Tuesday

26th Jan 2021

EU Commission mulls ways round Hungary-Poland block

The EU Commission is considering alternatives to push ahead with the coronavirus recovery fund without Hungary and Poland - if the two countries maintain their veto on the bloc's budget due to the linking EU funds to respect for the rule of law.

A senior commission official said the remaining 25 member states could proceed with setting up the €750bn recovery fund, which is aimed at helping economies hit by the pandemic, to act as a "bridge" until Hungary and Poland stop their blockage.

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The official said the alternative would be based on EU law, and "effectively would replicate the original package".

"We are confident a solution can be found," the official said, adding that with the fallback option, money from the recovery fund could start flowing in June, as originally planned.

The official did not go into details how the "community based" option would work but said it would be "legally robust".

The commission is also preparing for the possibility of the seven-year €1.1 trillion EU budget not being in place in time, due to the blockage by Budapest and Warsaw.

The EU treaty sets out a provisional budget in such case, which has only been used once before, in 1988.

That would be in place until the commission puts forward a new draft budget for 2021 based on the budgetary ceilings of the current seven-year budget.

The official warned, however, that crucial policies, such as the cohesion policy, the Just Transition Fund helping green the economy, and the Horizon research program, would not be able to go forward without a new legal basis.

Payments would continue for contracts already signed under those programs, but no new commitment could be made. Rebates, compensation to net contributors to the EU budget would also not be paid.

The only "automatic" payments would be the agricultural direct subsidies, foreign and defence spending, and administrative costs.

The commission's willingness to draw up such plans highlights the high stakes stand-off between Hungary and Poland and the rest of the EU, ahead of a summit of EU leaders next week in Brussels.

Warsaw and Budapest have so far showed no sign of willingness to walk back on their resistance to a new mechanism - agreed by 25 member states and the European Parliament - on linking EU funds to the respect for the rule of law.

Poland and Hungary are already under EU scrutiny for breaching EU rules and values.

On Tuesday, German chancellor Angela Merkel - whose country holds the EU's rotating residency - said it called for compromise from both sides.

"The rule of law is the basis for the European project," she said, rebuffing claims by Poland and Hungary that the rule of law conditionality was introduced through the backdoor.

On Wednesday, Portuguese prime minister Antonio Costa - whose country will take over the presidency in January - warned that the EU's economy would be paralysed if neither the bloc's budget nor recovery fund are approved this month.

"Next week we really have to have this agreement," Costa said ahead the EU summit.

Von der Leyen tells Poland and Hungary to go to court

Poland and Hungary should ask the EU's top court to assess linking EU funds to the respect of the rule of law instead of blocking the budget and recovery package, the EU Commission chief said, most MEPs backed her up.

Deal reached on linking EU funds to rule of law

The deal means MEPs and the German EU presidency unblocked a major political hurdle to agreeing on the €1.8 trillion long-term EU budget and coronavirus recovery package.

Podcast

Showdowns over the rule of law

Brussels is increasingly expected to serve as the European Union's sheriff on rule of law - but its ability to enforce adherence to democratic norms and values remains weak.

Opinion

Why China and Cambodia are watching Hungary's EU battle

Cambodia, along with authoritarian states like China, now see Hungary not only as a lobbying ally within the EU - but an inspiration as a fellow 'sovereignty'-fundamentalist, who argue no other state has the right to judge their domestic affairs.

Orbán says rule-of-law deal 'centimetres' away

One possibility for a compromise could be a declaration, attached to the rule-of-law conditionality, on how it will be used - that alleviates the concerns of Hungary and Poland.

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