Last Thursday, EU leaders unblocked the €1.8 trillion budget and the Recovery Fund after reaching a compromise with Hungary and Poland on how to link European funds to respect for the rule of law. The agreement came after intense negotiations in recent weeks, with the aim of lifting the veto of Budapest and Warsaw, which saw the new mechanism, already agreed by the European Parliament and 25 Member States, as a means of waging political wars against them. The bloc has threatened to derail the next seven-year budget aimed at mitigating the economic consequences of the pandemic.

EU leaders meeting in Brussels agreed in the summit conclusions that rule of law conditionality will only be used for the budget from next year and for the Recovery Fund, not for payments made from the current budget. The use of the new instrument is likely to be delayed, as European leaders have agreed that any sanctions process could only start after approval by the EU Court of Justice.

The governments of Warsaw and Budapest, however, wanted to avoid any link between EU funds and the link to fundamental values. The conditionality of the rule of law will most likely not be implemented for at least several months, having to be given the green light by the Court of Justice. Economists and business groups from both countries had implored governments not to use a veto, and there was a risk that 25 European countries would work on a separate recovery package without Hungary and Poland.

Both the Polish and Hungarian governments claim that the EU’s concerns about the rule of law are in fact an attack on political differences, despite human rights groups claiming that there are well-documented cases of violations in both countries. Over the past decade, Orbán has boasted of creating an “illiberal democracy” and faced accusations of clientelism and corruption. Poland’s Law and Justice (PiS) party has only been in power for five years, but during this time it has undermined the independence of the judiciary and women’s rights. Opposition forces in both Poland and Hungary are likely to discuss in the coming days whether the rule of law compromise is a victory or a defeat for the two governments. Some focused on the positives, while others felt let down by the German EU Presidency for accepting the compromise. “Today’s agreement is a political decision to pass the budget and, unfortunately, the rule of law mechanism has been sacrificed. Now it is almost toothless,” was the joint statement by Hungarian citizens’ organization AHang and Polish citizens’ movement Akcja Demokracja, which had previously called on the EU to stand firm in the decision.