PRESS - POLITICO - Poland blinks first ahead of showdown at the EU budget corral

Polish deputy premier signals possible compromise on €1.8 trillion budget-and-recovery plan.


With the EU’s plans for a landmark €1.8 trillion budget-and-recovery package stalled, a first glimpse emerged Thursday of a way out of the crisis.

A Polish deputy prime minister, Jarosław Gowin, told reporters that Warsaw could potentially accept a “binding” declaration — approved by the EU’s 27 heads of state and government — to clarify how Brussels would use a new "conditionality” mechanism tying EU budget funds to respect for the rule of law.

With Hungary and Poland blocking the historic spending program over opposition to the rule of law mechanism, Gowin’s comments came a day after the European Commission warned that it was prepared to push ahead and create a new coronavirus recovery fund without the support of Warsaw and Budapest.

Gowin’s remarks offer no guarantee that the deadlock will be resolved, amid conflicting signals from other Polish officials and no immediate similar gesture from Hungarian Prime Minister Viktor Orbán.

Gowin is a moderate within Poland's government, and it was far from clear if his remarks reflected a change in position by Prime Minister Mateusz Morawiecki. Asked if Gowin’s comments indicate a compromise is near, a senior Polish official said: “I wouldn’t say that at all. Almost no progress.”

But the scenario outlined by the Polish minister may offer hope to those in Brussels grappling with a range of unpalatable fallback options, ahead of a crucial summit of EU leaders in Brussels next Thursday and Friday.

EU officials and diplomats concede that launching a new recovery fund with only 25 countries would be a complicated backup, requiring several months to design and negotiate. And in the absence of a deal over the bloc's seven-year budget, an emergency procedure would kick in, leading to some delayed payments and, at least temporarily, an inability to commit funding to new projects in key areas such as health and research.

Gowin acknowledged that such a provisional system would hurt all EU countries. It would be especially painful for those like Poland and Hungary that traditionally rely on EU funds. 

“There’s a possibility of compromise,” Gowin said, adding “The provisional budget … will be unfavorable for Poland and unfavorable to all the other 26 countries. It’s in all Europeans’ interest to find a good agreement, a good compromise when it comes to the conditionality rule.”

The European Parliament will not approve the bloc’s seven-year budget without the rule of law mechanism, which is supported by the overwhelming majority of EU heads of state and government. Gowin said he believed the “binding interpretation declaration” could be used to reach an accord without “reopening the discussions about the shape of this law.”

Germany, which holds the Council’s rotating presidency, negotiated the details of the rule of law mechanism with the European Parliament, and has been trying to broker some sort of deal with Hungary and Poland to break the deadlock.

With Budapest and Warsaw dug in, frustration has been mounting across the rest of the bloc — particularly in countries hit hard by the coronavirus pandemic, which are eager to initiate the €750 billion rescue program. Meanwhile, net contributors to the EU budget such as the Netherlands, Denmark and Finland have insisted they will not bow to extortion.

For weeks, no one had been willing to budge, and some officials in Brussels said there was only narrow space for an agreement.

“We know that the room for movement is very limited,” a senior EU official said Thursday. “We have to come up with a creative solution that is acceptable to all and we know we can’t step out of the agreement that was reached with members of Parliament that was actually a work of art.”

German Chancellor Angela Merkel earlier this week called for compromise, saying the politicians had a responsibility “to turn apparent incompatibilities into a result with which everyone can live.”

The rule of law fight has risked spilling over into other policy debates. Without confidence that the overall budget will be approved, senior officials and diplomats warned that heads of state and government on the European Council almost certainly would not adopt more ambitious climate targets at next week's summit.

The German presidency has been trying to develop a compromise that would leave the deal with Parliament in place, but would give Hungary and Poland assurances in the form of a written declaration that they would not be unfairly targeted by the rule of law mechanism.

Creating an explicit role for the Court of Justice of the European Union might also help convince the two countries that they would not end up unfairly in the crosshairs of the Commission.

Katja Leikert, deputy chair of Germany’s Christian Democrat Union/Christian Social Union parliamentary group, called for a deal that would maintain unity among all 27 EU countries.

“We need a de-politicization of the conflict and a stronger involvement of judges and legal experts not politicians no matter from which party,” Leikert said. “That means solutions, which will be in the interests of objectivity and clarification in order to avoid a possible historic split in the EU.”

“At the moment we have no absolute guarantee that it will work out well,” the senior EU official said. “A solution in parallel to the European Parliament agreement could work out well but it hasn’t been accepted — by anyone.”

But an alternative recovery plan would also likely spark new political debates and questions in member countries.

Some officials have floated the idea that Article 122 of the treaties could be used to construct a recovery fund that does not require greenlighting from Budapest and Warsaw. But it remains unclear how the new fund would be structured, and whether participation would formally add to member countries’ debt levels — a serious concern particularly in southern Europe.

An official from Merkel’s CDU party said any new agreement on the recovery fund would face hurdles in Berlin, including potentially lengthy debate. “It took them two months with hearings etc. to accept the current solution [on the budget and recovery fund] in the Bundestag,” the official said. “So any new deal would take some time.”

Valérie Hayer, a French MEP from the Renew Europe group who took part in the budget negotiations, said an effort that forced an emergency budget to kick in would not be acceptable to many MEPs.

“The Commission’s objective is simple: put pressure on governments to agree on the next MFF,” Hayer said. EU cohesion funds would be among the programs to take a steep cut should the bloc be forced into a temporary backup budget. “It would be very heavy, in particular for Hungary and Poland,” she said. 

While some officials speculated the Commission’s warning that the EU could move ahead without all members was an effort to raise pressure on Hungary and Poland, one EU diplomat said the Commission was serious in looking at different options — even if it remains unlikely an alternative recovery fund for 25 countries would ultimately be adopted.

“I don’t think the Commission is bluffing, but I think the chance of it being achieved at the end is limited,” one EU diplomat said. “I cannot see this passing before mid-February.”

A second, senior diplomat insisted that despite the challenges, a solution could be found that did not involve Hungary and Poland. “There are various options, some are more difficult than others,” the diplomat said. “I think the most important conclusion is that it is feasible. So it’s doable, it’s feasible, and it will work.”

However, a third diplomat indicated that the recovery plan currently on the table, with the participation of all 27 member countries, is still very much the preferred path forward. “Other options are not easy,” the second diplomat said. “Unity is our common interest.”

Maïa de La Baume, Jacopo Barigazzi and Hans von der Burchard contributed reporting