The issue regarding “the rule of law” is a godsend to the so-called Frugal Five (headed by Austria and the Netherlands) as it can be used to blackmail the EU East, which no one in the West or the South will cry and mourn for, and at the same time introduce a mechanism into the logic of the EU’s functioning, which in the future can also be used to discipline the “EU funds grabbing” countries of the South (I have not said yet that these funds are due to them, as the Dutch have been getting richer for years not only as a result of their work, but also at the expense of the Spanish and Italians due to structural flaws in the Eurozone).
Tomorrow in Brussels, the European Council summit will decide (or not) about the fate of the new EU budget (Multiannual Financial Framework, MFF) and the Recovery and Resilience Facility (RRF), part of the comprehensive Next Generation EU (NGEU). I have written “decide or not” as there is a million dollars for whoever can predict the final outcome of the ongoing negotiations. In normal times, we would probably say that sooner or later the leaders of European countries will reach an agreement. But times are not normal, and have not been for at least a decade. Therefore, today it is only possible to construct different scenarios and estimate probability of their occurrence.
Three apparently marginal but key contexts of the entire matter
However, before we start to analyse possible scenarios, we need to make some preliminary, though serious, observations, without which any attempt to analyse what is happening currently on the EU stage is doomed to failure. Observations which, unfortunately, very often we lose sight of in the public debate, and which in consequence lead to stories in media that have little in common with the reality.
Let’s start with the most trivial possible observation ‒ the modern world is an extremely complex reality. As Prof. Kołodko enjoys “many things happen as they do, as many things happen at once”. The COVID-19 pandemic has radically accelerated many processes that we have been witnessing for at least several years.
From the perspective of forecasting the EU future, a revision of globalization is of key importance. Globalization as we are familiar with started with the liberalization of international trade, and today, due to customs wars and the emergence of strong regional trade blocs and the weakening of the World Trade Organization (WTO), we are now witness to some stage of globalization coming to an end. It is possible that we will face the regionalization of globalization – some sort of globalization 2.0, which brings both opportunities and challenges for the world and Europe.
For obvious reasons, this is not indifferent to the fate of the EU, in particular for Germany, which has built its current economic power on the foundation of multilateralism and free trade. Anyone who thinks that with the end of the Trump era in international politics we will return to the point before it, will be deeply disappointed.
Certainly, German political leaders, whose perspective goes far beyond the European backyard, have no illusions. It has very important consequences for the assessment of actions undertaken by Berlin. As contrary to the opinion of some Polish politicians and experts from both sides of the barricade of the political dispute, the role played by our country in the German foreign policy is not as special as they believe.
Nota bene, France will probably play a less and less important role. As recently as a year ago, it seemed that President Emmanuel Macron would bring about a German-French balance ‒ as he had managed to achieve several spectacular diplomatic victories over Berlin, which resulted in an unprecedented in recent decades increase in tensions between France and Germany. However, the pandemic literally wiped out Paris from the first deck of the Community, and the strategic ambitions of the French president, voiced from time to time in other high-profile interviews (the last one was published on November 12th in Le Grand Continent), are more embarrassing than intriguing (and I am writing this not from the perspective of Warsaw but Berlin).
In this context, it is hardly surprising that the German political elite stopped looking at and worrying about (even in a purely symbolic way) the President Macron’s postulate to build a European strategic autonomy and went on to send signals to Washington about the need to rebuild the transatlantic partnership, which assumed i.a. taking advantage of the US nuclear deterrence potential.
The second preliminary observation concerns the growing tensions and divisions between the North and the South within the EU itself. This process has been growing for several years, and was triggered by the introduction of the euro currency in 2002 and the EU enlargement two years later. It was then that the stream of investments (along with industry) moved from the South to the East of Europe, and the companies in Mediterranean basin countries gradually began to lose their competitiveness due to the process of “communitising” the currency. The crisis of 2008 only accelerated this process, and the western European political elite, while trying to save its skin from the growing populist movements, directed reluctance of its societies towards the new member states, which had taken away and stolen their prosperity.
As a result, even before the Law and Justice government took power in Poland, our region had begun to be pushed away from the main European table. The marginal role played by Central European states during the July EU summit is therefore not only credited to Jarosław Kaczyński or Viktor Orbán, but to the much longer-lasting processes which I tried to draw attention to in the analysis summarizing the results of the recent EU negotiations on MFF and RRF.
