Tag Archives: European Commission

Viktor Orbán’s first day in Brussels without his British prop

Today, after a meeting of the European Council sans David Cameron, several European leaders gave press conferences, starting with President Jean-Claude Juncker. From his brief summary of the meeting, we learned that there had been unanimity on two important issues.

First, there will be no internal à la carte market. “Those who have access have to implement all four freedoms without exceptions and nuances”: the free movement of goods, the free movement of services and freedom of establishment, the free movement of persons (and citizenship), including free movement of workers, and the free movement of capital.

The second point was that while the European Union does need reforms, they can be neither additional nor contrary to what has already been decided. What he has in mind is the strategic agenda of the European Council and the ten priorities the European Commission declared earlier. Here I will mention only four of these priorities that are not at all to the liking of the Visegrád 4 or countries that sympathize with the group: (1) a deeper and fairer internal market, (2) a deeper and fairer economic and monetary union, (3) an energy union, and (4) a common European agenda on migration. From the Hungarian point of view, perhaps the most significant announcement by Juncker was that “it is about speeding up reforms, not about adding reforms to already existing reforms.”

Viktor Orbán also gave an “international press conference,” as the Hungarian media reported the event. Normally, after an ordinary summit, there are only a couple of Hungarian media outlets that are interested in Orbán’s reactions, but this time the prime minister’s press conference was conducted in English and with a larger group of journalists.

The Associated Press’s short summary concentrated on “personnel changes,” which without additional background information didn’t make much sense. In order to have a better understanding of what Orbán was talking about, we must interpret his words in light of Jarosław Kaczyński’s demand for the resignation of Jean-Claude Juncker and other EU officials a few days ago. Orbán, who talks so much about the unity of the Visegrád 4 countries, doesn’t seem to be ready to support the Polish leader’s attack on Juncker and the Commission, at least at this time. The Hungarian prime minister thinks that “time, analysis, thought and proposals are needed” before such changes are discussed. In his opinion, “it would be cheap and not at all gallant in these circumstances to suddenly attack any leader of the Commission or any EU institution.” In addition, Orbán doesn’t stand by Kaczyński on at least two other issues. Kaczyński severely criticized Donald Tusk, the president of the European Council, while Orbán praised him. Orbán also rejected, for the time being, the Polish politician’s call for a rewriting of the EU constitution.

Viktor Orbán at his press conference / AP Photo

Viktor Orbán at his press conference / AP Photo

Hungarian summaries of the same press conference are naturally a great deal more detailed and therefore more enlightening when it comes to an analysis of Viktor Orbán’s current thinking on the situation in which he finds himself. Here I will concentrate on two of Orbán’s priorities.

The first is his hope that future negotiations between the European Union and the United Kingdom will be conducted not by the European Commission but by the European Council. Even if the European Parliament and the Commission were willing to agree to such an arrangement, which I very much doubt, the complexity of these negotiations precludes such an arrangement.

Orbán’s second priority is the introduction of an entirely new set of what he calls “reforms.” He, as opposed to most European politicians, has a different notion of what constitutes “reform.” Instead of the European agenda that aims at deepening integration, he would like to see a loosening of ties among member states. During the press conference, Orbán repeated several times a Hungarian saying, allegedly first uttered by Ferenc Deák, the architect of the 1867 Compromise with the Crown who was famous for his figures of speech. Deák, after the 1848-1849 revolution, likened the absolutist administration to a hussar’s dolman which was buttoned incorrectly and which could be fixed only if the hussar unbuttoned all the buttons and started anew. In plain language, the whole structure of the European Union is wrong and it is time to undo everything and begin again from scratch. But, as we learned from Juncker, this is not what the majority of the European Council has in mind. In sum, I don’t believe that either of Orbán’s two important goals has the slightest chance of being accepted.

There is one issue, however, on which he fully supports Juncker’s position. As far as he is concerned, there can be no question of Great Britain limiting the immigration of citizens of the European Union. In his opinion, the East European countries went beyond what would have been a reasonable compromise when in February they accepted Cameron’s very tough demands on European citizens working in the United Kingdom. But now there can be no concession on this issue. If Great Britain wants to enjoy certain trading privileges with the European Union, its government must allow EU citizens to live and work there.

Restricting immigration from Europe, especially from its eastern part, has been a topic of long-standing political debate in the United Kingdom. Theresa May, the home secretary who has a chance of becoming David Cameron’s successor, has been talking about limitations for a number of years. Both Boris Johnson and Theresa May want to close the door on unskilled labor from Europe without Britain’s losing access to the single market. They interpret the EU’s free-movement principle as the freedom to move to a specific job rather than to cross borders to look for work. And there is no question, the pro-exit Conservatives are not talking about Middle Eastern refugees here. They decry the fact that “a third of Portugal’s qualified nurses had migrated, 20% of Czech medical graduates were leaving once qualified, and nearly 500 doctors were leaving Bulgaria every year.” The Brexit leaders could talk about Hungary as well, which saw about 500,000 people leave for Great Britain, Germany, Sweden, and other countries in the West.

