By Andreas Kluth | Bloomberg,

has done it again: She’s “merkeled.” In German, that neologism means to hedge, delay, dilute and fudge — as the eponymous German chancellor is wont to do. There’s much to be said for this elastic style of politics, especially in the labyrinthine European Union. Merkel’s latest fudge, however, will weaken and undermine the bloc, and tarnish her legacy.

The compromise was struck between her government, which currently holds the EU’s rotating presidency, and two rogue member states, Hungary and Poland. They’ve been threatening to veto the bloc’s seven-year budget and a pandemic recovery fund, worth a combined 1.8 trillion euros ($2.2 trillion). Budapest and Warsaw were holding the package hostage because they wanted to remove a mechanism that ties EU funds to observance of the rule of law.

Here’s the fudge: The mechanism is still there in the text, unaltered, so the EU can say it stayed firm. But it’s been been neutered with additional “interpretations” so that it’ll almost certainly never be applied. That in turn allows Hungary and Poland to declare victory and let the EU’s money flow — not least, to them.

The background is that Hungary for a decade and Poland for half as long have been whittling away at fundamental principles of liberal democracy, to which they acceded when they joined the EU in 2004. Stealthily and cynically, their populist governments have been infringing on judicial independence and more — enough for Brussels to launch formal proceedings against them under Article 7 of the European treaties.

That process, however, is notoriously toothless, because sanctions against any member state would require a unanimous vote by the other 26, and Budapest and Warsaw have each other’s back. So the Netherlands and a few likeminded countries, as well as the European Parliament, insisted on an additional mechanism to be included in a historic budget-cum-stimulus deal struck in July.

Almost as soon as that clause was written, the usual haggling broke out about what it could mean. Euro-hawks claimed it was straightforward: No rule-of-law, no money. Hungary and Poland threatened to sink the whole deal.

So the merkeling started. In a first round of compromise, the wording was diluted so that the mechanism became almost useless. It now applies only to those rule-of-law breaches that directly corrupt the use of money from Brussels. It no longer has any bearing on all other violations, from cherry-picking judges to harassing journalists, academics or opponents.

Even this gesture from Brussels, astonishingly, wasn’t enough to appease Budapest and Warsaw. Hence Merkel’s final fudge: On top of the mechanism’s previous dilution, there’s now also the prospect of indefinite delay. The clause won’t kick in until Hungary and Poland get a chance to take it to the European Court of Justice in Luxembourg. Those judges will take their sweet time, and a decision isn’t expected until mid-2022. Conveniently, this will come after Hungary’s parliamentary election, slated for early 2022.

Viktor Orban, Hungary’s prime minister, can therefore keep playing his cynical game of pocketing the European cash that buoys his submerging economy while running a quasi-autocracy. His country is a big net beneficiary of the EU budget, and stands to get another 6.2 billion euros from the pandemic stimulus fund he’s so graciously allowing now. Poland can expect even more: It’s the single biggest net recipient of European money, and would get 23.1 billion euros on top from the stimulus.

Some reports suggest that there may have been additional understandings in the compromise. Even after the Luxembourg court approves the rule-of-law mechanism, Hungary and Poland can probably appeal or deflect decisions, thus stretching them out forever. Portugal, which will take over the EU presidency on Jan. 1, may also bring the separate Article 7 proceedings to an official close.

Merkel’s fudge is as disappointing as it is unnecessary. As I argued last week, the EU held all the trump cards in this bluffing game. It could have delayed the adoption of its seven-year budget and instead entered 2021 with an annual emergency budget. And the 25 countries other than Hungary and Poland could have raised the recovery fund on their own. That would have brought Budapest and Warsaw in line fast.

In general, fudging — and Merkel’s knack for it — is an underappreciated art. It’s often the only way to get anything done in politics, and not only in the EU. And yet the rule of law isn’t a technical matter like, say, a resolution fund for European banks or guidelines for public deficits.

Judicial independence and the associated institutions of a free press and civil society are essential for a supranational bloc that’s ultimately held together by values. As the historian and author Timothy Garton Ash told me, the rule of law is in fact “existential” for the union. Dilute it, and you begin dissolving the EU.

Europe under the leadership of , due to retire in less than a year, had a Faustian choice to make: It could stand up for its values, even at the cost of delaying a necessary infusion of money, or it could get the cash flowing, but at the price of selling its soul. Unfortunately, the EU failed the test.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andreas Kluth is a columnist for Bloomberg Opinion. He was previously editor in chief of Handelsblatt Global and a writer for the Economist. He’s the author of “Hannibal and Me.”

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