The third observation concerns Poland itself. We are the fifth largest country (in terms of the population size) and the sixth largest economy (in terms of GDP) in the EU. Moreover, even if only unofficially, Poland is regarded in the EU as a country representing the opinion and stance of our part of Europe. In practice it is only slightly more than 10% of the EU’s GDP and 20% of the EU population, but at the same time as many as 11 countries, which is not without significance in the context of the voting system in the EU Council, although we are not given any direct chance to block any decision in the majority vote (there at least 13 countries or at least 35% of Community citizens are required). Nevertheless, solidarity-based cooperation of the whole region poses potential challenges for the “old” member states.
Therefore, even if they treat us as the second category of member states, and sometimes even as an unnecessary burden, theoretically we have a non-zero chance to try to influence the shape of the process of European integration and increase the transaction cost for the West. Theoretically, because Warsaw, by entering into the pointless dispute with Brussels over the reform of the system of justice, effectively deprived itself of this influence and let Poland be blamed for taking away our place at the decision-making table. At the same time, the “good change camp” gave the countries of the North a perfect excuse to create a mechanism that will make it possible to block not only us but also the poorer South.
A foreground fight: the North vs. the South
Bearing in mind those three observations outlined above, we can now try to understand what we really are witness of. We must make it clear ‒ all this confusion is not about Warsaw or Budapest at all, even though the eyes of the entire European public opinion are now focused mainly in this direction. So what is it all about? Countries of the North defined today as the so-called Frugal Four/Five, on the one hand the largest beneficiaries of the single currency (especially the Netherlands and Austria), and on the other hand the largest net contributors to the EU budget, have been searching for a way to reduce the EU budget for a long time by introducing some conditionality principles.
The issue of “the rule of law” has been a godsend to them, as it can be used to blackmail the EU East, which no one in the West or the South will cry and mourn for, and at the same time introduce a mechanism into the logic of the EU’s functioning, which in the future can also be used to discipline the “EU funds grabbing” countries of the South (I have not said yet that these funds are due to them, as the Dutch have been getting richer for years not only as a result of their work, but also at the expense of the Spanish and Italians due to structural flaws in the Eurozone).
In this sense, abandoning the unanimity principle in favour of a qualified majority in the process of imposing penalties on member states is a milestone in the process of European integration ‒ so far it has been almost impossible to “punish” one state. It is now becoming relatively simple.
It is enough to convince a few countries of the South that without punishing Warsaw or Budapest, there is no chance of launching RRF or more funds of MFF, and in a few months to convince Poland and Hungary that they could get some money if they vote against Rome or Madrid.
It sounds trivial, but I am not the only one who noticed that the countries of the North are the only winners of the July summit, as they have set a very clever trap thanks to which it is possible to block the entire Community in a safe manner. Safe, because Germany, as a country of the North and the biggest beneficiary of the eurozone, will make every effort to build a blocking minority in the EU Council in any case against the remaining countries of the North (and with over 80 million citizens and financial resources to “convince” the smallest member states it does not seem to be unachievable). It also applies to RRF itself, as the National Reconstruction Plans, i.e. the basis for mobilising funds, are to be approved not by the Commission, but the EU Council, and also by a qualified majority.
However, the following must be clearly stated, regardless of the Polish context. The introduction of the “punishment” logic will be a bomb planted into the entire process of European integration, as it can trigger real “animal instincts” among the member states. There is no doubt for me that this mechanism will not be purely hypothetical ‒ the countries of the North had put so much effort into its development not in order not to take advantage of it now. If it is possible to launch it successfully, it will be a matter of weeks to test it in practice.
By the way, there is one more reason why the rule of law, and more specifically the issue of respecting the EU values under Art. 2 of the Treaty on European Union, enshrined in the Charter of Fundamental Rights, is regarded by the countries of the North as a godsend. Taking account of the dominant world view of the European public opinion, which is also expressed in the European Parliament, all the odium related to the introduction of this mechanism, dangerous from the perspective of the future of the EU, will fall on these poor people from the East.
Even moderate German politicians, who are aware of the risks associated with the introduction of this principle, are unable to put themselves in the role of a trusted intermediary (ehrlicher Makler), traditional for German foreign policy, between the divided and feuding parties. And Amsterdam is currently using it in a brutal manner ‒ by passing the ultimatum “either the rule of law or the Dutch veto” in the Dutch parliament, Prime Minister Mark Rutte has further narrowed the, already scarce, room for manoeuvre for the German EU presidency.
