(Bloomberg Opinion) -- This is one of a series of interviews by Bloomberg Opinion columnists on how to solve today’s most pressing policy challenges. This conversation has been edited and condensed.

Andreas Kluth: This week, Hungary and Poland shook the entire European Union by vetoing the bloc’s upcoming seven-year budget and its attached Covid stimulus package, worth $2 trillion altogether. The two countries object to a conditionality clause that ties the funding to member states’ adherence to democratic standards and the rule of law.

You’ve studied eastern and central Europe for decades and have written numerous books on the region’s politics and history, including “The Magic Lantern: The Revolution of ’89 Witnessed in Warsaw, Budapest, Berlin and Prague,” a new edition of which has just been published. How do you explain what happened this week?

Timothy Garton Ash: What is happening is really shocking. The populist governments of Hungary and Poland are holding the entire EU to ransom, so that they can continue to receive very large sums of money from the EU while undermining two of the most fundamental principles on which the European Union is based — namely, number one, that it’s a community of democracies; and number two, that it’s a shared community of law.

AK: Hungary, under Prime Minister Viktor Orban, and Poland, under the Law and Justice Party, both claim they’re not dismantling the rule of law and civic liberties. And yet they’re opposed to adopting these provisions. In terms of the deterioration of democracy in these countries, how bad has it gotten?

TGA: I don’t think most Europeans have woken up to just how bad it is. Freedom House now classifies Hungary as a partly free country. I would argue that it is no longer a democracy. It is de facto something like a hybrid-authoritarian or competitive-authoritarian system. Poland is less far down that road, but its populist government is trying to head the same way. These are EU member states. A great deal of effort has been devoted by them to appear as if they still conform with the standards of democracy and the rule of law that EU member states are meant to abide by, under Article Two of the basic treaty of the European Union. But if you look carefully at the way Hungary is ruled, it is no longer a democracy. And that is an absolutely shocking fact, which puts an arrow into the very heart of the European project.

AK: Is the slide toward autocracy in these countries reversible? Or is it too late?

TGA: It’s absolutely reversible. In the case of Poland, you can still have a free and relatively fair election, because you have big independent media, powerful opposition parties and a massive civil society. [The opposition] could win the next election in 2023 at the latest and start reversing the trend. In Hungary, it’s more difficult because Orban has almost everything under his control, except the cities, some smaller independent media and certain parts of civil society. But that doesn’t mean he’s there forever. The Hungarian opposition is actually getting its act together in a very significant way. If the rule of law and democracy in Hungary gets the support it should get from the rest of the EU, it’s reversible there too.

AK: Let’s talk about how we got here, because this wasn’t the idea when the EU expanded to take in the countries formally behind the Iron Curtain. What’s changed in the region in the years since the revolutions of 1989?

TGA: What was intended by all sides in the 1990s and 2000s was that becoming a member of the EU would consolidate liberal democracy in post-communist states in central and eastern Europe, just as it helped to consolidate democracy in countries like Spain and Portugal after their dictatorships. This happened for a time. But it turned out that while countries had to live up to high European standards in order to be admitted to the club, once you were admitted, you could do whatever you like. It’s the only club I know in history where you have to abide by the rules before becoming a member but can break them once you’ve become a member. In 2010, Orban was elected in a free and fair election and got a sufficient majority in parliament to change the constitution. He then started systematically dismantling democracy, riding a wave of popular discontent at the way liberalization, European-ization and globalization have played out. Without the wave of populism, you can’t understand what has been happening.

AK: These countries fought for their freedom in 1989. Why do they no longer seem interested in the liberal project?

TGA: In the case of Orban, it’s overwhelmingly about power and money. That’s the hard reality. But behind that there are a lot of ordinary people who feel completely discombobulated by the liberal revolution they’ve been through over the last 30 years. You have societies that are divided — not unlike the United States, by the way — between those who embrace that change, which is roughly half the society, and those who don’t, which is roughly half the society. The skill of the populists has been to aggregate those discontents to get it just over 50%, so they win the election and not the other side. In the last Polish presidential election, it was almost as close as that: 51% to 49%.

AK: Is this a uniform phenomenon in the region, among countries formerly behind the Iron Curtain?

TGA: Absolutely not. Eastern Europe does not exist. It’s very important to repeat this: eastern Europe does not exist. They are as much different individual countries, as are those in western Europe, northern Europe and southern Europe. I’d also point out that in a recent opinion poll, 72% of Polish and Hungarian respondents supported a rule of law conditionality attached to EU funds. So we should never talk about this as being Europe versus Poland and Hungary. It’s most Poles and Hungarians, with most other Europeans, criticizing their populist governments.

