EU leaders to discuss Polish, Hungarian veto of recovery plan, no solution seen yet

BRUSSELS (Reuters) - European Union leaders will discuss on Thursday the Polish and Hungarian veto to Europe’s 1.8 trillion euro (£1.6 trillion) financial plan to recover from the recession caused by the COVID-19 pandemic, but officials do not expect a solution this week.

FILE PHOTO: European Union flags flutter outside the European Commission headquarters in Brussels, Belgium August 21, 2020. REUTERS/Yves Herman

Warsaw and Budapest refused to back the financial plan for the whole EU, even though they are its beneficiaries, because the money is conditional on respecting the rule of law.

Both countries are under EU investigation for undermining the independence of courts, media and non-governmental organisations and with the condition in place they risk losing access to tens of billions of euros.

“We won’t find a miracle solution at this meeting,” a senior EU official said. “We are not going to come up with a solution that we will share with the 27 on a video-conference.”

The 27-nation European Union is grappling with a second wave of the coronavirus and EU GDP is expected to shrink again in the last three months of the year after a recession in the first six months. Governments are desperate to get jointly borrowed EU money flowing as soon as possible to save businesses and jobs.

“We are fully confident that we will get there but we are in crisis mode right now,” the official said.

The financial package is made of a 1.1 trillion euro 2021-2027 EU budget (MFF) and the 750 billion euro recovery fund. Neither can be launched without unanimous support of all EU governments and the European Parliament.

But while Poland and Hungary refuse to support the financial plan with the rule of law condition, others, like the Netherlands and the European Parliament, refuse to accept it without it.

“The European Parliament... reiterates the agreements reached on both the MFF and the Rule of Law are a closed deal and can in no way be reopened,” the parliament said in a statement. “No further concession will be made on our side.”

Hungarian Prime Minister Viktor Orban and Poland’s de facto ruler, Jaroslaw Kaczynski, face strong domestic pressures and expect a battle with the EU over what they define as sovereignty in the financial package will boost fading domestic support.

Some opinion polls show backing for Poland’s ruling party fell 10 points in recent months over a number of issues, a trend which the right wing of the governing coalition wants to exploit.

In Hungary, Orban faces an election in 2022 and trails the opposition in opinion polls for the first time in over a decade because of the pandemic and its effects on the economy.

Reporting by Jan Strupczewski and John Chalmers; Editing by David Gregorio