Money, Money, Money: The EU at a breaking point

A torn flag of the European Union

Capucine May

Capucine has recently graduated from UCL SSEES with an MA in political analysis, specialised in Central-Eastern European and Russian politics. Her interests lie in democratic institutions and consolidation, security studies, the politics of identity and the political economy. Her research has recently focused on the use of security discourses in altering popular perceptions of democratic representation, notably in Hungary. She is the online editor for SLOVO, UCL SSEES' postgraduate journal on Eastern Europe and Russia, and regularly writes about EU foreign policy in her own blog, Me & EU.

27th January 2021

Alex Damian | Getty Images

EU’s budget crisis as a manifestation of its internal identity crisis


Nowhere is the clash between liberal, rules-based democracy and nationalist, populist democracy that plagues the EU better illustrated than in its recent budget crisis. 


Budget crisis


On the 16th of November, Hungary and Poland teamed up to veto the approval of the EU’s budget, which included a 750-billion-euro Coronavirus recovery fund, much needed and awaited by members across the continent. This crisis reflects some of the deepest ideological divides present within the EU, and may even be an illustration of some of the seemingly insurmountable differences the Union is and will be confronted with in its attempt to remain a united bloc. 


Ironically, the COVID-19 fund, which had been agreed to in July this year, was at the time hailed as a miracle – not so much because of its terms, but rather because it was an example of one of the few decisions which EU member states have managed to agree upon unanimously. However, even during negotiation the fund at times seemed at risk of not seeing the light of day.  


Significant disagreements between the ‘frugal’ members, including the Netherlands, Austria, Denmark and Sweden, and France and Germany over the size and scope of the recovery fund threatened to break down negotiations. The deal was only agreed upon at 5:30 a.m. on the fifth day of what became one of the longest EU summits in history. Charles Michel, the Council President, hailed the deal as proof that “Europe is strong. Europe is united!”. But, at what seemed the very last hurdle, the deal stalled due to yet other, more obscure tensions: historically and culturally embedded ideological conflict over the role of rule of law in democracy. 


Historical tensions


These tensions are not new – they have manifested themselves countless times in the EU’s East-West relations, notably with Hungary and Poland. In April, there were renewed calls on the part of center-right parties to kick Fidesz, a Hungarian right-wing nationalist party, out of the European People’s Party, one of the Parliament’s largest and most powerful political alliances. This came after Orbán, the President of Fidesz and the Hungarian Prime Minister, used the COVID-19 pandemic to secure emergency powers, which at the time seemed set to remain in place for an undisclosed (and seemingly endless) length of time, undermining the rule of law in Hungary. This tension within the EPP – and the European Parliament more broadly – is rooted in deep ideological differences, and has been brewing for a long time. 


In 2018, the European Parliament triggered article 7 against Hungary. It had previously done so for Poland in 2017. This procedure, sometimes called the EU’s ‘nuclear option’, can be invoked in the case of a serious breach of EU values, potentially leading to the removal of member states’ voting privileges and application of sanctions. In the case of Poland, it was triggered due to excessive government control over the judiciary, and in Hungary due to “concerns about freedom of expression, academic freedom, the rights of minorities and refugees”.


More recently, in March 2019, Hungary’s Fidesz was effectively suspended from the EPP. Rising tensions between Orbán and other EPP members on questions of rule of law and the former’s erosion of liberal democracy in Hungary exploded when Orbán launched a political campaign demonizing the Commission’s approach to migration, and directly targeting the Commission’s president, Jean-Claude Junker, who is himself a senior member of the EPP. 


Tensions have done nothing but grow since then, with the most recent call for Fidesz’s exclusion from the EPP emanating from a wider group of member states which includes signatories from Czech and Slovak parties, members who form part of the Visegrad 4 and traditionally thought of as Hungarian allies. Disagreements and fractures have recently manifested themselves in Hungary, Poland and the Czech Republic’s disagreement with the EU’s new ‘migration pact’


Much of the growing divide within the EU, most notably between Hungary and Poland against supporters of supranational liberal democracy, is rooted in conflicting conceptions of democracy – with liberal, rules-based democracy on the one hand and illiberal, populist, and often nationalist forms of democracy on the other. This identity crisis has been simmering under the surface, but threatens the future solvency of the EU as an international organization. The EU’s recent budget crisis is simply another manifestation of this impending identity crisis. 


What does this illustrate?: different conceptions of democracy and governance 


Hungary and Poland’s veto of the EU budget on the 16th of November was intimately linked to this fragmentation, as it was designed as a move of protest against a clause in the budget which links EU funds to respect for the rule of law in member states. Both countries, as mentioned, are currently being investigated by the EU for questions of backsliding on democratic freedoms. This reflects a much deeper, more serious issue which threatens the future of the EU: conflict over what democracy means, and how and in whose name it is to be manifested and put in place. This is especially visible in the conflicting democratic discourses present in the proponents of liberal democracy in the EU, and Hungary.