Viktor Orbán did touch on immigration to the British Isles as one of the causes of the anti-European sentiment that has spread across England and Wales, but he maintained that “in British thinking migrants coming from outside of Europe and the employees arriving from the European Union are conflated, the result of which the voters felt that they didn’t get satisfactory answers from the European Union for their questions.” British Conservative politicians’ opinions on the subject, going back at least a year if not longer, leave no doubt that they were not been concerned with the refugees but with those EU citizens already in the country. The person who does conflate the two is Viktor Orbán. Last Friday he, who only a few days earlier had campaigned for David Cameron, manifested a certain glee in blaming EU’s refugee crisis for Brexit. I wonder how he will feel when one of the key sticking points in the U.K.-EU negotiations turns out to be East European immigration to Great Britain.

Meanwhile, I understand that the number of Hungarians planning to make the journey to the United Kingdom has grown enormously since the British exit vote. The hope is that anybody who arrives in Great Britain while the country is still part of the EU will be safe, but who knows what will happen later.

June 29, 2016

ONE OF THE FIRST STEPS AFTER BREXIT MUST BE THE REFORM OF THE EU BUDGET

As always, Hungarian Spectrum welcomes democratic voices from and about Hungary. Today András Lukács, President of the Hungarian NGO Clean Air Action Group (Levegő Munkacsoport) and Board Member of Green Budget Europe, presents his opinion, in the wake of the Brexit referendum, of the role of EU funds in the rise of Eurosceptism. He also offers some possible solutions.

♦ ♦ ♦

 The results of the Brexit referendum strengthened the conviction of all those who think that profound changes in the European Union are necessary to stop and reverse the rise of populist parties with Eurosceptic and, in some cases, even Europhobic agendas. It is hardly an unfounded opinion that if the governance of the EU is not changed radically, then even the mere existence of the EU is put at risk.

One of the main drivers of Eurosceptism is the way EU money has been used. It is telling that, according to a recent representative opinion poll, 61 percent of those surveyed in the Czech Republic, a net recipient of European funds, believe that the EU member countries should get along financially by their own means, i.e. wealthy member countries should not support poorer ones. I know of no similar survey in Hungary, but I do know that there is a widespread opinion here that EU money has led to serious problems. Many are even convinced that EU funds cause more harm to the country than good. For example, speaking at a conference in May this year, Zsombor Essősy, CEO of MAPI Hungarian Development Agency Corp., “The Expert of EU and Domestic Funds” (as it is described on MAPI’s website), stated the following: “If our country spends EU money following the present trends and framework, this might cause the biggest tragedy of Hungary.”

According to a detailed study on the topic by Hétfa Alapítvány, the use of EU money in other countries does not seem to be more efficient than in Hungary. Having spoken to quite a few people dealing with the issue in other net recepient countries, I am not surprised by this conclusion.

Along with others, our organization, the Clean Air Action Group (Levegő Munkacsoport), analyzed the reasons for such a perverse use of EU money. Here I will summarize just a few of these reasons, described in detail in our report.

EU funds are distributed to companies in a way that seriously distorts the market. Many companies make an enormous effort to receive as much EU money as possible in order to gain a competitive advantage, instead of improving their products or services. This situation is also a serious threat to democracy because practically no business group would be willing to criticize the government for fear of not receiving public money.

A substantial amount of EU money has been spent to support the construction of new hotels. Even the Hungarian Hotel Association expressed strong criticism of state subsidies for hotel construction, emphasizing that existing hotels often struggle for survival. Such results of EU funding are characteristic not only of the hotel industry but practically all sectors of the Hungarian economy. Photo by András Lukács

A substantial amount of EU money has been spent to support the construction of new hotels. Even the Hungarian Hotel Association expressed strong criticism of state subsidies for hotel construction, emphasizing that existing hotels often struggle for survival. Such results of EU funding are characteristic not only of the hotel industry but practically all sectors of the Hungarian economy. Photo by András Lukács

The present system of distributing EU funds is also a hotbed of corruption. Free money irresistibly attracts all those looking to get rich (or much richer) within a short time by illegal or semi-legal means. These circles do everything they can to capture the national and local governments, and, as practice proves, they often succeed. (This has been described in detail, for example, in studies by Transparency International Hungary.)

Another driving force behind the ill use of EU money is the endeavor of the government to spend every last cent, rendering the efficiency of spending much less important. Coupled with corruption and other factors, this leads—among others—to investments that are not really necessary, or do not represent the most efficient way to spend public money in a given period of time. Furthermore, even if the investment can be justified and even if there is no corruption behind it, it is often implemented in a very wasteful manner because it is financed with “free money.”

A new brandy distillery built with EU money. A World Health Organisation report (as summarized by 247wallst.com) states: “No country had a higher rate of alcohol use disorders than Hungary, where 19.3% of the population abused alcohol in some form. As many as 32.2% of Hungarian men and 6.8% of women suffered from alcohol use disorders, the highest among countries reviewed.” Photo by András Lukács

A new brandy distillery built with EU money. A World Health Organisation report (as summarized by 247wallst.com) states: “No country had a higher rate of alcohol use disorders than Hungary, where 19.3% of the population abused alcohol in some form. As many as 32.2% of Hungarian men and 6.8% of women suffered from alcohol use disorders, the highest among countries reviewed.” Photo by András Lukács

In our report, besides describing the situation, we also made concrete proposals to the European Commission and governments of EU member states to remedy the situation. The main points are the following.