Anyway, the Polish or Hungarian veto is extremely beneficial from the perspective of Amsterdam (but also Vienna) ‒ as by using Warsaw and Budapest it will be possible to derail and bury the entire RRF project, which the Dutch were reluctant to from the very beginning. From the point of view of the countries of the North, it is a win-win situation ‒ RRF may not be launched at all, and even if it is, it will be (just like MFF) linked to such rules that will enable its effective reduction in the future.
This whole confusion is not suitable for Germany
However, let’s come back to the German EU presidency. Contrary to the opinions prevailing in Poland, Berlin really wants to find an agreement ‒ still this year. There are at least three reasons for this thesis. Firstly, unlike other Western countries, Germany benefits greatly from the economic cooperation with the countries of Central Europe. Even if mutual trade relations are practically independent of the strained and cold political relations (last year we took the fifth place in the ranking of Germany’s trading partners), then pushing Poland or Hungary out of the first circle of European integration (e.g. by restricting access to structural funds or the internal market) would be a serious problem for Berlin.
Secondly, Germany is aware that consent to this mechanism will undermine and threaten the entire Community, not only in the East, but also in the South, and the stability of the EU is the national interest of Germany.
I am aware that Berlin may try to play this entire confusion tactically in order to weaken the United Right’s government in Poland which, as a result of the autumn wave of pandemic and women’s strikes, has found itself in a very difficult position, but I cannot quite believe that the crisis around “the rule of law” regulation was provoked by Germans themselves. What is more, its adoption in its current shape will politically strengthen the European Parliament, which Germany has a very strong position in, but is not particularly delighted with the prospect of further strengthening this institution.
Thirdly, failure to reach an agreement will prove that Berlin is not able to put things right in the European backyard, and it is significant at the time when we are to enter into talks about a new transatlantic partnership, where the EU under the German leadership is to play a slightly more assertive role than before. Anyway, the necessity to save what Berlin managed to put together with great difficulty during the July European Council summit takes time and distracts attention from other important processes, including, i.a. finalizing talks on Brexit or the revision of the global trade order we are now witnessing. Moreover, a possible failure on “the budgetary and rule of law” or Brexit front may seriously damage the global negotiating position of Germany.
Noteworthy is the fact that failure to reach an agreement means de facto that it is needed to restart negotiations on RRF, already in the intergovernmental formula among 25 member states. In case of RRF – much more difficult negotiations will be required contrary to for example the European Stability Mechanism which operates on the basis of such an agreement, because the signatory states of this new agreement will have to appear before a third party in the form of financial market institutions no longer as one entity (in practice the European Commission), but 25 entities.
Moreover, under a possible agreement, the debt will have to be incurred by individual member states, and not by the entire EU as an entity recognised by international law, which in turn, will de facto prevent the repayment of liabilities from the Community’s own revenues, e.g. from the so-called plastic tax which enters into force in 2021, or the planned in the near future: digital tax and the Carbon Border Adjustment mechanism, which was to some extent an argument that made it possible to obtain the approval of “the Frugal Five”. These countries, as net payers, did not want to guarantee the repayment of joint liabilities only with future membership fees.
As a consequence, a solution in the form of an agreement between 25 member states does not in practice differ much from the so-called coronabonds that were the subject matter of the intense negotiations in the spring 2020 and which the countries of the North strongly opposed. Noteworthy: unsuccessful negotiations. However, it means that with the rejection of RRF, the fun begins as if from the beginning, and we are opening a new Pandora’s box with all the conflicts which have accompanied us in recent months and which we managed to somehow patch up with the conclusions of the European Council in July. In practice it is said that such a new agreement can be completed within a few weeks, but in my opinion, in the light of the arguments presented above, they are a symptom of completely irrational optimism. Berlin seems to be aware of this, and that is why it will do its utmost to bring the divided and feuding parties to an agreement in Brussels today and tomorrow (or in the following days, if the summit takes longer).
Poland ‒ is “the rule of law mechanism” detrimental only to Law and Justice or to the Polish national interest per se?
The point is that finding such an agreement this year will be extremely difficult, and not only because of the pressure exerted by the Frugal Five headed by the Netherlands or the European Parliament, but also due to Warsaw and Budapest. People who have made it to this point may have the impression that the whole argument above is like putting the cart before the horse, and an attempt to take responsibility from the Polish authorities for the crisis. There is no doubt for me that a firmer stance has been taken with regard to the Polish position due to the games played within the United Right’s government.
