Poland Threatens to Veto EU Recovery Fund Over Rule-of-Law

Poland joined Hungary in threatening to veto the European Union’s 1.8 trillion-euro ($2.1 trillion) budget over the bloc’s efforts to make sure funds only go to countries that adhere to democratic standards.

Premier Mateusz Morawiecki on Thursday sent a letter criticizing the mechanism to European Commission President Ursula von der Leyen. A day later, Climate Minister Michal Kurtyka said he’s confident a deal can be worked to unlock funds needed throughout the bloc, signaling an element of brinkmanship by Poland over EU budget negotiations.

Poland Threatens to Veto EU Recovery Fund Over Rule-of-Law

EU negotiators reached a preliminary agreement last week linking funds from the budget and stimulus package to adherence to the rule of law. Poland and Hungary, which are both under formal EU probes related to the issue, would stand to lose about 23 billion euros and 6 billion euros, respectively, in grants if they were to bloc the budget.

“I’m confident we can find a consensus” Kurtyka told Bloomberg Television. It’s “extremely important that we are able to move forward” and reach agreement, he said.

Effective Veto

At stake is whether the EU can swiftly deliver hundreds of billions in much-needed funds to combat the steepest recession on record, while making sure the money isn’t misappropriated by countries where democratic checks and balances are weak.

A junior party in Morawiecki’s government said on Tuesday that the proposal is an attempt by the EU and its biggest budget contributor Germany to force foreign values upon member nations. Without its support, the government doesn’t have a majority in parliament and would need opposition support to ratify EU plans to issue debt.

Morawiecki spoke with German Chancellor Angela Merkel by video on Thursday, saying that the mechanism itself posed a threat to the rule of law and that it raised “serious legal doubts,” according to a Polish government statement.

“Officials in Brussels are out of touch with reality,” Polish Finance Minister Tadeusz Koscinski told Polsat News late on Thursday. “It is not clear who will decide whether there is the rule of law in Poland.”

The EU only needs a qualified majority of nations to impose the rule-of-law conditions, but requires the unanimous approval of all member states and a majority of EU lawmakers to give the commission the authority to borrow from the markets to fund the recovery package. That gives Hungary and Poland an effective veto over the package.

“Hungary can’t be blackmailed,” Hungarian Prime Minister Viktor Orban told state radio last week. “The rule-of-law debate sounds like it’s about the law but it’s a political debate.”

©2020 Bloomberg L.P.

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