There is an extended family of populisms right across the world, including Narendra Modi, Donald Trump and Jair Bolsonaro. Within that extended family, there are all sorts of peculiarities. One set is post-communist populism. There are some particular themes you find in post-communist populism — for example, the idea that 1989 wasn’t a genuine revolution, that it was just a corrupt deal between socialist dissidents and the communists. There’s this politics of memory, this argument about the past, which you don’t have in Britain or Brazil or the United States.

AK: One of the EU’s big design flaws is the lack of a mechanism to punish or expel countries that become undemocratic. Another is the lack of a common fiscal capacity that can borrow and spend to stimulate the economy. The package that Hungary and Poland are threatening to veto was supposed to be a step toward fixing that second problem. Does this dispute suggest that the EU can have either the rule of law or fiscal integration, but not both?

TGA: Among the EU’s problems is that it has both a north-south divide — because of the poor design of the euro zone — and an east-west divide. One way of thinking about what has happened over the last six months is that the EU at long last has started to address the north-south divide. That’s because Germany, in particular, has leapt over its own shadow and agreed both to big grants and, in effect, to mutualization of debt. That’s a hugely positive development, but in order to get that package through, you’ve got to get the Poles and Hungarians on board. My very strong fear is that the rule of law conditionality mechanism, which is already weaker than what the European Commission originally proposed, will be further watered down. If so, then from the first of January, we must come back to this issue and keep at the issue because it’s eating away at the very foundation of the whole European project.

There is no denying that this money from the post-Covid recovery fund and the budget is desperately needed. Many millions of people are on their knees economically because of Covid. It is a genuine and tragic dilemma. [But] I would still want the EU and the German leadership to be firmer. If you’re talking about being tough, threatening a veto, as Hungary and Poland have done, is being tough. I think toughness is the only language Viktor Orban understands. I’m not saying you should sacrifice the whole 1.8 trillion euro package, just to secure this thing. But if you have to make a compromise at the end of the day, don’t give up on this issue. Don’t think you’ve done the business, because you haven’t. For years, there’s been a really murky game of, “You pretend to be a democracy we pretend to believe you.”

AK: Is there anything Europe can do or avoid doing to help the opposition in Hungary and Poland?

TGA: There are many specific things that the western members of the European Union and others can do. It is a scandal that the best university in central Europe, the Central European University, was driven out of Budapest. What could have prevented it would have been a telephone call to Orban from the president of the United States, and an equally tough telephone call from the chancellor of Germany. To the best of my knowledge, neither of those telephone calls came. Similarly, in practice, the most important thing for the future of Polish democracy at the moment is defending the big independent media. The biggest independent television channel is owned by the Discovery Channel, in the U.S., and the most important Internet portal is owned by [Germany’s] Ringier Axel Springer. It’s really important that those foreign owners and shareholders hang on to those media. And I would like to see a telephone call from the relevant Western leaders urging them to do so. And if the attack comes from the Law and Justice party in the name of “re-Polonization” of the media, the whole EU has to say, “That’s not how we do things in Europe.”

AK: Is this debate over the rule of law and liberal values existential for the EU, in the literal sense? Could it hollow out the bloc’s values, and therefore the raison d’etre for even having a European Union? And alternatively, if we avoid that by staying firm, is there a risk that we’ll have more Brexits in the region in the coming years?

TGA: Nothing could be more existential. If the European Union is not a community of democracies, and does not guard the rule of law, I don’t know what that union is anymore. I don’t think we would have more Brexits. In a sense, what we have to do is to call Orban’s bluff, and to call [Law and Justice party leader] Jaroslaw Kaczynski’s bluff, because their populations, unlike the British, are overwhelmingly in favor of staying in the European Union. And by the way, the populist business model is built on biting the hand that feeds it. If you put together the budget and recovery fund, what Hungary is due to get is close to 10% of its GDP.

So worry not that Polexit or Hungexit is happening anytime soon. But if we don’t address these issues, then what you will get is not a collapse of the EU, but definitely a gradual weakening of the EU.

AK: So what’s the bottom line? Will the EU remain a bloc of open and liberal democracies?

TGA: Immediately, I fear the rule of law conditionality will be watered down. In a 10-year perspective, the EU will survive as a community of liberal democracies, or it will be gradually falling apart. One reason I’m optimistic about that survival is that, as we see in Poland and Hungary, when democracy and freedom are threatened, the people get out on the streets to stand up for it.

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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