February 2018

By András Bíró-Nagy

Democratic backsliding has become a top issue in European politics, not just among leaders who have started to realise recently that inaction might undermine the credibility of the European Union, but also in the international media as for now it seems evident that the construction of illiberal regimes in Hungary and Poland is fuelled by EU money. The governing parties Fidesz and PiS are not ’only’ accused of the systematic disassembling of the rule of law and hollowing out the democratic institutions. They are also accused of boosting the economy through contracts handed out to favoured insiders, thus they are largely financing their anti-democratic rule from EU funds.

In terms of going back on the commitments to the fundamental values of the EU, it has already turned out that the EU institutions lack the necessary legal instruments to tackle systemic threats to democracy. Infringement proceedings can target specific legal issues but they are not an appropriate tool to address challenges to the wider democratic framework.

At the same time, the EU’s Rule of Law mechanism (the so-called Article 7 TEU procedure which allows for the (unanimously supported) suspension of voting rights of member states found to be in ’serious and persistent breach’ of EU values) is likely to go nowhere in the case of Poland, since the governing PiS party can feel safe that invoking Article 7 will not lead to sanctions due to Hungary’s veto.

While Poland ignores the European Commission’s Rule of Law procedure, there has not been similar action against Viktor Orbán’s government in Budapest. This means that the EU tries to sanction the follower, but not the trendsetter. The Orbán government started to move towards a soft autocracy five years earlier; in other words, the Hungarian ’situation’ is in a much more advanced state, and the tools applied by the Hungarian government have also been more diverse. The main reason behind the inaction against Hungary is a party political one: Orbán’s Fidesz is a valuable member of the leading centre-right party family, the European People’s Party (Fidesz contributes 12 mandates to the EPP group in the European Parliament), while PiS is not and their main domestic rival (PO) is. This fact alone ensures that Fidesz avoids the same treatment that PiS receives. Based on the EU level responses to backsliding in these two countries, the limits of the EU’s legal capacity are obvious – and leaders in Hungary and Poland are well aware of them.

It is therefore hardly surprising that the brainstorming has intensified in Brussels and other European capitals about finding new and more efficient instruments to deal with current and future backsliding. The ideas floating around are formulated in a language that illiberal leaders also understand: the language of money. There are two major developments at the EU level that favour such debates: Brexit and the planning of the next Multiannual Financial Framework, the EU’s budget. From a budgetary point of view, Brexit means that the EU loses a net contributing country. This either leads to a smaller EU budget or member states need to be persuaded to increase their payments. Since the latter seems to be the likelier scenario during the EU budget negotiations, it is vital that all European leaders, from Germany to Cyprus, can explain to their electorates that their money is delivering public goods rather than serving private interests.

As a consequence, new tools to eradicate waste and abuse will be important. In this context, the widely reported stories about István Tiborcz, Viktor Orbán’s son-in-law, and Lőrinc Mészáros, the prime minister’s friend and mayor of Felcsút, the village where Orbán was born, make it all the more likely that new political conditionalities in cohesion policy will be introduced. In the Tiborcz case, the EU’s anti-fraud office, OLAF, called on Brussels to recoup €40m after it found ’serious irregularities’ and a ’conflict of interest’ following a two-year investigation into EU-funded street-lighting contracts. A former gas fitter, Mészáros now owns hundreds of companies, in construction, real estate, media, wine, farming and beyond. According to estimates by the Hungarian transparency website Átlátszó, 83 per cent of Mészáros family companies’ earnings comes from EU sources. At the same time, the Hungarian government has attacked Brussels for years, and it even launched a ’Stop Brussels’ billboard campaign last year.

It is unlikely that net contributors will continue tolerating this kind of behaviour in the next budgetary cycle. The wish of several member states to link EU funds to the Community’s fundamental values is understandable. However, it is far from evident how a direct link between EU money and rule of law can be established in practice. It is a huge challenge and may take several years to decide the exact point at which a country crosses the red line in terms of the quality of democracy. Even if there was agreement on what ’quality of democracy’ means, expect endless debates in each individual case should this link between democracy and finance be applied in the future EU budget.

What seems to be more feasible is the establishment of an EU prosecutor with powers beyond OLAF, and linking the EU funds to joining the European Public Prosecutor’s Office for all EU member states. Another potential way to prevent the abuse of EU funds would be a more active role of the European Commission in the allocation of structural funds. More direct management by the Commission would mean that EU funds would be distributed without the involvement of local networks in cases where there is a strong suspicion of corruption. According to the current rules, the Commission can suspend programmes when it finds irregularities, but the member state does not lose the resources.

The combination of the threat of losing funds and transferring them to the direct management by the European Commission, and an EU prosecutor who would investigate fraud and corruption cases involving cohesion and agricultural funds, has the potential to become a powerful policy mix.

These two instruments could contribute to stopping financing the oligarchs of illiberal democracies, and increase the probability of reaching the original goal of cohesion policy: to help poorer regions and countries catching up.

András Bíró-Nagy is Co-director of Policy Solutions and a Research Fellow at the Hungarian Academy of Sciences (MTA TK PTI). The author is writing in a personal capacity and the views do not represent the TransCrisis consortium as a whole.

Nick Sitter (Central European University)

Democratic backsliding has become a hot topic in the EU, not just because some states pursue policies that contravene their commitments to democracy and the rule of law, but because the EU is poorly equipped to deal with it. But what does democratic backsliding actually mean? This blog offers a short answer: the twelve institutional aspects of democratic backsliding.

The comparative politics literature covers three distinct aspects of backsliding – backsliding as a process that halts or reverses democratization; backsliding as an ideological alternative to liberal democracy; and backsliding in terms of bad governance.
The notion of backsliding as a process draws on the literature on democratic transition and consolidation, and involved analysis of dynamics that might halt or reverse these processes. Key features include decline in the rule of law and democratic practices, as well as concentration of political, social and economic power and the hollowing out of democratic institutions.

