Judicial spats set to delay EU recovery funds to Poland and Hungary

The EU is unlikely to approve Poland’s application for tens of billions of euros in pandemic-recovery financing before the end of the year, the commission’s executive vice-president has said, in a sign of the gulf that remains between the two sides over judicial independence.

The European Commission was also unlikely to be ready to agree by December 31 on a bid by Hungary for its own slice of the EU’s €800bn Next Generation funding, added Valdis Dombrovskis, executive vice-president of the commission.

The two countries both submitted bids for the recovery funds in May, but EU approval of the plans has been severely delayed because of deep differences over the rule of law. Brussels is pushing both nations to sign up to reforms that address longstanding EU legal concerns, as part of the milestones and targets they must agree to under the recovery programmes.

Diplomats have in recent weeks perceived signs of progress in dialogue between the commission and Warsaw, even as Hungary’s plan remains stuck. But speaking after meetings of finance ministers on Tuesday, Dombrovskis played down the chances of any imminent deals.

“The work is ongoing . . . It is unlikely that we can finalise this work still this year,” he said. “Movement on the substance is what really determines the speed. As soon as we are there in the substance, we can move forward.”

Delays beyond the end of the year mean both countries would be unable to secure upfront payments worth 13 per cent of their total bids. That money would instead be folded into the overall payment plans when a deal is finally reached.

Poland has applied for €36bn in loans and grants from the EU’s Covid-19 recovery fund, but Warsaw and Brussels have been at loggerheads for years over Law and Justice’s reform of the judiciary.

Poland is under pressure from the commission to dismantle a controversial disciplinary chamber for judges that the European Court of Justice has found to be illegal. The Polish constitutional court in October also found that parts of EU law were incompatible with the country’s constitution, raising the stakes further.

The commission meanwhile wants Budapest to address alleged deficiencies and weaknesses in the country’s procurement rules, which have stoked concern over corruption linked to the dispersal of EU funds.

Brussels has also been considering whether to wield a new tool in its legal arsenal that would allow it to withhold EU funding where there are rule of law violations that pose a risk to the union’s budget.

Hungary and Poland have sought to challenge that regime in the court. Last week those claims suffered a serious setback after a legal opinion from the EU’s advocate general recommended that the two countries’ legal action should be dismissed.

The advocate general found that the new rule of law conditionality mechanism, which seeks to protect the bloc’s budget from violations by member states, was legally sound and compatible with the EU treaties.

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