Analysis. The stakes are clear: without a softening on the issue of the rule of law, 2021 will start without an EU budget and without a coronavirus fund.

Why Hungary and Poland plan to block the EU budget and the Recovery Fund

Hungary and Poland intend to exercise their veto right and block the approval of the European Union budget for the next seven years (2021-2027) together with the related €750 billion Recovery fund/Next Generation EU fund.

As we wait for Thursday’s European Council by videoconference, the response to the economic crisis triggered by the coronavirus remains in the balance. Angela Merkel, holder of the rotating presidency of the European Union, will have to find a way to mediate in the clash between the Hungarian and Polish governments and the EU Parliament and other governments. The issue is significant: without respect for the rule of law (the independence of the judiciary or freedoms such as the right to abortion), European funds should be cut off from member states that violate these principles.

Three days ago, a head-on clash with Hungary and Poland had been excluded by the EU Commissioner for Economy Paolo Gentiloni in his remarks during a meeting with the CGIL “Futura” union: “I am confident that these scenarios of a veto will not actually translate into a veto: there will be a complicated negotiation, and I trust that the German presidency will carry it out in the best way.”

On Monday morning, however, the situation precipitated in the direction of a veto during the meeting of COREPER, the body which includes the ambassadors of the states to the European Union. The meeting did not reach the unanimous vote necessary to approve the agreements on the 2021-2027 budget and ratify the increase of the Union’s own resources, a necessary element to guarantee the issuance of the bonds that will finance the €750 billion of the anti-crisis fund, and thus also the €209 billion allocated to Italy.

The agreement on EU funds in exchange for the respect of the rule of law has been approved by a qualified majority. Hungary and Poland remained isolated. Their move was designed to hit the big target: the European budget. The stakes are clear: without a softening on the issue of the rule of law, 2021 will start without an EU budget and without a coronavirus fund.

According to the Hungarians, the agreement on the rule of law “goes in the opposite direction of the conclusions of the European Council in July” where an agreement was reached with the “frugal” countries on the Recovery Fund. On that occasion, the European Parliament criticized the cuts in health and research in the budget. Last week, €16 billion more were added, and the opposition was placated.

But Prime Ministers Orban and Morawiecki reopened the conflict. According to Orban, “it is up to the Hungarian citizens to decide whether or not their rights in their country are being violated.” The spokesman of the German presidency Sebastian Fischer said there was room for discussion: the two states “expressed reservations with regard to their opposition to one element of the overall package — but not to the substance of the [Recovery Fund] agreement.”

Respect for fundamental rights is a problem that also concerns Italy, which has been condemned for condoning torture at the G8 in Genoa in 2001, and particularly for the practice of life imprisonment in solitary confinement. The agreement on the rule of law should also apply in these cases.

The Minister of European Affairs Enzo Amendola has called the right to veto “obsolete and harmful to those who exercise it”; while, admittedly, Prime Minister Giuseppe Conte also threatened to use during the negotiations on the Recovery Fund. This was also the position taken by the President of the European Parliament, David Sassoli, according to whom the European treaties must be amended to eliminate the right of veto of governments. This would include the transformation of the ESM into an instrument of the EU Commission, the Recovery Fund into a permanent fund, and the transformation of the Stability Pact on deficit and debt.

The tensions on the budget have sparked clashes among the Italian parties as well. According to Fratelli d’Italia, this is all “the fault of the left and Grillo’s people,” “the frugal countries and the EU Parliament,” and the treaties already provide for sanctions on the issue, so the one being proposed is a “political-ideological” attack. The PD and M5S retort that “the Recovery has been blocked by the friends of Salvini and Meloni.”

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