The only compromise the Polish government could agree to would be to remove the reference to Art. 2 TEU and to leave the conditionality principle based on the identified violations in the spending of European funds. However, there is no such proposal on the table ‒ despite the efforts of the German EU presidency, it was not possible to delete this provision, and the European Parliament will be extremely consistent in this matter. So what is in the focus? Only the introduction of an additional period of reflection in the European Council (probably no later than the end of 2022) and the removal of the provision on “the risk of violation”, and not only the violation of the rule of law.
The second option may satisfy Prime Minister Orbán, who does not have great problems with the rule of law itself, as changes in Hungary take place at least formally pursuant to the force of local law. For Orbán, the accusations and charges of corruption presented by OLAF, the EU agency, are a bigger problem, but here the new regulation does not change much. However, it is difficult to suppose that the aforementioned permits would satisfy not only Zbigniew Ziobro, but also the president of Law and Justice, similarly to the introduction of further delays to the procedure or some political declarations limiting the material scope of understanding the concept of the rule of law.
There is also one more thing that, for some unknown reasons, is not raised, namely the timeframe and financial limits to the possibility of spending European funds. The penalty may well be a complete withdrawal of EU funds from the entire MFF, as well as a suspension of the payment of, e.g., 10% of funds for a given year. Certainly, the latter would be also painful, but incomparably less than a loss of the entire negotiated sum. However, given the negotiating mandate that Prime Minister Morawiecki has at his disposal, considerations about the level of the imposed penalty are not, in practice, a potential area of compromise, as a penalty is always a penalty.
Here it is worth asking whether the Polish objection in this form makes any sense? Is this new regulation really so dangerous for Poland? It seems to me that the answer to this question is by no means unequivocal ‒ also for many opponents of the current government. There is no doubt that with the change of government in Poland, the dispute over the rule of law will be composed as I cannot quite imagine that power in our country will remain in the hands of any group that accepts the shape of the changes introduced in recent years in the system of justice. However, the inclusion of the EU values from the Charter of Fundamental Rights in “the rule of law” mechanism causes more serious and persistent problems from Poland’s perspective. It seems that despite the dramatically fast-paced secularization, there will be no general consent to same-sex marriages adopting children within next 10 years along the Vistula River.
Why am I writing about this? As recently, EU Commissioner Věra Jourová responsible for the Rule of Law announced an LGBT strategy, according to which the Commission will take all possible steps to achieve universal recognition of parental rights for children brought up in same-sex relationships. I do not really believe that the majority of Polish people will change their views on this matter within such a short time frame. This in turn means that it will be possible to accuse the Polish state of violating values enshrined in the Charter of Fundamental Rights in its official interpretation.
If it turns out that some organization in Poland fighting for the right to adopt children by same-sex couples, obtains a negative decision on co-financing the project from the European funds, it may initiate the procedure provided for in the EU regulation. As US Ambassador to Poland in Warsaw, Georgette Mosbacher, concluded precisely, Poles (and probably other more traditional societies in our part of Europe) are on the wrong side of history. Importantly, not only are progressive movements on the other side, but also technological giants for whom LGBT communities are an important and wealthy customer. This in turn means that with the launch of such a mechanism, the riders of the digital Apocalypse will invade Poland and other more traditional EU countries. You play you lose.
Anyway, even if someone considers that I have a homophobic obsession, let it be noted that also in other areas, the possibility of interpreting the values from the Charter of Fundamental Rights is so wide and susceptible to political interpretation that almost every reform (education, pension, health, etc.) in every peripheral country in the EU’s East or South, may be targeted for any reason if there is such a political will. And as I have indicated before, such a will already exists. This in turn means that the fight against the current wording of the regulation is not only a fight to defend the interests of the United Right, but also, however lofty it may sound, to defend the cohesion of the entire Community. Unfortunately, in the light of the procedure under Art. 7 TEU, our opposition can be easily reduced to the first dimension only. It could be even claimed that, even without the decision of the EU Council, we in a sense have taken away our own voting right.