In the Treaty of Accession, all EU member states declared: “Our common wish is to make Europe a continent of democracy, freedom, peace and progress. The Union will remain determined to avoid new dividing lines in Europe and to promote stability and prosperity within and beyond the new borders of the Union. We are looking forward to working together in our joint endeavor to accomplish these goals.” In our understanding, this means that all member states will improve their legislative and institutional systems as much as possible in order to achieve these goals, but at least they will refrain from any backward measures. Therefore, it must be stipulated that member states repeal all legislative and institutional measures that have been adopted by the given member state since its accession to the EU that contradict the principle of non-retrogression as far as “working together in our joint endeavor to accomplish these goals” is concerned.

The European Commission must demand that the Hungarian government implement all possible best practice measures within a reasonable time to reduce corruption and other malfeasances. In our opinion, this is a measure that would fully comply with EU legislation. The European Parliament also called for measures “to be implemented right across the spectrum of EU policies, and for action not just in response to cases of fraud but also to prevent them.”

The Commission should require strict implementation of the European code of conduct on partnership in the framework of the European Structural and Investment Fund. According to the code, the governments of the member states must closely cooperate with “bodies representing civil society at national, regional and local levels throughout the whole program cycle consisting of preparation, implementation, monitoring and evaluation.” However, the Hungarian government has been doing just the opposite.

The fulfilment of the National Reform Program (NRP) and of the Country-Specific Recommendations (CSRs) should be the main criteria for the assessment of the efficiency of the use of EU funds, and not the success or failure of individual projects or groups of projects. The European Commission should strictly control the former, and not the latter. (The NRP is a document that presents the policies of the member country, which aim to achive the targets set forth in the EU’s Europe 2020 Strategy. The CSRs are the yearly assessments by the Commission on the progress of each member state towards achieving these targets, and they include recommendations for improving the country’s performance.) The NRPs and CSRs are approved by the governments of the member countries as well, thus they are binding commitments for these governments. In spite of this, the Hungarian government is generally doing just the opposite of what it committed itself to in these documents. This is well known to the European institutions concerned; for example, an assessment by the Economic Governance Support Unit of the European Parliament came to the conclusion that in 2014 only Bulgaria and Hungary made no meaningful progress in implementing any of the recommendations.

The EU should give all EU funds, destined for national purposes, directly to the national governments, without any requirements for the precise use of these funds, i.e. each national government should decide that for itself. On the other hand, in the event that a country does not comply with the above requirements, EU funding must be partly or completely suspended until it comes into full compliance. We believe that this is not only legally possible even today, but it is an explicit duty of the European Commission: according to EU legislation it is the Commission’s task to protect the EU’s financial interests.

I strongly believe that it is absolutely necessary to provide EU funds to the less developed member states with the goal of improving their economic well-being as well as their political stability in order to strengthen the EU as a whole and to make it more competitive globally. But EU taxpayers’ money must be used for this purpose, not against it.

June 27, 2016

Tibor Navracsics’s political “coming out”

Tibor Navracsics, who is EU commissioner in charge of education, culture, youth and sport, doesn’t appear too often in the Hungarian media, and when he does he is asked mostly about matters relating to Hungary rather than the work he does in Brussels. Thus, the Hungarian public knows very little about Navracsics’s views on and role in the European Union.

Last November Navracsics gave an interview to Mandiner’s András Stumpf in which he said that he has always been committed to the idea of the European Union, adding that “on the Hungarian right I am pretty much all that remains.” This sentence made a big splash as proof that, at least in Navracsics’s opinion, none of his former colleagues in the Orbán government is committed to the idea of European integration.

Navracsics had a rough time being confirmed as an EU commissioner. As I said at the time, “the long shadow of Viktor Orbán” followed Navracsics. After all, Orbán named him deputy prime minister in 2010, and he was also minister of justice between 2010 and 2014 when the European Union had serious reservations about the legality of several Hungarian laws. As a result, Navracsics received a post that came with very little actual power. Education and culture are fields handled exclusively by the individual nation states.

Since the Hungarian media pays mighty little attention to Navracsics’s role as commissioner, I thought I should say something about one of his tasks that, as a result of the refugee crisis, has given him greater freedom of movement and the possibility of making a more substantial impact.

Navracsics’s job description includes, among other things, “empowering young people of all social and cultural backgrounds so that they can participate fully in civic and democratic life.” It is this sentence that allowed Navracsics to expand his role considerably after the January 2016 Paris terror attack. By March Navracsics called together the EU ministers of education and urged them “to use education more effectively in building open, tolerant societies.” He talked to them about social inclusion, about combating prejudice, about encouraging critical thinking. Of course, this sermon made not the slightest dent in the Hungarian government’s policies at home.

