The European Union’s highest court has ruled that the 27-nation bloc can link financial backing for member states to respect for rule of law, and that a challenge by Hungary and Poland should be dismissed.
The right-wing governments of both nations had argued that such action lacked a proper legal basis.
Both nations, recipients of substantial EU funds, have come under increasing criticism over the past few years for veering away from western principles of respect for democratic values in their nations.
“The court dismisses the actions brought by Hungary and Poland in their entirety,” the European Court of Justice said in a statement.
The ruling was hotly anticipated by many who had accused the two nations of democratic backsliding and had seen the linkage measure as the EU’s most potent weapon to prevent a democratic legitimacy rift deepening within the bloc.
When it comes to democratic principles, “the European Union must be able to defend those values, within the limits of its powers”, the court said.
The European Commission had said it would await Wednesday’s ruling before committing on whether to withhold funds.
Hungary’s justice minister Judit Varga called the ruling a “political judgment” and proof that the EU was abusing its power.
“The ruling is another application of pressure against our country because we passed our child protection law during the summer,” Ms Varga wrote, referring to contentious legislation last year which forbids the depiction of homosexuality or gender change to minors in media content.
But the EU’s passage of the rule of law mechanism pre-dates that Hungarian law, which many critics have condemned as a violation of LGBTQ rights.
Hungary and Poland have in the past rejected such reasoning, arguing that the court was overstepping its authority in approving a new mechanism that is not described in the EU’s own treaties.
They said making a link between finances and the legal decisions of independent member states amounted to blackmail by Brussels.
The court argued that democratic backsliding had not only a political impact but also affected budgetary matters.
“The sound financial management of the union budget and the financial interests of the union may be seriously compromised by breaches of the principles of the rule of law committed in a member state,” it said.
Poland and Hungary have faced criticism in the EU for years over allegations that they have been eroding judicial and media independence, among other democratic principles.
The EU struggled to do much to alter the course of either nation, and turned to linking money to their adherence to democratic behaviour.
Respecting democratic rule of law principles is a beacon of the EU admission criteria and the court insisted that, once in, those principles should stick.
“The court specifies first that compliance with those values cannot be reduced to an obligation which a candidate state must meet in order to accede to the European Union and which it may disregard after accession,” it said.
In Hungary, Prime Minister Viktor Orban has been pushing what he calls “illiberal democracy”, which his critics say amounts to stifling democracy.
In Poland, the Law and Justice party overwhelmingly dominates government and has also increasingly faced criticism from other EU member nations. The government has broken the nation’s own laws to gain political control over courts and judges.
Hungary and Poland initially sought to block the budget because of the introduction of the new mechanism, but eventually agreed to the plan on condition that the European Court of Justice would review it.