The EU will start preparing a new recovery fund against the pandemic without Hungary and Poland, unless the two countries lift by Tuesday (8 December) their veto to the EU budget and the stimulus agreed last July totalling € 1.8 trillion, a senior EU diplomat said.
Warsaw and Budapest, both under EU scrutiny for what Brussels sees as undermining judicial and media independence, are blocking the budget and the recovery fund because they object to making the money conditional on respect for the rule of law and democratic norms.
“We need to have an agreement by Hungary and Poland by today or tomorrow at the latest. If we don’t, we will have to move to scenario B,” the EU diplomat told Reuters.
Hungarian and Polish leaders, Viktor Orban and Mateusz Morawiecki, have insisted that they will not give their blessing unless the rule of law conditionality attached to the EU funds is substantially watered down or scrapped.
If both member states persist with their veto, a senior EU official said last week he was “pretty confident” that a solution could be found and implemented “quite quickly” to “replicate the effects” of the recovery fund without them.
The Commission could come as early as January with a “bridge” solution based on EU law. The options being considered include enhanced cooperation among member states or a system of national guarantees to back the borrowing of €750 billion for the fund.
While this would affect all EU countries, it would be most painful for Poland and Hungary, both of whom are large net beneficiaries of EU funds.
Officials declined to enter into details and did not clarify what would happen with Hungary and Poland’s portion of the recovery fund.
Even if member states are forced to use the bridge solution, recovery funds could still be channelled to member states by next summer as planned, once the ratification process of the mechanism is completed in member states.
Their veto is expected to come up during an EU summit on 10 and 11 December, when leaders are expected to discuss also the response to the COVID-19 pandemic, relations with Turkey and the US, climate and the future relationship with the UK, whose post-Brexit transition period expires on 31 December.
[Edited by Zoran Radosavljevic]