Three scenarios for the following months
In the introduction to this article I have claimed that its purpose is to outline possible scenarios of the situation. Taking the above considerations into account, it can be certainly stated that the regulation introducing the EU spending conditionality linked to the compliance with the principles of the rule of law enshrined in Art. 2 TEU, irrespective of the Polish or Hungarian consent, will come into force sooner or later. It can be assumed as well that immediately after its introduction, a procedure targeted at Poland regarding suspending payments will be launched. Basically, this is all we know. The rest is a matter of scenarios and probability.
Let’s assume that in the first scenario Poland exercises a veto to MFF and RRF. From January 1st, 2021, we have a provisional budget which is less beneficial for Poland, as it limits the possibility of spending funds from some programs. At the same time, the remaining member states vote in the EU Council in favour of the rule of law mechanism and launch it against Poland. The chances of its implementation are relatively high, given the fury of the countries of the South for blocking RRF.
Disbursement of European funds for Poland is relatively quickly suspended, and thus, the already difficult internal situation of the United Right’s government gets even more complicated. The Commission initiates the process of creating a new aid instrument in the logic of an intergovernmental agreement for 25 or 26 countries (without Poland, with Hungary or without, a last-minute change of opinion by Prime Minister Orbán cannot be excluded). Negotiations drag on, there is a new dispute in the EU, and existing resentments grow in their intensity. As a result, the Polish veto leads to an acceleration of the process of Community disintegration. This is obviously the worst case scenario, the probability of which is not high, let’s estimate it at 5%.
In the second scenario, Poland suspends its veto conditionally, as a result of which the negotiations are extended until the first quarter of 2021. This solution is not very suitable for the German EU presidency, but better than a total failure of the talks. The introduction of the rule of law regulation is suspended so as not to block the possibility of reaching a compromise between MFF and RRF, the more so as the latter is to start operating only on April 1st, 2021. Moreover, if the EU Own Resources Decision is not adopted by all national parliaments, the Community budget can also “last” in the first quarter. Formally, however, there is a provisional budget, with the limitations indicated in the first scenario.
Within these few months in Poland there is a turning point in the ruling camp ‒ depending on its direction, reaching an agreement at European level becomes either more or less likely. Similarly to the first scenario, the Commission works on a new RRF ‒ just in case. Taking account of the complexity and dynamics of the political situation both in the EU and in Poland, today it is impossible to predict the effect of the negotiations during the March European Council. This scenario (postponement of the decision) seems to me much more probable, my estimate is 25%.
Finally, the third scenario. The German EU presidency comes up with an unconventional solution, Poland withdraws its veto, and the Netherlands does not exercise it. MFF and RRF start without delay. The rule of law mechanism is in practice temporarily deferred. At the same time, Prime Minister Morawiecki is exposed to enormous internal pressure, especially from the more pro-European part of the United Right, and there is a beginning of a political rollercoaster in Poland. My estimate: probability of this scenario is 20%.
Why is the sum of probability of these scenarios 50% and not 100%? The reason is simple ‒ the three variants mentioned above are of basic and fundamental character. There are many more combinations that finish with, e.g., a dispute and Polexit (probability rather less than 1%) or an agreement and a pro-European reconstruction of the government, with the withdrawal of at least some reforms in the system of justice (probability comparable to Polexit).
Anyway, since we are talking about other possible scenarios, we must not forget about such a plot twist, in which Prime Minister Morawiecki agrees in Brussels to adopt the regulations introducing MFF and RRF, but the parliamentary majority in Poland rejects the ORD decision, and thus, the entire elaborate and fine agreement is blown up. By the way, however, noteworthy is the fact that almost every scenario leads to a cabinet crisis in Poland. It is really hard for me to imagine a situation in which the political status quo could be maintained along the Vistula River. Whatever the outcome of these negotiations is, it will be a gamechanger for the ruling camp.
To sum up, taking account of the arguments presented above, without knowing the backstage of the negotiations, both of those conducted in Brussels and Warsaw, it is impossible today to answer the question whether Poland will exercise a veto or not. Today I would say that the chances that Poland will not exercise a veto right and will at least formally join the EU Reconstruction Fund are 75%. But the fact that still a month ago I would not have given this scenario more than 5% of probability shows very clearly what a difficult situation the government has got into also because of its own mistakes (though noteworthy: not only its own mistakes). As a veto is, in a sense, always a tragic situation. However, since we have already mentioned the issue of probability, one thing may be stated for certain ‒ not only the government, but also the Polish state, will not escape this situation unscathed.
Polish version is available here.
dr Marcin Kędzierski