If it is serious about fighting cronyism, the EU could cut its spending

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The run-up to today’s EU Summit has been marked by yet another confrontation between Hungary and Western European EU member states, over a new Hungarian law banning ‘displaying or promoting” homosexuality to people under 18. Western EU leaders will attempt to convince Hungarian PM Viktor Orbán (picture) to amend the legislation.

It should be noted that a statement by 14 EU member states condemning the new law laid bare the “East-West” divide in the EU:

These divisions did not stop the European Commission from threatening to drag Hungary before the European Court of Justice, unless the legislation which the Commission considers to be discriminatory, is amended.

According to EU Commission President Ursula von der Leyen, “this bill clearly discriminates against people based on their sexual orientation,” adding “it goes against the fundamental values of the European Union: human dignity, equality and respect for human rights.”

The Commission asserts that the legislation violates the EU’s Charter on Fundamental Rights, EU rules covering audio visual and media matters, and EU rules governing the provision of services in the single market. It also alleges that the legislation puts homosexuality and trans gender issues “on the same footing as pornography and are considered as capable of exerting a negative influence on the physical and moral development of minors”.

The Hungarian government has defended itself, arguing that the bill is really designed to “protect the rights of children, guarantee the rights of parents and does not apply to the sexual orientation rights of those over 18 years of age, so it does not contain any discriminatory elements”. It is also making the case that the bill actually serves to protect article 14 (3) of the EU fundamental rights charter, which provides that “the right of parents to ensure the education and teaching of their children in conformity with their religious, philosophical and pedagogical convictions shall be respected.”

The EU’s long-running concern over the rule of law in Hungary

In the past, the EU has launched a formal legal investigation of Orban’s government for undermining the rule of law, under its so-called “article 7” procedure, which enables to suspend some of its rights as an EU member state. The same procedure has been launched against Poland, but because unanimity is required, it all comes to nothing.

Whether Hungary’s legislation actually violates the EU fundamental rights charter is a matter for the European Court of Justice to decide.

Fundamentally, however, there is a problematic rule of law situation in Hungary, which is described in numerous international reports. According to the OSCE, elections run in 2014 and 2018 according to new legislation introduced by Orban’s party were “free but not fair”. The Venice Commission in 2019, has complained that “laws on administrative courts lack effective checks and balances in government”.

In particular, reduced media freedom is seen as problematic. According to Eurasia Group, “a number of independent & investigative websites exist, but the vast majority of print, TV & radio media are now under direct or indirect government control, supported by state-owned company advertising.” According to Reporters Without Borders (RSF), “the emergency “coronavirus law”, among other things, allows [the Hungarian state] to punish the publication of fake news with a five-year prison sentence. The executive itself decides in the first instance whether a report is true or false. In this way the law allows the government to exercise direct control over media outlets, making them unable to keep the public informed as they should.”

Ironically, this kind of tough approach to “fake news” is something many Western-European left-of-center types have been advocating for.

Not just in Hungary

An important thing to remember here is that the situation is not all that different in the other Central and Eastern European countries. Similar problems of cronyism and executive control of the judiciary can be witnessed in Poland, Romania, Bulgaria and frankly all across the former Warsaw pact states, perhaps with the exception of the Baltic states. Only last month, Czech investigators recommended that the prime minister, Andrej Babiš, is indicted over alleged fraud with EU funds flowing to his business Agrofert – controlled by him through trust funds – which received 1.5 billion euro in EU funds in 2019, making it the largest Czech recipient. Also the newly created “EU  Prosecutor” is investigating.

It is not as if Hungary or its Central and Eastern European neighbours started from a perfect level. In Central and Eastern Europe’s Soviet client states, the independence of the judiciary had been non-existent for years. In effect, removing “judges from the Communist era” has served as the excuse of the executive to crack down on the judiciary’s independence. Opinion polling twenty years ago in Central and Eastern Europe concluded that “between 13 and 29 percent of the people in ECE countries would support a dictatorship”.

Whereas in Central Europe – Poland, Hungary, Czechia and Slovakia – a big transition has taken place, this was much less the case in places like Romania, where the former secret service, the feared Securitate network has consistently kept its influence, or Bulgaria, where the beleaguered Prime Minister Boiko Borisov, used to serve as the body guard of the last Communist dictator Todor Zhivkov. Despite all evidence, the European People’s Party still keeps Borisov, who has just faced a massive electoral defeat, following anti-corruption protests, on board.

To recognize how deep-seated rule of law deficiencies are, is important in order to change things for the better.

“Culture wars” and Euroscepticism as a means to deflect attention

A complication is that Victor Orban’s model combines undermining the rule of law with legitimate criticism of EU overreach, like EU mandatory migration quotas, but also of “woke” fanaticism in the West, like the phenomenon of “taking the knee” in sports, something which is not a neutral gesture to oppose racism, but instead refers to the “Black Lives Matter movement”, which is carrying an ideology that is at best outspoken leftwing – critical of family values and the police – and at worst identitarian itself.

However, according to Hungarian MEP Katalin Cseh, who’s with Renew Europe, “Orban’s culture wars (however cruel) are only the means, kleptocracy is the ultimate end”:

This really touches upon the heart of the matter. At the end of the day, the likes of Orban have done hardly anything to stop EU centralisation, as they are more than eager to receive even more EU cash. As Cseh points out, however: EU funding does not only fuel cronyism in member states with institutions that are more vulnerable to corruption, it also encourages these kind of culture wars as a means for the likes of Orban to build a base of support, both inside and outside of Hungary.