The notion of backsliding as a normative alternative to liberal democracy is linked to the classic ‘democratic dilemma’ – the balance between majority rule and minority rights. Its draws on the populist tenet that the true representatives of the people should rule more or less unconstrained. This brings into question the importance of independent media, civil society and separation of powers, inasmuch as the role of all organizations should be to support the executive.

The notion of backsliding in terms of bad governance is in many ways a mirror image of the academic debates about good governance. Corruption, rent seeking, abuse of public procurement, and the establishment of an oligarchy are classical elements. This can be extended to policies that directly contravene individual and human rights, and in the EU context, core EU values. The result is various forms of hybrid regimes.

In practice, the strategy of democratic backsliding involves four key elements in terms of political institutions – centralization of power, control of the electoral process, state capture, and limiting civil society. Successful pursuit of these goals can blur the boundary between party and state, to the extent that a façade democracy may be maintained by way of elections and institutions that formally resemble those of liberal democracies, but in practice amount to a one-party regime.

The following twelve paragraphs elaborate on the most important aspect of these four sets of institutional changes that a party-leader who has won an election might embark on to build an illiberal democracy.

1. The most urgent element of centralization of political power for an aspiring authoritarian leader is centralization of executive power by way of controlling the legislature. In the long term this might include changes to the legislative structure (e.g. elimination of an upper chamber); in the short term perhaps the easiest measure is curtailing consultation, debate, and scrutiny of parliamentary legislation, or limiting parliament’s ability to hold the executive to account.

2. The second, somewhat less urgent but equally important, step is to exercise control of the judiciary. Changing the personnel in the constitutional court and/or the court’s competence, power, or decision-making procedures is the most controversial type of measures. Other, less visible, forms of control include changes to the personnel, procedures and remits of the ordinary courts, or simply ignoring court rulings.

3. The most effective, but also the most difficult, aspect of institutional centralization is the adoption of a new constitution. If done competently (and unilaterally), with high thresholds for constitutional reform, this can lock-in the ruling party’s policy and personnel preferences for the foreseeable future – even in the event of a loss of power.

4. The whole point of illiberal democracy, however, is that the ruling party does not lose the next election to the ‘enemies of the people’. Re-designing the electoral system, or adopting a new tailor-made electoral law could help secure this goal.

5. But electoral reform is rarely enough. Unless it is banned out-right, a competent opposition might respond to the incentives of the new electoral system. It may therefore be necessary to allow for periodical review of the electoral law before each election (by a government-controlled body), e.g. re-districting and rules about candidate/list eligibility.

6. The third key element of institutional manipulation in the quest of re-election concerns amendments of the regulations for electoral campaigns, including campaign finance and political advertising.

7. Once victory is secured, a central tenet of illiberal democracy is that all power resides with the leadership. Democratic backsliding usually involves both an effort to capture the state and build an oligarchy. The most important measures include corruption, or more specifically a shift from ordinary corruption to grand corruption; from bribes in an open system to a closed system where public procurement, tax breaks or regulatory rules are designed to benefit the oligarchy.

8. Controlling the state apparatus also involves control of the ‘arms-length’ agencies of the state, such as the national audit office and regulatory authorities. Most liberal democracies are based on a number of independent agencies with a high degree of credibility. In the EU system this also extents to the central bank.

9. This third element of democratic backsliding and state capture involved the other levels of the state, including local and regional government – and, in the EU, representation at the EU level.

10. Unlike the classic authoritarian recipe (eliminating opposition), the illiberal democracy model involves limiting or marginalizing independent voices. Control of the mainstream media – print, broadcast and on-line – is perhaps the most important issue. Besides direct and active state ownership, media regulation and oversight is the most direct tool. But oligarchic ownership and political direction of state advertising to supportive outlets can also help.

11. In the same vein, limiting the freedom of action of independent interest groups and NGOs is a common strategy for both authoritarian states and backsliding democracies. In the EU context, this includes efforts to limit, penalize or stigmatize foreign funding – whether private or from international organizations.

12. Finally, in the long term, illiberal democracy also involves silencing independent voices that affect politics more indirectly, by way of culture and education. The list of civil society organizations that can be brought directly or indirectly under political control is almost endless, including e.g. universities, schools, theaters, sports associations, churches etc.

The point here is not to set out an exhaustive list of institutional measures that define democratic backsliding, but rather to focus on a limited set of key institutional changes that – if carried out with due care and attention – limit the operation of liberal democracy to the extent that the regime could be characterized as backsliding on democratic commitments.

Mild versions of many of these types of reform can be found in ordinary liberal democracies, but the higher the number that is combined and the more extensive the reforms, the more solid the basis for the backsliding diagnosis.

Moreover, these reforms must be evaluated in context. A remarkable feature of the recent illiberal challenge to the EU system has been its open attack on the whole idea of the open society, individual liberties and the rule of law – as well as international cooperation. Institutional reforms are supported by both words – the narrative about national, populist, illiberal democracy – and action. Each of the twelve sets of reforms include a raft of abuses of power by way of e.g. bending and stretching the rules on emergency measures, impeaching or arresting opponents, legislating against opposition parties, harassing media or civil society, abusing audit and inspection regimes, and – of course – using the oligarchy’s economic power to support the governing party and weaken the opposition. Even the occasional bit of political violence might be called for. Democratic backsliding is most easily identified in the form of institutional change – but illiberal democracy cannot work without persistent abuse of power and a good story to cover it.

The author is writing in a personal capacity and their views do not represent the TransCrisis consortium as a whole.