Poland, Hungary should go to EU court on rule of law, not block budget, Commission says

BRUSSELS (Reuters) -Poland and Hungary should ask the European Union's top court to assess the link between access to EU money and observing the rule of law, instead of blocking the EU's 2021-2027 budget and recovery plan, the head of the European Commission said.

The suggestion is one of the possible ways EU officials have been informally discussing to end the vetoes of Warsaw and Budapest holding up 1.8 trillion euros ($2.14 trillion) of EU funds to lift the economy of the 27-nation bloc.

Speaking to the European Parliament, Ursula von der Leyen stressed that the EU's rule that the bloc's funds can only be sent to governments that observe the rule of law would be applied only to protect EU budget funds.

"We are talking here about the violations of the rule of law that are threatening the EU budget and only that," she said. "It is very difficult to imagine anybody in Europe who would possibly have anything against that principle."

Poland and Hungary, who are under formal EU investigation for undermining the independence of courts, media and non-governmental organisations, fear they risk losing access to tens of billions of euros over the next seven years.

"Anyone still in doubt has a clear path. They can go to the European Court of Justice and allow the new rules to be tested there," von der Leyen said.

"That is the place where differences of opinion about legislative texts are usually settled and it is not done at the expense of millions and millions of European citizens who are urgently waiting for our help," she said.

Resolving the issue is also in the interest of Poland and Hungary which are to receive one of the highest amounts per capita from the EU, badly needed to help their economies overcome the devastating effects of the COVID-19 pandemic.

In a decade in power, Hungarian Prime Minister Viktor Orban has used public spending to build a loyal business elite which includes some members of his family and closest friends, partly using billions of euros worth of state and EU funds.

For Poland, EU cash is crucial to continuing to develop rural areas and small towns where many of the voters of the ruling nationalist PiS party live.

The 1.1 trillion euro 2021-2027 EU budget, the 750 billion recovery fund and the rule of law regulation are all linked in one package by the German EU presidency, so Hungary's and Poland's veto to one rule of law regulation also stops the two financial projects.

Orban called on Germany not to link them, saying that asking him to back such a link was tantamount to asking for his "suicide". He said the three issues could be dealt with separately, which would allow the EU to go through with the 1.8 trillion financial plan now, while the the rule of law regulation could be addressed later.

But EU officials say the deal made by leaders at their summit in July was that the rule of law condition would be part of the financial package.

Some, like France, suggest that if Hungary and Poland do not drop their veto, the EU could move ahead with the recovery plan without them, using a treaty option called enhanced cooperation which allows a group of at least 9 countries to move ahead with a project others obstruct.

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(Additional reporting by Krisztina Than and Marton Dunai in Budapest; Reporting by Jan Strupczewski, Editing by William Maclean)

By Jan Strupczewski