Navracsics4

Then there is the refugee crisis. Navracsics proposed a program of “integration of refugees and migrants,” which the Commission acted on. Navracsics received  €1.6 billion “under the Creative Europe program for cultural projects promoting the inclusion of refugees and migrants.” So, what Navracsics is doing in Brussels is the exact opposite of what the Orbán government stands for. While he is working for the integration of refugees and migrants, Orbán is fighting tooth and nail for their exclusion.

In light of this, Navracsics’s most recent interview on June 6 with Péter Zentai on KlubRádió’s “Eurozóna” shouldn’t have been such a revelation. But suddenly the Hungarian media realized that Navracsics doesn’t agree with Viktor Orbán on either the refugee issue or Hungary’s relations with the European Union.

In the interview he expressed his optimism about the future of the EU. Its history has been full of clashes of interests among the member states, but at least until now the result was always deeper integration. He believes that “if common sense prevails in the majority of the member states” the current problems will be solved. This didn’t convince the interviewer, who said that the situation in Europe is “dramatic,” especially in light of a possible Brexit. Navracsics admitted that the European Union is at a turning point, but whatever happens with the British referendum, it is his “conviction that there are far more strategic interests in favor of the continued existence of the Union and its continued integration than against them.”

Perhaps the highlight of the interview was Navracsics’s criticism of the Hungarian opposition, which has been far too timid in standing by a common European policy on the refugee issue. Politicians supporting the European Union should argue as loudly in favor of common action as those do who promulgate a policy based on individual nation states. “We must clearly explain that membership in the Union and the continuation of integration is in Hungary’s national interest…. I regret that on the domestic political stage pro-EU politicians constitute only a soft-spoken tiny minority which doesn’t argue forcefully enough in favor of the point of view that I’m trying to express here.”

Finally, Navracsics, unlike many of the politicians of the democratic opposition, decided to go on record as agreeing with the Commission’s stand on quotas. It is, he said, “an absolutely acceptable solution which only means that if the number of refugees exceeds the regular numbers in a given country—which so far has not occurred anywhere—then the other members would come to its assistance and help in the placement of those affected. Therefore it is not the same as a mechanically enforced compulsory quota.”

Echoing Navracsics, Júlia Mira Lévai in HVG admonished those opposition politicians “who don’t dare to go against the current public mood and who are not brave enough to represent their own values.” In Lévai’s opinion, Navracsics’s “coming out” will play a significant role in the disintegration of Fidesz, which might be near, especially if leaders of the democratic opposition follow Navracsics’s advice.

I agree with Lévai that the timid response of the democratic opposition to Orbán’s refugee policies is mistaken. Always trying to follow a middle ground, as MSZP leaders usually do, will not satisfy the growing number of voters who are turning against the government and Fidesz. But I disagree that it is the refugee issue that will be the catalyst for the inevitable disintegration of Orbán’s power structure. A more likely candidate is the government’s disregard of the Hungarian National Bank’s highly illegal financial dealings, orchestrated by the chairman of the bank, who is exhibiting increasingly erratic behavior. And to the bank scandal one can add the boorish behavior of the newly created Fidesz media, which even some members of the inner circle find distasteful. But more about these developments tomorrow.

June 15, 2016

Poland at a crossroads?

After spending three days on domestic affairs, today I will concentrate on the Polish-Hungarian-European Union triangle, with a quick look at Putin’s Russia.

There is no question that Jarosław Kaczyński has been an excellent student of Viktor Orbán. The new Szydło government is copying the Orbán model step by step, just at an accelerated pace. While it took the slower-moving Orbán machinery two or three years to achieve its desired results, the eager Poles thought that a few months would suffice. It didn’t take long for Polish foreign minister Witold Waczczykowski to announce a change in the country’s foreign policy. The Szydło government will not follow its predecessor’s policy of acquiescence toward the European Union, he said. As a result of Polish belligerence, most commentators were certain that Brussels would act quickly and without hesitation. If the European Union opts to avoid a confrontation, the same thing will happen in Poland as happened in Hungary, where Orbán’s political system has solidified to the point that it may last for decades. Poland is too important a country to allow this to occur.

Cass Mudde of the University of Georgia wrote an article in the Huffington Post in which he suggested that “the success of PiS in Poland could turn out to be a poisoned chalice for Orbán” because of the possibility of EU sanctions not just against Poland but against Hungary as well.” As we know, however, Orbán made it clear on January 8 that “it’s not worth it for the European Union to rack its brains over any sanction against Poland because that would require full agreement. Never will Hungary support any sanction against Poland.”

A few days later Kim Lane Scheppele pointed out that a veto by Hungary could easily be neutralized. In an article that appeared on January 11 in politico.eu she sketched out a possible legal action that would take care of Viktor Orbán’s threat of a veto. Here is her scheme:

Sanctions require a unanimous vote of the European Council, minus the offending state, meaning Hungary does have a veto.

But Article 7 includes two separate parts: a warning system outlined in Article 7(1) and the sanctions mechanism of Article 7(2)-(3). The only way to keep the threat of sanctions on the table under Article 7(2) is for European institutions to act against both Poland and Hungary at the same time by invoking Article 7(1) first.

