Top EU court OKs funding cuts for rule-breaking states

The court said the new powers do not go beyond the treaties nor create parallel sanctions structures.

The judgement puts pressure on the EU Commission to start the process of suspending funds to Poland and Hungary — two countries where nationalist governments are under scrutiny for rolling back judicial independence and eroding democracy.

Hungary and Poland say the scrutiny is unmerited, and instead claim the EU is imposing liberal values on their more conservative societies.

All eyes now turn to the European Commission, which is expected to launch the so-called rule of law mechanism that was approved on Wednesday by the court and that leads to the suspension of funds.

EU Commission president Ursula von der Leyen welcomed the judgement. But she sought to row back against pressure to use the new procedure immediately.

It would take "weeks" to prepare "guidelines providing further clarity about how we apply the mechanism in practice," she cautioned in a statement.

Von der Leyen, who will miss a debate in the European Parliament later on Wednesday on the issue, made no mention of Hungary and Poland in her statement.

Polish government spokesman Piotr Muller said after the judgement that the decision by the court and the push by the EU institutions to introduce funding-freezes go beyond the EU treaties.

Those amounted to a "dangerous trend that may result in legal uncertainty within the EU," Muller said.

Hungary's justice minister Judit Varga accused the EU of "abusing its power" following the court ruling on Wednesday.

But for Germany's foreign minister Annalena Baerbock, the ruling "upholds the legality of this important tool for the EU to protect and strengthen our community of values."

Billions are at stake for Poland and Hungary, where prime minister Viktor Orbán is facing elections in April.

The commission has already refused to approve Covid-19 recovery funds for the two countries – there are €36bn earmarked for Poland and €7bn for Hungary – because of concerns about corruption and judicial independence.