Leaders of Hungary and Poland drop vetoes on rule of law mechanism linked to bloc budget
Michael Peel, Mehreen Khan and Sam Fleming in Brussels
DECEMBER 11 2020
EU leaders have adopted a €1.8tn budget and landmark post-pandemic recovery package after Hungary and Poland dropped objections to a new mechanism tying payments to rule of law principles.
Charles Michel, European Council president, announced the deal on Thursday evening at a summit in Brussels, saying the accord meant the EU could now “start with the implementation and build back our economies”.
The agreement follows weeks of uncertainty, as the historic economic recovery package agreed by leaders in July was overshadowed by vetoes threatened by Budapest and Warsaw. It removes a key barrier to the implementation of the €750bn recovery fund, under which Brussels will gain unprecedented powers to borrow hundreds of billions on the markets and hand it out as budgetary support to member states.
The deal means the EU can now push forward legislation aimed at enacting the fund, which should start paying out to stricken member states in the second half of next year. About €390bn of this sum will be distributed in the form of grants, raised via issuance of EU debt by the commission, with the remainder coming in the form of loans to facilitate the recovery in member states.
It also paves the way for the enactment of the EU’s upcoming seven-year budget, which was also being blocked. The stand-off was sufficiently serious for the commission to have been examining alternative plans to push through the recovery fund without the participation of Poland and Hungary — a fallback option that would have sent a damaging signal about the bloc’s ability to unite behind a response to the crisis.
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The budget deal paved the way for an agreement at the summit to ambitious reductions in EU carbon emissions. An agreement to target cuts of “at least 55 per cent” in emissions over the next decade was announced by Mr Michel on Friday morning, following all-night talks that were earlier held up by wrangling with Poland over the details of the carbon reduction plans.
Hungary and Poland were won over with a non-binding declaration designed to assure them they would not be singled out under the new rules, which allow EU funding to be held back when countries endanger the bloc’s budget by violating the rule of law.
The four-page “interpretative declaration” gives reassurances that the rule of law mechanism will apply only to the next EU budget — starting from 2021. It also gives the European Court of Justice a role in ruling on the legality of the tool, should it be challenged by a member state in court even before it is used.
The ECJ would have to deliver its judgment before the European Commission draws up guidelines on how to trigger the mechanism — a requirement that would be likely to delay any sanctions process.
The question of when measures to curb budget funds can come into force is significant for Viktor Orban, Hungary’s prime minister, who faces national elections in 2022.
Vera Jourova, the commission vice-president in charge of transparency and values, welcomed the deal, saying it was “good news for the citizens and business of Europe who are all hit by the pandemic and its economic impact”. She added: “The union needs to be better equipped to deal with the consequences of rule of law deficiencies, in this case affecting the budget.”
Supporters of the rule of law compromise insist the EU has not capitulated to the demands of Warsaw and Budapest, since the text of the underlying proposed legislation remained unchanged. But the stand-off has highlighted a deep split within the bloc as critics decry what they see as a slide towards authoritarianism in Hungary, Poland and some other member states.
The European Parliament, which negotiated the draft rule of law mechanism with governments, earlier voiced its support for the compromise. Manfred Weber, leader of the parliament’s biggest centre-right group — the European People’s party — said the statement respected the “red lines” agreed between MEPs and governments in November.
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“The statement is not legally binding but the text we agreed is legally binding,” said Mr Weber. “The legally binding mechanism is a huge success.”
Mark Rutte, prime minister of the Netherlands, backed the plan after warning there were “questions” that needed to be answered about when the mechanism could come into force. The Dutch parliament has pushed for a stringent mechanism to punish breaches of EU values and has called the draft agreement the “minimum” it can accept.
Angela Merkel, Germany’s chancellor, said as she arrived at the summit that finalising the accord and releasing the funds would be a “very important sign for the European Union’s ability to act”. Germany is the holder of the EU’s rotating presidency and took the lead in negotiating the compromise with Poland and Hungary.
Additional reporting from Guy Chazan in Berlin
https://www.ft.com/content/03d72613-1745-4520-9ba3-5a94c8a3963f
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