Those who were certain that this time the European Commission would not choose the road of appeasement as it did in the case of Hungary were correct. On January 13 the Commission launched a probe into policy changes in Poland that may clash with EU law. This is an unprecedented move with serious implications. For example, it could lead to the application of Article 7 of the Treaty of the European Union.

In the wake of the announcement of the probe, the Poles even copied Orbán, who took up the challenge and faced a very angry European Parliament in 2012. Prime Minister Beata Szydło announced that she would attend the debate on Poland in the European Parliament and defend her government’s right to make changes in the structure of the constitutional court and the media. Her speech was very East European in flavor. In addition to repeating several times that Poland is as much a part of the EU as the other 27 countries, she said that Brussels, instead of “rounding on Poland, ought to be looking to engage with a country with a troubled history and which had fought at great cost for its freedom.” These words could easily have been uttered by Viktor Orbán himself. It is still too early to know what the reaction to Szydło’s speech will be, but people in the know in Brussels are certain that “the stage is set for a ‘carnage’ in the European Parliament.”

Szydlo

Beata Szydło in the European Parliament, January 19, 2016

There have, however, been voices in the western media that have cautioned the European Commission in its handling of Poland. As early as January 13, the day the European Commission decided on a monitoring procedure against Warsaw, The New York Times came out with an editorial which claimed that “punishing Poland through sanctions would be counterproductive and even hypocritical, given the proliferation of like-minded parties across Europe,” the logic of which escapes me, I’m afraid.

What the editors of The New York Times think about Polish-EU relations is neither here nor there, but what Donald Tusk thinks is something else. After all, he is the president of the European Council who is supposed to represent the interests of the Union and not the country of his birth. But although Tusk is a political adversary of Kaczyński, he felt compelled to come to Poland’s rescue. His move was interpreted by The Financial Times as a break “with the rest of the EU’s leadership … by questioning Brussels’ decision to launch a formal review into whether Poland’s new media and judicial legislation violate the rule of law.” He declared that the EU can clarify the situation in Poland “by other methods, not necessarily triggering this procedure.” He didn’t elaborate what these other methods might be.

Meanwhile, in Hungary Viktor Orbán is most likely eagerly watching what’s going on in Brussels. Will the Poles be persuaded to abandon their revolutionary zeal under domestic and foreign pressure? There are signs that President Andrzej Duda (PiS) and other PiS officials began a campaign a few days ago to ease tensions between Poland and the European Commission. If they succeed, Viktor Orbán will not be a happy man because he is counting on the formation of a large eastern bloc of 90 million people as something of an alliance against the core countries in Western Europe. Naturally, such a bloc without Poland is worth nothing.

This kind of fear is reflected in one of Zsolt Bayer’s articles titled “Lengyelek” (The Poles). After recalling all the humiliation and treachery Poland has suffered through her history at the hands of the western powers, especially the United States, Bayer doesn’t understand “Polish devotion to the United States.” Poland must choose. Either they follow Hungary’s example or they will end up with the same “base, unjust, unbearable and unacceptable harassment that Hungary had to suffer.” Poland must be careful, Bayer warns, because it is clear that the United States has been hard at work trying to persuade Poland to loosen its ties with the alliance system Viktor Orbán managed to create from the formerly ineffectual Visegrád4 group. If a 90-million strong Eastern Bloc materializes, it will be the center of a “normal” Europe as opposed to the “mentally deranged West.” So, a lot depends on Poland, a country that should be grateful to Hungary because of Hungary’s generosity toward her in her times of peril. “There is no war yet but the situation is very serious. We should not let them drive a wedge between us.”

After reading Bayer’s lines about the possibility of a war in Europe, one wonders about the psychological state of some of the Fidesz leaders who lately have been discussing ways of strengthening the military capabilities of the country. László Kövér went so far as to talk about “the catastrophe of abolishing compulsory military service” in 2004. Do they really think that war is going to break out in Europe sometime in the near future? Possibly.

Finally, a friendly warning to Poland. Putin is delighted with the growth of right-wing radicalism and the recent emphasis on the sovereignty of nation states within the European Union, as Vladislav Inozemtsev of The Moscow Times, points out. “The events in Europe are being seen with undisguised joy” in Russia. “The Kremlin supports and will support the ultra-right and ultra-left parties who seek to put Europeans back to their ‘private apartments.’” So, going along with Viktor Orbán will be useful to Poland’s archenemy, Russia. The leaders of PiS should think very seriously whether they want to play into the hands of Vladimir Putin or not. Yes, they do have a choice.

September 19, 2016

Viktor Orbán’s meeting with Jarosław Kaczyński

Yesterday afternoon vs.hu learned from several sources that Prime Minister Viktor Orbán will travel to Poland at the invitation of PiS, the country’s governing party. In terms of protocol it will be a private visit. At this point the word was that he will meet several “very important politicians.” From the scant information that has reached us since, however, it looks as if Orbán met only Jarosław Kaczyński, the party chairman. The meeting took place in Niedzica at the Polish-Slovak border, a town that belonged to Hungary prior to 1918. The meeting was long–six hours, including a lunch of the famous Polish delicacy zurek soup and trout.

