I am new to budget negotiations, but since it has become a major element of the #RuleOfLaw debate, here is an attempt (and timeline) at understanding this evening's veto from Hungary and Poland. I open thread.

In July, the EU-27 agreed to a recovery fund to deal with the economic fallout of the COVID-19 pandemic. The deal included both grants and loans. The latter are less attractive for Southern member-states. 1/

The EU-27 also agreed that there will be some sort of rule of law conditionality attached to the recovery fund, but left the details for later. Everybody praised the EU's swift and united response to the crisis and went on with their summers. 2/

Meanwhile, the Parliament and the Council continued negotiations on the EU long-term budget 2021-2027, the so-called MFF, which was also agreed in July at the political level but needed agreement from both bodies. 3/

Now it's when it gets tricky for the non-initiated. Both the MFF and the Recovery Fund require unanimity. The difference is that, with no agreement, the MFF will simply be rolled into the next year, as it happens in most countries. But the Recovery Fund can't. 4/

One major element of the Recovery Fund is the so-called own resources ceiling. Again, a complex thing for the non-initiated but basically it is the legal basis the EU needs to raise funds from capital markets to endow the Recovery Fund. No own resources = no money for grants 5/

Now enters the #RuleOfLaw. Attaching some rule of law requirements to disbursing EU funds is not a new idea. Council and Parliament have been debating it for some time, as a way to bypass some of the problems posed by Art.7 procedures 6/

In November, Council and Parliament reached an agreement on #RuleOfLaw conditionality. Now there was a pandemic, and a Recovery Fund, conditionality would apply to both. Here, my first question: why would Poland and Hungary agree to such mechanism three weeks ago... 7/

... and now veto (part of) the budget? Two reasons: first, the agreement is not law yet; second, Hungary and Poland managed to water it down substantially: the initial idea was to have a reverse QMV on a Commission's proposal to stop funding. This did not happen 8/

Now you are the Polish and Hungarian governments and want to use the #RuleOfLaw conditionality as a bargaining chip and propaganda machine. What do you do? Do you threaten to block the MFF? It would not matter much, as it will be rolled into the next year 9/

So you go to the next best thing: the own resources ceiling that matters so much to Southern countries. Perhaps you hope the Frugals would not make much of a fuss, since they don't like grants to start with. Perhaps you think Germany neither 10/

Then you get your good old Slovenian friend (!?) on your side, and you create the perfect victim narrative by muddling the story to the extent that people with a EU research background have to spend their afternoon tweeting about in the hope of understanding something 11/

Your spinning has then worked wonderfully. The general public overlook the technicalities. In Poland and Hungary, media explain that Brussels wants Budapest and Warsaw to take migrants in or else. In Spain and Italy, they say the Hungarians and the Poles are holding our money 12/

The truth, as usual, is somewhat more nuanced. The #RuleOfLaw conditionality mechanism that your governments agreed to has nothing to do with migrants and it is much less aggressive than what most other member-states would have wanted. 13/

The Frugal Four and Germany are NOT happy because as much as they opposed mutualisation, they want the Recovery Fund to start pumping money to the EU's economy, as they know what may happen if it does not. 14/

Nobody is willing to let go of the #RuleOfLaw conditionality and, frankly, everyone is rather frustrated with you now. Many think you are bluffing, as the money you will receive from the Recovery Fund amounts to ca. 3 per cent of your GDP. 15/

So the EU seems to be prepared to call your bluff, by floating ideas on how to get the recovery fund outside of EU structures, for example, through enhanced co-operation or via an international treaty. Neither would be ideal, but nor is the current situation 16/

What many on the West forget, though, is that governments come and go but resentment tends to linger. Understanding why Orban and Morawiecki's strategy works domestically is important to break the stalemate. This is more than a €750bn worth Mexican standoff. Ends/

Epilogue: any addendum, correction or comment to my rather basic explanation would be more than welcome. As I said, I am not an expert on budget negotiations, so this thread is as much for my clarity of thought as it is to spark some debating out there.