EU leaders to discuss Polish, Hungarian veto of recovery plan, no solution seen yet

BRUSSELS (Reuters) – European Union leaders will discuss the Polish and Hungarian veto of the EU’s 1.8 trillion euro financial plan to recover from the recession caused by the COVID-19 pandemic on Thursday, but officials do not expect a solution this week.

FILE PHOTO: European Union flags flutter outside the European Commission headquarters ahead of an EU leaders summit at the European Council headquarters, in Brussels, Belgium July 16, 2020. REUTERS/Yves Herman

The veto is likely to delay hundreds of billions in EU funds at a time when the 27-nation bloc is grappling with a second wave of the coronavirus and its economy is likely to shrink in the last three months of the year in a double-dip recession.

Governments are desperate to get jointly borrowed EU money – the first ever attempt by the bloc to borrow and spend together – to save businesses and jobs.

But Warsaw and Budapest refused to back the financial plan for the whole EU, even though they are its beneficiaries, because the money is conditional on respecting the rule of law.

Both countries are under EU investigation for undermining the independence of courts, media and non-governmental organisations and with the condition in place they risk losing access to tens of billions of euros.

While Poland and Hungary refuse to support the financial plan with the rule of law condition, others, like the Netherlands and the European Parliament, refuse to accept it without it. Both sides appeared to be digging in.

“There is zero chance for the EU budget or the rescue package to take effect in its present form,” Hungarian prime minister’s chief of staff, Gergely Gulyas, told a briefing.

Poland’s lower house of parliament voted through a resolution supporting the government’s veto.

But a government spokesman left the door open for striking a deal, given that Poland alone would get more than 130 billion euros from the financial package.

“We are convinced that a compromise will be reached in the negotiation process that will enable the Polish government to accept a solution,” he told Reuters by text message.


But critics of Poland and Hungary were equally determined.

“I think we should ask the two capitals to explain (at the leaders’ video-conference) what their real problem is. It’s not up to us to come up with proposals. I think it’s up to Budapest and Warsaw,” one senior EU diplomat said.

The European Parliament said in a statement it would not accept any dilution of the rule of law condition, which had already been watered down from its original demands.

The financial package is made of a 1.1 trillion euro 2021-2027 EU budget and the 750 billion euro recovery fund. Neither can be offered without the unanimous support of all EU governments and the European Parliament.

Officials expected no solution to the stand-off this week, but diplomats informally discussed various options.

Paris has signalled the EU would move ahead with the 750 billion fund without Poland and Hungary under an EU law called enhanced cooperation that allows a group of at least nine countries to pursue a joint project if others object.

The Netherlands has hinted at the possibility of moving ahead with an intergovernmental treaty, also excluding Warsaw and Budapest.

Neither option would be optimal, diplomats said, as they would take time which the EU does not have. They would also face problems setting up the joint EU borrowing mechanism that is the whole point of the current recovery fund, backed by the joint EU budget and new EU taxes that would pay it back.

“The main option is to launch a diplomatic offensive to get Poland and Hungary into the agreement. That is the central way,” an EU government official said.

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