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Top E.U. court says bloc can withhold billions of euros from Hungary and Poland for violating rule of law

The European Commission headquarters in Brussels. (Yves Herman/Reuters)

BRUSSELS — The European Union, long criticized for standing by as members reneged on their democratic commitments, can withhold funds when countries fail to uphold the rule of law, a court ruled Wednesday.

It is a potentially powerful tool. The question now is whether the bloc will use it.

The first tests will probably involve Hungary and Poland. Both nations have been among major beneficiaries of E.U. subsidies, which have continued despite concerns over efforts to undermine independent judges, a free press, political opposition and civil society.

Wednesday’s ruling by the European Court of Justice was welcomed by E.U. officials, anti-corruption groups and advocates for the rule of law — and disparaged by officials in Budapest and Warsaw.

“The Commission will defend the Union’s budget against breaches of the principles of the rule of law,” European Commission President Ursula von der Leyen said in a tweet. “We will act with determination.”

Hungarian Justice Minister Judit Varga, however, called it “living proof that Brussels is abusing its power.” Sebastian Kaleta, Poland’s deputy minister of justice, said the ruling amounted to “historic blackmail.”

The E.U. money at stake supports a range of activities, from infrastructure to farming and beyond. It’s money that is part of why the vast majority people in Poland and Hungary say they’re glad to be part of the European Union, despite their governments’ clashes with Brussels. It’s also money that country leaders can dole out in a way that helps keep them in power.

But going forward, the bloc will be able to suspend the self-management of subsidies by countries that do not abide by the rulings of its top court, or countries that tolerate the misuse of E.U. funds.

The European Commission, the European Union’s executive arm, can trigger the mechanism. At least 15 of the 27 member states — representing about 290 million people out of the total population of over 440 million — would need to endorse it.

Some political analysts assessed Wednesday that would be more likely to happen in the case of Hungary than with Poland, which recently has made some conciliatory gestures.

The commission is expected to announce in the coming weeks how it wants to proceed.

Officials are keenly aware that the timing alone of such an announcement could have political implications. Hungary is preparing for parliamentary elections in early April, when Prime Minister Viktor Orban could face his biggest opposition challenge in more than a decade.

The European Union already has withheld some payments to Poland and Hungary from a pandemic recovery fund. Opposition parties in Hungary have campaigned on a platform to unlock those payments and restore normal relations with Brussels.

But the recurring payments from the E.U. budget that were addressed in Wednesday’s court ruling are of much greater significance.

“The court’s decision gives us ground to hope that the systemic corruption and intentional demolition of democratic checks and balances will come to an end in Hungary,” said Miklos Ligeti, legal director of Transparency International Hungary.

Orsolya Vincze, an expert at K-Monitor, a Hungarian anti-corruption group, said in a statement that the ruling will make a difference only if the European Commission “is determined to make use of it.”

It will also depend on whether Poland and Hungary can find allies.

Some countries, particularly in Western Europe, want to make the union more cohesive in terms of the core values its members should uphold — democracy, human rights, the rule of law. Other countries, led by Poland and Hungary, have resisted such efforts.

One such fight has been over LGBT rights. Several Polish regions and towns have declared themselves to be “LGBT-free” zones in recent years, which prompted criticism from Western European nations, as well as E.U. threats to withdraw funding for those places. Numerous places backed down amid the E.U. threats.

Amid the mounting disagreements, Poland’s constitutional tribunal, which itself has been under scrutiny for being influenced by domestic political interests, said in a controversial ruling last year that Polish law can take precedence over decisions by the E.U.’s top court.

The European Parliament subsequently condemned the Polish statements and called the constitutional tribunal “a tool for legalizing the illegal activities of the authorities.”

In the face of potential financial sanctions and the current crisis in Ukraine sharpening concern about being on a direct collision course with Brussels, Poland has taken some steps toward appeasement over controversial judicial reforms.

This month, Polish President Andrzej Duda put forward a law to scrap the country’s “disciplinary chamber” for judges, which had been a major source of contention with the European Union. The European Court of Justice had previously ordered that the Polish chamber — which has the power to lift the immunity of judges and expose them to criminal procedures — be suspended, ruling that it was “not compatible” with E.U. law.

“We do not need a dispute with the European Commission,” Duda said as he submitted the proposal. Considering the current “threats” in Europe, Poland “needs peace,” he said.

But the president and the ruling Law and Justice party, with which he is affiliated, do not see eye to eye on how to proceed, with Law and Justice suggesting a lesser step of removing the chamber’s license, while other ministers have slammed the move.

After Wednesday’s ruling, Polish Justice Minister Zbigniew Ziobro tweeted, “This is a gloomy date that will be written in history textbooks, but it is not the end of the battle for Polish freedom and freedom in the EU.”

In Hungary, Varga, the justice minister, framed the E.U. court ruling as being motivated by Hungary’s upcoming referendum on “child protection.” On the same day as Hungary’s April elections, voters will be asked whether they support the “promotion” of content related to sexual orientation to those under 18. It follows a law approved last year that restricted LGBT material; that measure was criticized by the European Union as breaching its values.

“Brussels has a problem with the child protection law,” Varga said. “This is not a matter concerning rule of law.”

Noack reported from Paris and Morris from Berlin. Dariusz Kalan in Warsaw contributed to this report.