Euroscepticism is also a great way to fend off allegations of misuse of EU funds. In response to this, Czech PM Babis stated that “no one from abroad will horn in on our affairs” and “We don’t want the European Parliament, green fanatics, to manage our country”. Somehow, this welcome critical attitude towards EU overextension has been completely absent in his government’s overall EU policy, since Babis in 2017. His party is also a member of the EU-federalist Renew Europe Group in the EP.

For the EU, it is hard to do much, let alone excluding Hungary as a member state

Despite the corrupting effect of EU funds, EU membership has definitely been a good thing for Central and Eastern Europe. The prospect of it may have helped to prevent civil war after the collapse of the Soviet Union. The EU’s single market has definitely helped to lift up the economies of these countries. True, there is the issue of brain drain, but this was probably hard to avoid even in the absence of EU membership. The one thing the European Union should have avoided is to transfer vast resources to governments vulnerable to cronyism and corruption.

At the end of the day, there is nothing wrong with democracies in the EU opting for a more rightwing or a more leftwing approach to things, as long as fundamental rights and freedoms are preserved. In cases where this is in doubt, as for example in the case of the Hungarian legislation, an independent court will need to settle the matter. If the ECJ decides that the legislation is incompatible with EU membership, EU leaders will need to act upon that. The only trouble is that it is legally not possible to exclude an EU member state, whatever Dutch PM Mark Rutte may say, as he just threatened Hungary with expulsion:

Furthermore, it is also diplomatic science fiction for EU leaders to single out and condemn one of their own, and certainly when the likes of Hungary enjoy support among other Central and Eastern European member states. The truth is that ultimately, there is nothing really the EU or other EU member states can do against the erosion of the rule of law, apart from one thing: not fueling it.

How EU funds have been fueling cronyism

The NY Times has documented how Orban’s close circles have profited from EU cash, as “he uses European subsidies as a patronage system that enriches his friends and family, protects his political interests and punishes his rivals.” Orban’s son-in-law reportedly received 600,000 € EU funds for his agribusiness. According to Hungarian MEP Katalin Cseh, “he has a proven record of fraudulent applications, concluded by EU’s own investigators.” She also recalled that “the wife and son of Fidesz MP Sandor Kovacs won 170,000 € of EU aid for ‘tourism’ developments on his own property. Reporters found no showroom open to the public.” adding that “without exaggeration, there are cases like this every other week. This is the face the EU is showing to my constituents— that it’s a cash machine for well-connected local oligarchs, who are posing as feudal lords, above the law.”

According to the Hungarian socialists that are in the opposition against Orban, “the money drives the whole system…Two-thirds of GDP growth comes from EU funds. Pull that money, and Fidesz would collapse.”

Just to put into perspective how terrible the situation already is today:  Between 2014 and 2018, Hungary – but also Bulgaria – absorbed more in net EU transfers than their economy grew by. Where did all that money go?

The EU’s “rule of law mechanism” is unlikely to solve much

In response, the EU decided to agree a “rule of law mechanism” last year, which is supposed to allow withholding EU cash for the likes of Hungary in cases of misspending or corruption. One must be skeptical that EU leaders will ever dare to pull the diplomatic trigger and selectively withhold EU cash, after condemning one of their own as “undemocratic” or “corrupt”. That is simply not how diplomacy at the EU level or elsewhere works, and rightly so. The right thing to do instead would be to cut EU funds for everyone. An indication is how the activation of the mechanism was kicked in the long grass at least until after the 2022 Hungarian elections.

It is simply defying belief that just when EU leaders agreed an imperfect and questionable mechanism to cope with misuse of EU funds, which indicates they are aware of the dangers of large EU transfers, last year, they also agreed the “EU recovery fund” as well. This amounts to an extra 800 billion euro on top of the regular 1.100bn euro multiannual EU budget.

The only opposition against the EU “recovery fund” was coming from the so-called “frugal four” group of EU member states, before the agreement among EU leaders. Afterwards, it really only struggled in the Finnish Parliament, where a two thirds majority hurdle was only narrowly overcome.

Not just in Central and Eastern Europe

This is not to say that EU funds flowing to Southern Europe haven’t been unproblematic. On the contrary, also there, EU spending has a bad track record, and also there, the signs of the EU recovery money not ending up where it belongs are abound. In Italy, organized crime would already have been “choosing the companies that are best-placed to take part in recovery fund tenders, especially in the health and infrastructure sectors where a great deal of money will be spent”, according to Italy’s top investigator on organized crime.

This is also not to say that Northern European EU member states are places where the rule of law is solid and guaranteed. In Belgium, political appointments are rife in the justice system – even if judges can be said to be independent after having been appointed. And let’s not wade into how the government behaved during the Covid crisis.


In the end, there is every indication that EU recovery fund cash will be as poorly spent as regular EU spending and that it will fuel cronyism. Just like regular stimulus, it is unlikely to do much to boost economic growth, as it will instead prop up cash-strapped governments, thereby disincentivising them to embark on competitiveness reform needed to generate fiscal revenue. Last but not least, more cronyism, more scandals with EU money and more lackluster economic performance of EU member states that are net receivers of these transfers are bound to fuel more Euroscepticism.

In sum, the European Union and its lavish funding has played an important role in sustaining and promoting cronyism in Central and Eastern Europe, not just in Hungary. You’d expect supporters of the EU to therefore realise that scrapping overall EU spending is the way forward, as it will appear diplomatically impossible to only scrap selectively, but instead most supporters of the EU fail to see the link with the EU recovery fund and cronyism. Hungarian MEP Cseh seems to have set her hopes on the European Parliament taking the European Commission to Court “for its failure to apply EU law and take action against rampant corruption.” We can only hope that when she concludes that this strategy will fail, there is only one option left to do: scrap most EU spending, starting with the recovery fund. The EU doesn’t have much influence over cronyism in its member states, but to cut EU spending is at least one way.