomy".

Věra Jourová, the European Commissioner for Justice, Consumers and Gender Equality was the first member of the Juncker Commission who, in early 2018, began talking openly about a need to put in place a special mechanism to link EU funds and the rule of law. Currently she is the Vice President of the European Commission for Values and Transparency – whatever that may mean. The idea of linking EU funds with the rule of law came from the conviction that Article 7 proceedings triggered against Poland seeking to find "an acute risk of a serious breach to the values set forth in Article 2 by a member state" had little chance of success. In early 2019, whilst running for the position of President of the European Commission, Germany's Manfred Weber, leader of the EPL in the European Parliament stated that triggering Article 7 proceedings against Poland and Hungary sends a staunch signal to other countries, but that an instrument is required which could be used to impose penalties on member states without the need for unanimous approval from the European Council. Ursula von der Leyen, the current President of the EC, repeatedly voiced support for such a mechanism. In April of last year the European Parliament gave the go-ahead for the creation of such a mechanism, by adopting a legislative resolution pertaining to a Regulation of the European Parliament and of the Council "on the protection of the Union's budget in case of generalised deficiencies as regards the rule of law in the Member States". Therefore it is the Council (or member states) which should voice its opinions on this matter. In a form as adopted during the EP's previous term, the draft resolution prescribes that the European Commission could be the one to put forward a suggestion for a given country to be cut off from funds the EC decides that the actions of that country endanger the independence of the judiciary and the rule of law in a general sense. For that purpose the Commission would appoint a special group of "independent experts" whose job it would be to pinpoint deficiencies within the scope of rule of law in a given country. On top of that, in a text adopted by the European Parliament, rule of law is defined in such a general manner, that the European Commission could in principle interfere within all area of a country's activity, without having to adhere to the very strict terms for imposing a penalty on another country as set forth in Article 7 the Treaty on European Union. Such a mechanism would neither be in accordance with the letter nor the spirit of European treaties and would be a surefire way to a rapid disintegration of the EU due to ever escalating conflicts sparked off by the actions of the Commission and CJEU. Thus it is not figures which constitute the biggest challenge in negotiations on EU's multiannual financial frameworks for 2021–2027, but the spectacularly dangerous postulate of linking funds with alleged failures to observe the rule of law. Who would benefit from that? Whereas back to the figures, we are only talking about flows to and out of the EU budget. However, one must not forget that the overall issue of financial flows is somewhat different. Thomas Piketty, a French economist, accurately calculated net financial flows from former communist countries into Western Europe – in the form of dividends and profits generated by West European businesses operating within former Soviet Bloc markets – and it turns out these are far larger than the surplus EU funds received by those countries. Whereas taking Poland as an example, between 2010 and 2016, the average surplus of EU funds it received amounted to 2.7 per cent of the Polish GDP and the outflow of money associated with investments made by West European companies was 4.7 per cent of GDP. For Hungary the corresponding figures were 4 and 7.2 per cent. Thus the cohesion policy may be understood similar to the understanding expressed within the scope of the Politico website by Clotilde Armand, a Romanian MEP, as a partial compensation for opening up the markets to West European corporations who purchased national assets after the fall of communism. And this is yet another reason, , summarised in the following words, for why EU budget net beneficiaries should not give in to blackmail: "And don't you believe it if someone tells you that Europe will give you money and still leave you with complete political autonomy". Nobody is doing anyone any favours here.

Olivier Bault 

Article published in DoRzeczy 9/362 and translated from polish