Unfortunately, we know practically nothing about what transpired between the two men. The Polish opposition media’s guess is that Orbán was giving Kaczyński tips on how to make the constitutional court and the media serve the government’s interest. I, however, doubt that much time was spent on Polish domestic affairs since there are far too many international issues that demand the attention of the Polish and the Hungarian leadership.

Jarosław Kaczynski and Viktor Orbán in 2010

Jarosław Kaczyski and Viktor Orbán in 201

First and foremost, the two probably formulated a common policy response to David Cameron’s “new curbs on welfare payments for migrant workers.” Cameron is currently on the campaign trail to win support for his plan to limit in-work benefits for migrants. In his quest he seems to have the support of Germany, whose interior minister, Thomas de Maizière, thinks that Cameron’s “suggestions are not a matter of regulating migration but a matter of regulating welfare legislation.” Poland and Hungary, however, have an entirely different view of the matter. First of all, Hungarian officials greatly object to the word “migrant” in connection with their own nationals, who should be called either EU citizens or guest workers. “To consider Hungarians in Britain as migrants is painful to our ears,” Orbán complained in Brussels on December 18, 2015. I suspect that these two East European countries will eventually have to swallow Cameron’s bitter pill.

In addition to hammering out a common policy regarding Polish and Hungarian immigrants in Great Britain, which Viktor Orbán can relate to David Cameron, who will arrive in Budapest for a short visit tomorrow, there might have been a second item: Hungary’s relations with Putin’s Russia. You may recall my post of February 19, 2015 titled “Polak, węgier—dwa bratanki / lengyel, magyar–két jó barát—not at the moment” in which I described how Hungarian diplomats tried to convince Kaczyński to meet Orbán, who visited Poland shortly after Putin’s visit to Budapest, but the chairman of PiS refused. The answer was that such a meeting was out of the question after Hungary’s flirtation with Russia, Poland’s archenemy. Kaczyński, who hasn’t met Orbán since, most likely wanted to clear the air and to hear directly from Orbán himself about his relationship with Putin.

The third topic may well have been Poland’s unexpected decision to honor the promise of the former government and take 4,500 refugees as part of the quota system. That decision seriously weakens the position of the other three Visegrád4 countries. Viktor Orbán looks upon the joint action of these four countries, standing together against Brussels, as one of his major achievements of late. Surely, he was counting on the new PiS government to abrogate the former government’s offer, especially since in November Beata Szydło, Poland’s new prime minister, made it clear that her government was not prepared to accept the quota system because of the changed circumstances that followed the Paris terrorist attacks. Well, it seems that the situation changed again. Yesterday it was announced that, after all, Poland will take the promised number of refugees. Mind you, only during the next two years and allowing only 150 of them at a time at certain intervals. However cautiously, Poland abandoned Viktor Orbán’s rigid stance on the issue of quotas. The change of heart most likely follows the harsh criticism coming from Brussels on the arch-conservative PiS government’s moves concerning the Constitutional Court and the media.

What moves of the Polish government do EU politicians find unacceptable? I’m relying here on the assessment of Dalibor Rohac of the American Enterprise Institute, not exactly a liberal stronghold in the United States. According to Rohac, “the law changes the status of Poland’s public broadcasters to ‘national cultural institutions’—like the National  Museum or the National Ballet—placing them under direct control of the government.” As for the Constitutional Court, shortly before the October election the Sejm elected five new constitutional court judges, but after the election PiS and President Andrzej Duda sought to reverse these appointments, notwithstanding a ruling by the Constitutional Court that confirmed that the election of the new judges was valid. Both the European Commission and the European Parliament reacted, calling these moves a clear violation of the EU constitution.

Vice-President Frans Timmermans sent two letters to the Polish government asking for clarification of the bill. At the same time Günther Oettinger, EU commissioner for digital economy, told the Frankfurter Allgemeine Sonntagszeitung that “many reasons exist for us to activate the ‘Rule of Law mechanism’ and to place Warsaw under monitoring.” Although Witold Waszczykowski, the new foreign minister, immediately summoned EU ambassadors to demand an explanation, perhaps cooler heads prevailed and the decision was made to retreat, at least partially.

Waszczykowsk’s introduction to the German media hasn’t been exactly a success. In an interview with Bild he accused the former right-of-center Polish government of following a Marxist model, which is “a new mix of cultures and races, introducing a world of cyclists and vegetarians who focus only on renewable energies and fight against any form of religion. This has nothing to do with traditional Polish values, which are awareness of history, patriotism, faith in God, and a normal family life between husband and wife.”

I should add that only yesterday Waszczykowski announced an entirely new Polish foreign policy, which sounds as if it will be built on confrontation with Brussels. “Our foreign policy cannot be part of the mainstream, we cannot simply abide by Brussels’ decisions,” he announced on Polish public radio. Polish foreign policy seems to be in flux. As long as Waszczykowski’s ideas prevail, one cannot be sure that Poland will be a cooperating member state of the European Union.

