European Recovery Fund Faces More Delays Amid Veto Threats

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The negotiation over the European Union’s jointly financed economic recovery package risks more delays, a senior diplomat warned on Monday, after Hungary and Poland insisted they will veto the process.

While EU leaders agreed in July on the bloc’s budget for the next seven years along with a stimulus program funded by joint debt, parts of the accord still need unanimous backing by member states. Scheduled talks among government ambassadors in Brussels on Monday afternoon aren’t expected to yield a consensus, the diplomat said, asking not to be named in line with policy.

Hungary and Poland have said they disagree with a deal struck last week between Germany, which represents national governments in the talks, and EU lawmakers, who also wield a veto power, over strings attached to the disbursement of the 1.8 trillion euros ($2 trillion) in funds. The two Eastern European governments say that the so-called rule-of-law conditionality unfairly stigmatizes them over their democratic standards.

“When it comes to the future of our children and grandchildren, Hungary and Hungarians don’t agree to compromises, whether in the case of a revolution or just a simple veto,” Hungarian Justice Minister Judit Varga said Monday in a post on her Facebook page. “It isn’t Hungary which is blackmailing and pressuring Brussels in the talks about EU budget funding, but the other way around.”

Budget Crisis

Painstaking negotiations over the terms of the package are already behind schedule, and the senior EU diplomat in Brussels said a block by Hungary’s would throw them into a renewed crisis. The diplomat reiterated that delays are now inevitable and the EU’s leaders may have to weigh in the process when they hold a video conference on Thursday.

Hungary is slated to receive almost 7 billion euros in grants from the planned EU stimulus, in addition to its regular allocations from the EU. Poland, also among the main beneficiaries from the budget, is expected to get nearly 25 billion euros in grants from the additional stimulus package, based on European Commission calculations at constant 2018 prices.

Polish business lobby groups said in a joint statement that a veto would hamper the economy’s ability to bounce back after the pandemic, undermine investor interest and leave the country “alone and at odds with its allies in Europe.” But economic interests appear to be losing to political ones, with the justice minister and his allies publicly demanding that the country’s prime minister reject the budget plan or risk serious consequences.

“This is key moment in our history, how much is sovereignty worth, a billion, several dozen billion, several hundred billion euros? For us it’s priceless,” Poland’s Deputy Justice Minister Michal Wojcik said on Monday.

— With assistance by Marek Strzelecki, and Veronika Gulyas

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