Can EU funds promote the rule of law in Europe?

Policy brief
Jasna Šelih with Ian Bond and Carl Dolan
21 November 2017
  • The EU is a values-based organisation, but it has struggled to respond effectively when member-states violate its values, including the rule of law. The rise of populist parties that reject European values suggests that the problem may grow. The EU needs to defend its values more effectively.
  • The rule of law is the backbone of democracy. It is essential to the functioning the EU, which depends on shared confidence in individual legal systems; and essential to the Union’s aim of embedding liberal democracy in Europe.
  • Countries where the rule of law is weak are unlikely to be able to use EU funds effectively. In the absence of the rule of law, corruption can flourish; that damages the public finances as well as investor confidence.
  • The EU has been trying to force new member-states to pay more attention to EU values and the rule of law since the post-Cold War enlargement process began in the 1990s. But the instrument chosen, requiring a political decision to suspend a member-state’s voting rights, has proved impossible to use in practice.
  • The Commission can in some cases start infringement proceedings, when in the process of violating EU values a member-state has breached a specific EU law. But it is possible to honour the letter of the law while breaching its spirit and ignoring the EU’s values.
  • The Commission has also created a ‘Framework to strengthen the rule of law’, but the Commission can only make non-binding recommendations to improve the situation in a member-state.
  • The EU’s biggest levers are financial. European structural and investment funds are designed to reduce economic and social inequality in the EU; they amount to more than €450 billion for the period from 2014 to 2020. Over the years, various economic conditions have been attached to them, designed in particular to stop countries running excessive deficits while receiving EU funding for investments.
  • A number of member-states and some European commissioners want to see respect for the rule of law included as a condition for EU funding. The EU already links compliance with EU values, and especially rule of law, to progress towards EU membership for candidate countries; the task is to make rule of law conditionality as effective in changing the behaviour of existing member-states as it is in the case of candidates.
  • The Commission could do many things without treaty changes, either by taking a broader interpretation of existing EU laws, or by proposing new conditionalities when the rules governing structural and investment funds are revised ahead of the next budget cycle.
  • Any mechanism devised to improve compliance with EU values and the rule of law must in principle be applicable to all member-states, not just poorer and newer ones.
  • As a first step, the EU needs regular assessments of the operation of the rule of law in all member-states. The EU Fundamental Rights Agency already collects relevant data; with an enlarged mandate, it could report on individual member-states. Information could also be drawn from the Council of Europe and civil society organisations.
  • On the basis of the assessments, the Commission could judge whether there was a rule of law problem in a member-state, and if so, how serious. For less serious breaches of the rule of law, a member-state would have to draw up a plan to meet its obligations.
  • For more serious breaches, the Commission could suspend disbursement of funds, and step up monitoring and verification. In doing so, it would have to ensure that poorer regions and vulnerable groups did not suffer disproportionate harm from measures designed to hit governments that ignore EU values and the rule of law. Funding could be directed away from governments and go directly to enterprises, or be disbursed by civil society organisations.
  • Countries that perform particularly well could be rewarded with extra funds, on the model of the current ‘performance reserve’ for structural and investment funds.
  • Informal discussions on the next budget cycle are already starting, so this is a good moment to discuss strengthened rule of law conditionality and any new legislation needed to underpin it.
  • Nothing will change unless member-states have the political will for it. But the lesson of the accession process is that the EU can improve the quality of democracy and the rule of law by working with stakeholders in member-states where there are problems.
  • It cannot be right that the EU is forced by its own rules to subsidise member-states that flout EU values, and in doing so damage their own economic prospects. The rule of law is the best long-term guarantee of economic convergence between EU member-states.

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