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Germany, backed by a group of countries including Hungary and Poland, is leading a revolt against new EU legislation aimed at shining a light on foreign influence in political campaigns.
Under the proposed law, the bloc would set up a central register for media, non-governmental organisations and lobby groups that receive funding from outside the EU.
Berlin and other capitals have thrown their weight behind international NGOs which have condemned the proposed regime, saying it mirrors discriminatory measures imposed by the governments of Russia and Georgia on dissenting voices in those countries.
The Hungarian government itself clashed with the European Commission when it set up the Sovereignty Protection Office, a dedicated agency investigating opposition politicians and NGOs that receive funds from abroad.
The backlash is likely to force the bill back to the drawing board of the new EU commission which will be formed later this year and comes just days ahead of elections to the European parliament which have been marred by an alleged Russian influence campaign and other scandals.
The commission put forward the draft law in December in a bid to improve the transparency of foreign funding received by NGOs, lobby groups, consultants and others carrying out “interest representation activities” on behalf of non-EU governments.
It was proposed in the wake of the 2022 Qatargate scandal surrounding the European parliament, in which lawmakers were accused of receiving bribes from Qatar and Morocco via a human rights group set up by a former MEP turned lobbyist.
During a meeting of EU ambassadors last week, countries including Germany, Poland and Hungary called for the legislation to be changed, with several other member states unwilling to move forward with the proposal at this stage, the people said.
One senior EU diplomat said the proposal posed a dilemma for the bloc.
“A scheme which could work well in a liberal democracy — with a government that encourages and appreciates input from the civil society — could be easily abused by illiberal democrats/autocrats to be,” the diplomat said.
“We have to find the answer on how to make such a scenario impossible,” they added.
“It exposes the EU to charges of hypocrisy. We criticise governments like Georgia for passing a foreign influence law and we are discussing something that will be seen as similar ourselves,” said a second EU diplomat.
The commission proposal would mandate organisations to report which country they work for and what activity they carry out, as well as the annual amount paid. They would also have to keep records of those activities. Those who don’t comply with the rules could face fines.
Transparency International and other NGOs have criticised the proposal for only covering funding by foreign governments, and not all state funding including from European capitals, arguing that this could lead to stigmatisation.
The commission has defended the law as necessary, arguing that at present there is no central register on foreign government funding, making it difficult to assess which organisations could be fronts for influence operations from abroad.
A spokesperson for the commission said the proposed law was “very different from national restrictive legislation, often called ‘foreign agent’ laws prevalent in other countries”.
“The EU’s proposal does not aim to impose restrictions or bans, but sets up transparency requirements to make information on such interest representation activities publicly available,” the spokesperson added. The new legislation is due to be discussed by EU ministers later this month.
Additional reporting by Javier Espinoza in Brussels