European Union leaders will discuss on Thursday the Polish and Hungarian veto of the EU's 1.8 trillion-euro financial plan to recover from the recession caused by the COVID-19 pandemic, but officials expect no solution this week.
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.
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. Both sides appeared to be digging in.
Poland's lower house of parliament will vote later on Thursday on a resolution in support of Warsaw's veto. But critics of Poland and Hungary were equally determined.
"I think we should ask the two capitals to explain (at the leaders' video-conference) what their real problem is. It's not up to us to come up with proposals. I think it's up to Budapest and Warsaw," one senior EU diplomat said.
The 27-nation EU is grappling with a second wave of the coronavirus. Its gross domestic product 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 to save businesses and jobs.
The financial package is made of a 1.1 trillion-euro 2021-2027 EU budget and the 750 billion-euro recovery fund. Neither can be offered without the unanimous support of all EU governments and the European Parliament.
Officials expected no solution to the stand-off this week, but diplomats informally discussed various options.
Paris has signalled the EU would move ahead with the 750 billion fund without Poland and Hungary under an EU law called enhanced cooperation that allows a group of at least nine countries to pursue a joint project if others object.
The Netherlands has hinted at the possibility of moving ahead with an intergovernmental treaty, also excluding Warsaw and Budapest.
Neither option would be optimal, diplomats said, as they would take time which the EU does not have. They would also face problems setting up the joint EU borrowing mechanism that is the whole point of the current recovery fund, backed by the joint EU budget and new EU taxes that would pay it back.
Under the French idea, the money could be disbursed by the European Stability Mechanism, the euro zone bailout fund.
"It’s a pain, I agree, but it’s … not too bad," one French official said. (Reuters)