The EU was created in the debris of the Second World War in an attempt to tie the fates of European countries together, thereby stemming the threat of war breaking out amongst them. According to Furedi (2018), the founders of the EU established their legitimacy not by acting in the name of nations or traditional values, which were concepts associated with the discourse of the Nazis, but rather by looking towards technocratic authority, the rule of law, and attempting to forge a new, anti-nationalist identity (Furedi 2018). Representation became representation of all viewpoints. The EU’s very identity is therefore rooted in a form of democracy which attempts to be value-neutral, and is often anti-traditionalistic. This form of democracy, in which everyone is equally represented, is generally thought of as liberal democracy. 


On the other hand, Orbán’s concept of “Christian democracy” is rooted in two central elements: the need for a united ‘demos’ which serves as the basis of democratic legitimacy, and the view that the nation, historically and culturally constructed by the state, is the only truly legitimate ‘demos’ for a democratic system to represent (Egedy 2014). He believes that there is a need to build a community or ‘demos’ which can then be legitimately represented by a democratic government. This is not an uncommon view in democracy studies (Weiler 1999, Innerarity 2014). In Orbán’s view, then, democracy is only legitimate if it is national, taking the nation as its ‘demos’, and works to represent the national voice


Orbán has worked to craft and instill a sense of national identity which is heavily value-laden, and “culturally and historically defined”. The Hungarian nation is portrayed as fundamentally rooted in Christianity and shared Hungarian heritage.  He has instilled this conception of identity through the renaming of streets and national holidays (Palonen 2013), and by participating in civic activism to foster these national sentiments (Greskovits, 2017). This is the community and the values which, in his view, must be represented and protected by the government in order for it to be legitimately democratic – even if this means going against rule of law. 


This points to fundamentally contradictory concepts of identity and representation, which lie at the heart of democracy. In fact, Orbán views liberal democracy as endangering the legitimacy of democratic representation. Orbán and other right-wing politicians in Hungary view liberal democracy and especially multinational democratic systems, such as the EU, as threatening democratic representation by encouraging foreign elite rule and endangering the existence of national communities. The EU also views Orbán’s system of nationalist, populist democracy as a threat to the rule of law system upon which liber democracy is built. Not only do Hungary and the EU’s conceptions of democracy clash, but they see each other as the most significant threat to their own identity and system of representation. This fundamental clash is what will threaten the EU, and what is reflected in the current budget crisis. 


What can the EU do?


On the 26th of November, Orbán and Morawiecki issued a joint declaration stating that neither country would accept “any proposal that is deemed unacceptable by the other”. They have asked for a substantial revision of the rule of law clause. This suggests EU leaders may face a major clash on issues of rule of law at the European Summit later this year. Leaders of the rest of EU member states stated they were not willing to make concessions on issues of rule of law, as this would threaten to undermine the very fundamental pillar upon which the EU is built: liberal democracy. However, if the stalemate remained, the EU would have had no budget for 2021, and an would have found itself relying on emergency mechanisms

In December 2020, the EU agreed to a compromise which delays the adoption of the mechanism linking EU funds to respect for rule of law. This was largely perceived as a victory by Hungary and Poland, with the Hungarian Justice Minister tweeting “Victory!” in reaction. Although nothing has changed the text of the mechanism, this compromise could delay its imposition by 1.5 to 2 years – which one MEP from Renew Europe, a pro-Europe political group of the European Parliament, said gives Orbán just enough time to win another election. Once again, the EU has backed down in the face of pressure from nationalist forces – reflecting a position of weakness rather than powerful unity which threatens to weaken the shared identity which holds the EU together.


This crisis, though a heated point of conflict, will be neither the last or the worst the EU will have to deal with in the near future. Tensions on key questions tied to the EU’s very identity are exposing the fragile basis on which its unity is built. No matter what the outcome this time, the budget crisis reflects an ominous underlying issue the EU will eventually have to face: how to manage contrasting understandings of democracy within the union, itself built upon the concept of liberal democracy and the rule of law?



Further Reading

Furedi, Populism and the European Culture Wars: The Conflict of Values Between Hungary and the EU

Egedy, G. (2013). Conservatism and nation-models in Hungary . Hungarian Review.

Palonen, E. (2013). Performing the nation: the Janus-faced populist foundations of illiberalism in Hungary. Journal of Contemporary European Studies, 26(3), 308-321.

Greskovits, B. (2017). Rebuilding the Hungarian right through civil organization and contention : the civic circles movement. EUI RSCAS. Cadmus, European University Institute Research Repository.

Share This