The Brief – Follow the money… back to the values

The Brief is EURACTIV's evening newsletter

Money disputes are always the bitterest ones in families. The European clan is no different. But the battle that is looming in the union will be like nothing seen before.

It will begin on Wednesday, when the European Commission unveils its proposal for the EU’s long-term budget for 2020-2027. Nobody will be happy with the next multiannual financial framework (MFF).

Some countries will complain because they have to contribute more, others because their paybacks will be scrapped. Some governments will protest because their farm subsidies or funds for infrastructure projects will be cut, others because the overall figure will fall short of what is needed to deal with new challenges and priorities.

No country will feel the pain of the first post-Brexit budget as much as Poland and Hungary, the troublemakers of the bloc. As expected, the Commission will link payments with the rule of law. But as sources familiar with the proposal told EURACTIV, the aim is not to punish countries for breaching European values but to ensure “sound financial management” of EU resources.

The Commission wants to guarantee that money is spent as agreed. But the executive is not interested in going behind single cases of potential misuse or corruption, but to follow the money back to a system where judges and auditors cannot guarantee that the EU funds are properly spent, or amend the situation in case of misbehaviour.

In other words, the respect for the rule of law is an “essential precondition” to achieve sound financial management, the sources explain.

So we are back to the same result (punishing countries breaching the rule of law) through different ways. The trick is that the legal basis will not be Article 7, which requires the unanimity of member states to activate the ‘nuclear option’ of suspending the voting rights of countries breaching the Union’s fundamental values.

Instead, the executive have found legal grounds in the rules on financial management (Article 322), and copied the reverse qualified majority voting introduced to punish profligate governments in the aftermath of the crisis.

As a result, countries whose judiciary system is under the spotlight could see their EU funding frozen unless a qualified majority of member states overturns it. It looks quite unlikely that Budapest or Warsaw would drum up enough support today.

Their misery would not end there. Even if their EU money is put on hold, the punished member states would have to continue co-financing their share of the projects. As officials explained, the rationale is that Brussels does not want to punish farmers or researchers for their authorities’ mistakes.

The Commission will count with a new ally in its crusade: the new European Public Prosecutor. Once the new office is up and running, its main purpose will be to protect the Union’s financial interests. So he would gather evidence for the Commission to apply the new conditions.

However, neither Poland nor Hungary are part of the 20 countries that set up the new body through enhanced cooperation.

The Commission will argue on Wednesday that the new regulation does not intend to single out any country as it will apply across the board. And it will insist that it is not about protecting values but taxpayers’ money.

But the legal arguments and the communication strategy will hardly prevent a political backlash from Hungary’s Viktor Orban or Poland’s Mateusz Morawiecki.

The MFF draft proposal will only mark the start of a process that could take more than a year and a half to settle.

As in any other negotiation, there will be give and take. But it is hard to imagine where compromise lies unless the critics introduce enough safeguards to make the new conditionality inoperative. That would be a high price to pay to get their vote to approve the MFF.

The Roundup

By Alexandra Brzozowski

Despite recent disagreement over visions for the future of Europe, Germany and France have pledged to deliver a joint proposal to reform the eurozone in time for a leaders summit in June.

France, Germany and Britain – the EU’s largest economies – join forces and argue that the EU ‘must be ready to react’ when it comes to US trade tariffs that could be imposed upon the bloc.

With naval power Britain at the EU’s exit door, Spain has gone on the offensive and dallies over being the next major player defending European shores in post-Brexit Europe.

Days before local elections, Britain’s interior minister Amber Rudd has resigned over a controversial immigration policy – another bitter blow to Prime Minister Theresa May.

After two weeks of mass protests that have transformed Armenia’s political landscape, opposition leader Nikol Pashinyan was formally nominated for the post of prime minister by his supporters, but the story is far from over.

Poland and Hungary are the only two EU countries that have not accepted any refugees under the EU relocation and resettlement programme. Read here how a new project tries to overcome fears and stereotypes.

A recent poll shows that most Swiss support the government’s plan to forge a new treaty with the European Union that would introduce arbitration panels to help settle disputes.

Parliament slams the brakes on the Commission’s proposal for an overhaul of regional funding, after its regional affairs committee decided to hold an extensive hearing on the matter.

Ireland has decided to increase its crop-based biofuel transport share to provide ‘business certainty’ in the field.

The company Simplon shows that coding can be a tool for social inclusion, as it trains long-term job seekers free of charge and employees retraining to become web developers.

French President Emmanuel Macron’s ambitious plans for an EU digital tax targeting US tech giants such as Google or Facebook has faced strong headwinds.

Look out for…

Labour Day, the annual holiday to celebrate the achievements of workers, which means the Brief takes a one-day break. It will be back on Wednesday, when Brussels begins its big battle on the first long-term post-Brexit budget.

Views are the author‘s

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