EU countries close in on deal to end budget block

Hungary and Poland have said EU countries are near a deal to end a damaging conflict over plans to link the bloc’s €1.8tn budget and post-pandemic recovery package to compliance with the rule of law. 

Viktor Orban, Hungary’s prime minister, said member states were “just one inch from reaching a consensus” on an accord that would unlock the much-needed funds and end a veto threat made by Budapest and Warsaw. 

“I have an opinion that we are very, very close to [reaching] a good agreement for the unity of the European Union,” he told reporters on Thursday.

Mateusz Morawiecki, prime minister of Poland, said EU leaders had “worked out conclusions” that were “a prerequisite to go forward with the process”.

Angela Merkel, Germany’s chancellor, said finalising the deal 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 has taken the lead in negotiating the proposed compromise with Poland and Hungary. 

The leaders’ comments came as they arrived at an EU summit in Brussels that has been overshadowed by the threat to the historic economic package agreed by the bloc in July. The dispute has exposed a deepening crisis over what critics see as the slide towards authoritarianism in Hungary, Poland and some other member states.

On Wednesday, EU negotiators drafted a four-page “interpretative declaration” to break the budget deadlock over the plan to curb payouts of bloc money to countries that breach the rule of law. The text is designed to give reassurances to Poland and Hungary that the rule of law mechanism will apply only to the next EU budget — starting from 2021. It also gives a role to the European Court of Justice to rule on the legality of the tool, if it is challenged by a member state in court even before it is used. 

The ECJ would have to provide 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 Mr Orban, who faces national elections in 2022.

Mr Morawiecki warned there needed to be a “line of demarcation” between EU budget anti-fraud controls and wider rule of law regulations, to prevent “politically motivated” attacks against member states. Warsaw’s dispute with Brussels revolves around its sweeping overhaul of the judiciary, rather than allegations of corruption. 

Supporters of the rule of law compromise plan insisted the EU had not capitulated to the demands of Warsaw and Budapest, because the underlying proposed mechanism remained unchanged. Ursula von der Leyen, commission president, said this was “crucial”. 

The European Parliament, which negotiated the draft rule of law mechanism with governments, also 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. 

“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.”

But critics such as Guy Verhofstadt, a Belgian MEP and former prime minister, say the proposed agreement violates the EU treaty by restricting the commission’s autonomy. “You cannot save the Rule of Law by breaking the law,” he wrote on Twitter.

Dutch prime minister Mark Rutte said he was “neutral” on the agreement and had many “questions” about the interpretative statement. He called on the commission to “make sure” that potential breaches of the rule of law could be sanctioned “retroactively” from January 2021, regardless of when the ECJ delivers its verdict. The Dutch parliament has pushed for a stringent mechanism to punish breaches of EU values and has called an agreement on the tool as the “minimum” it can accept. 

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