Commentators are trying to find an explanation for the drastically different reaction of the European Commission and Parliament to the Polish government’s attempts to imitate Orbán’s illiberal state. How fast the EU reacted in the Polish case and how sluggish it was when Orbán was dismantling Hungarian democracy bit by bit. Professor Kim Scheppele pointed out a fundamental difference between the two cases just yesterday. The two-thirds parliamentary majority enabled Fidesz to change the constitution, so it never violated its own fundamental law. Therefore “the EU was totally at a loss in figuring out how to handle a perfectly legal coup,” she told The Financial Times. The Polish case is different. The PiS government, not having a two-thirds majority, cannot attain the kind of absolute power Orbán managed to acquire. The combination of constitutional limitations as well as internal and external pressures will most likely have a restraining effect on the Szydło-Kaczyński government.

Is Paks II dead?

On December 27 I read a brief announcement in Magyar Nemzet, which didn’t seem to rouse much interest in the Hungarian media. In the December 23 issue of Magyar Közlöny, the government’s official publication of all new laws and ordinances, there had been a news item about the government’s decision to immediately transfer 8,4063 billion forints to the Hungarian National Film Fund headed by Andy Vajna, an American-Hungarian former film producer, who in the last few years has been a special favorite of Viktor Orbán. The article, titled “The Film Fund is getting further billions,” skimmed over the fact that this large sum was transferred from money that had been set aside for the recapitalization of the company created specifically for the Paks II project. Instead, the reporter expressed his astonishment that Vajna’s fund only this year received 12.3 billion forints. He didn’t worry too much about where this money came from.

I, on the other hand, focused on the source of these billions. Paks II is, as we have often heard, of strategic importance. It will ensure Hungary’s energy independence in the future. How could it be that Orbán suddenly would find culture more important than his pet project, on which he staked his reputation when he was repeatedly accused of being Putin’s puppet who is ready to serve Russia’s interests in weakening the European Union? I immediately jotted down the question: “Is Paks dead?”

A day later I read an article in Bloomberg that related the story of Vnesheconombank (VEB), which for years has been used by Putin to pay for special projects, “from the Sochi Olympics to covert acquisitions in Ukraine to oligarch bailouts.” Now, this state bank itself is in need of rescue, which may cost the Kremlin $18 billion or 1.2 trillion rubles. This is the same bank that is supposed to lend €10 billion for Paks II. Could there be a connection between the financial troubles of VEB, as well as of the whole Russian economy, and the possible scrapping of the Paks II project? We have been inundated with stories coming from Russia about the economic fallout of plummeting oil and gas prices, the expenses incurred in the invasion of the Crimea and the war in Syria, and the U.S.-EU boycott. Inflation is currently 12.1% and, while a year ago one U.S. dollar was worth 40 rubles, today the exchange rate is 70 to 1. For all these reasons there have been conjectures that, given the state of the Russian economy, the Russian government is incapable at the moment or in the near future of financing Paks II.

Russia’s financial difficulties are only the part of the problem. In November the European Commission called on the Hungarian government to suspend all further projects in connection with the construction of the Paks II nuclear power plant because Budapest didn’t follow EU rules governing open bidding procedures. The reaction of the Orbán government was defiant; they swore that everything is going ahead without the slightest attention to the infringement procedure. In fact, János Lázár promised to bring suit against the Commission if necessary.

In addition, it is likely that the European Commission is in the middle of an investigation into possible hidden state subsidies in connection with Paks II, which are also against EU laws. The Hungarian government would have to prove that the enormous investment in the two new reactors is financially justified. At present, most experts say that it is not.

snapshot

In order to prove that Paks II is a financially viable project, the government came up with an “independent evaluation” by the Rothschild Group. In no time, however, it was discovered that the study was anything but independent. The Rothschild Group was instrumental in preparing the ground for the contract between the Hungarian government and Rossatom, the Russian state company that is supposed to build the reactors. Moreover, a former undersecretary of the Orbán government in charge of energy matters is today an employee of the Group and works for the company out of Budapest.

The latest news on the possible fate of Paks II arrived on the last day of 2015 when the public learned that three tenders had been invalidated because the company in charge of the project “will not be able to sign the contracts.” A more detailed reason for invalidating these tenders was not given. The three tenders were for important studies in connection with the proper implementation of the project to the tune of 100 million forints. They were supposed to describe how the new reactors would be integrated into the existing system. If these studies are no longer necessary, it might mean that the whole project has been abandoned.

I vividly recall some commenters on Hungarian Spectrum insisting that there was no way Viktor Orbán would ever give up this project, which he considers the crown jewel of his years as prime minister. It is true that he is between a rock and a hard place, but I suspect that Russia’s financial troubles are the source of his retreat. Since he is fully aware of the snail’s pace of the European Union, if he could get the financing he would immediately embark on the project. By the time the European Court of Justice rendered its judgment, half of the project would be built. Knowing him, he would opt for that strategy, trusting his proverbial good luck. So, if Paks II is scrapped, it will be because Russia is incapable of lending 10-12 billion euros to Hungary.

We can be sure, however, that the public explanation of the government’s failure to build the reactor (assuming it does not proceed) will be the European Union’s interference in Hungary’s internal affairs. The fault will lie with those “swindlers or at best unfit idiots who try to turn us out of office in the most dastardly, the most cunning, and the most boorish way.” Just as László Kövér recently described West European politicians. Blaming the European Union will bring further popularity. Many Hungarians already believe that evil foreigners want to destroy them, and if they learn that Brussels made their “energy independence” impossible, they will feel even more liked a besieged fortress surrounded by enemies.

