New safeguarding tools such as the so-called ‘conditionality’ regulation have improved the protection of EU finances from rule-of-law breaches by member states, but there are still significant risks, according to a new report by the European Court of Auditors (ECA).
“While the recently introduced additional safeguards are a clear improvement, we [the EU] are still not immune to rule of law breaches,” warned Annemie Turtelboom, the ECA member who led the audit, at a press conference on Wednesday (21 February).
Hungary and Poland both face rule-of-law-related EU budgetary measures with an estimated impact of around €22bn and €134bn respectively, although in the longer rather than short-term.
Existing safeguard mechanisms, including those under the Recovery and Resilience Facility and cohesion policy, allow the EU to introduce measures, like financial corrections or suspension of payments, when a breach of the rule of law affects the EU’s financial interests.
“In reality, there is only very limited immediate sanction on the governments,” the lead EU auditor argued, as the blocked amounts mostly concern future payments and commitments up to the end of the decade and do not affect larger programmes like the Common Agricultural Policy — which accounts for about one-third of the EU budget.
Meanwhile, the frozen funds could hamper the development of EU programmes or negatively impact citizens in those states, the Luxembourg-based auditors also said.
For example, without additional financial support, Polish and Hungarian students could be excluded from participating in an Erasmus+ exchange programme.
A second risk is that the rule-of-law conditionality regulation becomes a mere box-ticking exercise, with no real improvements on the ground.
In this case, the conditionality regulation would be a missed opportunity to improve the situation in the member state, the auditors noted.
“It could also create a dangerous precedent that could undermine the regulation’s effectiveness in the future and, furthermore, the actions tackling rule-of-law issues could be reversed once the budgetary measures are lifted,” Turtleboom said.
Political bargaining chip
On top of that, both risks could become more significant as political considerations could ultimately play a major role in the decisions not to block, or to release, EU funds, the auditors point out — citing the situation that occurred in December 2023 with Hungary.
At the time, rule-of-law decisions on Viktor Orbán’s country had to be taken virtually simultaneously as member states were about to vote on Ukraine’s accession talks, which required unanimity and to which Hungary was initially opposed.
Just a few days before Orbán briefly left the room to allow the EU to open accession talks with Ukraine at their summit in Brussels, the commission approved the release of €10bn in cohesion funds for Hungary.
“We can not afford political bargaining playing a major role in decisions that should be grounded in technical and legal analysis,” the leading EU auditor commented.
“We also cannot afford to take different approaches towards the different member states,” Turtelboom added.
In this sense, the EU auditors concluded that the measures taken under the conditionality regulation for Hungary in 2022 were justified, but for other countries, they could not assess the reasons for using one tool or another.
As a result, the commission did not transparently demonstrate that the EU’s financial interests are protected in all member states where it identified challenges to the rule of law, the auditors concluded.
The EU executive has accepted or partially accepted all the ECA’s recommendations except the last, where the Luxembourg-based auditors suggested that the commission improve the rule of law framework when preparing future legislative proposals.
According to a World Justice Project index, Hungary and Bulgaria are the EU’s worst performers on rule of law, followed by Poland, Romania, and Greece.
