Often quoted but rarely read, article 2 of the Treaty on the European Union has the merit of being crystal clear:

“The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities.

These values are common to the Member States in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail.”

In other words: the rule of law in the EU isn’t a ‘nice to have’, but an immovable basis upon which the EU is built on. The EU is not a cash machine for national governments, nor should it finance governments who do not respect our common values, and respecting the rule of law is simply ‘non-negotiable’: it must happen, especially within our Union.

This is why Renew Europe has been pushing so hard for European values to be at the heart of the EU budget by introducing a rule of law mechanism clause applied to the whole 2021-2027 MFF and the Recovery fund. However, together with my Hungarian colleague Katalin Cseh, we also believed it was necessary to limit the impact such conditionality would have on the member state’s beneficiaries. Just because a government is baffling fundamental rights or baffling with the rule of law does not mean the country’s citizens, local authorities, NGOs, civil society organisations, or SMEs should suffer as a result of freezing EU funding going to that member state. They should not pay the price of their government’s illiberal drifts.

Smart conditionality is the solution to this problem: it would allow the European Commission to centrally manage funds directly with recipients without the involvement of the national government. This idea is not new and has been implemented for many years for several EU funds. The Instrument for Pre-accession Assistance (IPA) is an example: the coordination between the Commission and independent political organisations who manage the funds excludes national governments. It demonstrates that it is operationally possible for the Commission to centrally manage funds going to a country without the involvement of the country’s national government. If this can be outside the EU, why can’t it be done within it? It is a question of political will, not capability.

How would this work in practice? Currently more than 80% of the EU budget is handled by shared management, which means that national governments are in charge of their allocation in their country. Should a government commit serious violations of rule of law, then the Commission would, for a certain time-period, regain complete control over funds through direct or indirect management. If it is direct management, then either the Commission itself from Brussels, it’s representation in a member state or Executive agencies would work in direct contact with beneficiaries to avoid a shortfall in funding. If indirect implementation is preferred, then the administration of EU funds would be entrusted to a politically independent organisation, whether it is a European (e.g. the European Investment Bank) or a predetermined local one. Since this is currently being done in many neighbouring countries, there is no need to reinvent the wheel: the details of how the Commission manages this process have already been fleshed out.

For example, for funds directly managed by EU delegations in third countries, EU officials in the delegation’s political section are in charge. They know the country, language, local stakeholders, political context and controversies making them harder to fool compared to officials coming from outside. The EU delegation is in charge of the whole fund management process: promoting the call for applications, reporting, ensuring visibility, auditing, sights visits, etc. No national government is involved: EU delegations liaise directly with the beneficiaries. This shows, yet again, that if EU officials are capable of doing this externally, then there is no reason why it could not be done temporarily in a member state.

There are several ways in which smart conditionality could be implemented. For Renew Europe, this model could become a blueprint for management of all EU funds in the future. The first way to make implement it would be a horizontal clause in the 2021-2027 MFF. This approach would make the most sense. In addition, since the Recovery plan should be mainly supervised centrally, it could represent an important first opportunity to implement the ‘smart conditionality’. The second option is adding smart conditionality into each piece of EU legislation that sets out the rules for EU funds, but that would take many years and runs the risk of it being left out.

Looking ahead, the speed and way in which Europe recovers from the Covid-19 pandemic will be a defining moment in the EU’s history. All governments will focus their efforts on the economy, and rightly so. However, we will never accept a trade-off between economic recovery and respecting the rule of law. Fundamental rights and the rule of law are not empty slogans; they are the foundation of our Union and must be protected effectively all across Europe. The European Council deal in July was a welcome step in bringing conditionality into the EU budget, but it now needs to be implemented fully. Smart conditionality can ensure that there can be no rebates on our values.

Sandro Gozi is Member of the European Parliament since February 2020. He is currently involved with the Internal Market, Constitutional Affairs and Regional Development Committees. In the past he served as a political assistant of the European Commission President Romano Prodi. He was a diplomat, Member of Parliament and then Secretary of State for European Affaris under the Renzi and Gentiloni Governments in Italy until 2018. He was elected on the French Renaissance list in May 2019 and also was an adviser to the French Prime Minister Edouard Philippe.