Infringement procedure against Hungary on account of the Paks nuclear power plant

Well, it’s official. The European Commission called on the Hungarian government to suspend all further projects in connection with the construction of the Paks II nuclear power plant because Budapest hasn’t followed EU rules governing open bidding procedures. Here is the official press release:

Commission opens infringement against HUNGARY for lack of compliance of the Paks nuclear power plant project with EU public procurement rules

The European Commission decided today to launch an infringement procedure against Hungary concerning the implementation of the Paks II nuclear power plant project. Following exchanges of information with the Hungarian authorities and a thorough assessment of the terms of the award, the Commission still has concerns regarding the compatibility of the project with EU public procurement rules. The Hungarian government has directly awarded the construction of two new reactors and the refurbishment of two additional reactors of the Paks II nuclear power plant without a transparent procedure. The Commission considers that the direct award of the Paks II nuclear power plant project does not comply with EU legislation on public procurement (Directives 2004/17/EC and 2004/18/EC). The Directives consolidate the basic principles of the Treaty on the Functioning of the European Union of transparency, non-discrimination, and equal treatment. These principles seek to ensure that all economic operators have fair chances to participate in a call for tender and to win a contract. The European Commission has decided to send a letter of formal notice to Hungary, which constitutes an official request for information and is the first step in an infringement procedure. The Hungarian authorities now have two months to respond to the arguments put forward by the Commission.

As expected, the Orbán government is defiant. János Lázár in his usual fashion expressed his total disgust with Brussels and promised to bring suit against the Commission if necessary. In his harangue against the EU he judiciously avoided talking about the actual case, the lack of an open tender, which is an EU requirement. Instead, he talked about the EU allegedly prohibiting Hungary from signing bilateral commercial agreements with so-called third countries or such country’s citizens. Hungary has “the right to sign agreements with China, the Arab countries, or for that matter with Russia.” But of course, this is not the issue here. After all, as we learned from José Manuel Barroso’s letter addressed to Viktor Orbán, which I published on Hungarian Spectrum today, the contract with Rosatom was considered to be legal as far as EU law was concerned. The way the contract was awarded, however, was another matter. Barroso in his letter made this eminently clear. Barroso did not, as Lázár now claims, “promise his support of the project in principle.” On the contrary, he called attention to the problem of “the rules on public procurement and state aid.” That was a signal of further probes into the legality of the deal.

Nuclear Power Plants in the European Union

Nuclear power plants in the European Union

Lázár is trying to divert the conversation from the real issue–defiance of EU laws that are on the books to ensure fair competition. Instead, he is trying to show that the controversy is the result of the outsize influence of western multinational corporations. After all, he said, Paks II is one of the largest projects underway in Europe. Large amounts of money can be made by being one of the contractors or suppliers. So, according to Lázár, the issue “is not political but commercial.” Well, indirectly it might be commercial, but what the EU is directly complaining about is an illegal process. The Hungarian government transgressed several European laws and directives that are supposed to ensure equal opportunities to all.

János Lázár was right on one point. He bitterly complained about the length of time it took to deliver the infringement procedure. After all, it was about two years ago that the Hungarian government began final negotiations on the Paks II project. Indeed, it is hard to imagine that it would take two years of solid work to come to the conclusion that Hungary was in the wrong when it signed a contract with Rosatom without open competitive bidding. Népszabadság noted that despite all his blustering, Lázár said nothing about Hungary’s total unwillingness to repeat the bidding process, this time with multiple applicants.

Attila Aszódi, the government commissioner in charge of the project, was asked by many media outlets to comment on the situation. Aszódi is described in his curriculum vitae as an “energy engineer” (energetikai mérnök). Before he was called to head this project he was a full professor at the Institute of Nuclear Technology at the Budapest Engineering University. So, I guess one cannot be terribly surprised that Aszódi is not well versed in legal matters. In his numerous interviews he painted a simplistic picture of the Hungarian position. In his opinion, since the European Union “raised no objections of principle to the agreement from the perspective of article 103,” it means that “the Paks II project itself must be legal.” A huge misunderstanding of the issue.

Meanwhile it turned out that the Hungarian government has spent a fair amount of money already on the project. Moreover, it has drawn on its loan agreement with the Russian government which, if the project comes to a halt, will have to be paid back immediately in one lump sum.

The most amusing news I read in the Hungarian media today was Rosatom’s reaction to the EU suspension of the Paks II project. The mammoth Russian firm announced that “Rosatom follows the dialogue [between EU and the Hungarian government] and fully shares the opinion of János Lázár concerning the legality of the project.” What a surprise.

The Hungarian government is desperately trying to find an effective way to make the problem disappear. One point they emphasize over and over is that no nuclear plant anywhere inside the European Union was built after an open bidding process. So far I have not heard any reporter who could prove or disprove this assertion. It would certainly be a worthwhile undertaking to find out whether the statement is true or not. And if true, what makes the Hungarian case different.