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Warsaw and Budapest, both under EU scrutiny for undermining
judicial and media independence, are blocking the budget and the
recovery fund because they object to making the money
conditional on respect for the rule of law and democratic norms.
"We need to have an agreement by Hungary and Poland by today or
tomorrow at the latest. If we don't, we will have to move to
scenario B," the EU diplomat told Reuters.
Scenario B means setting up the EU's 750 billion euro recovery
fund of grants and loans for just 25 member states, without
Poland and Hungary, so that others get the cash needed to help
lift their economies out of the 2020 coronavirus slump.
Under this scenario, the EU's next long-term budget of 1.1
trillion euros would remain blocked. The EU would finance itself
through a provisional budget in 2021 that would stop spending on
new projects and radically slash funds even for existing ones.
While this would affect all EU countries, it would be most
painful for both Poland and Hungary who are large net
beneficiaries of EU funds.
The senior EU diplomat said the legal basis chosen for setting
up the fund of 25 would determine how fast it could be done, but
that it would not take months.
The executive European Commission has said that this is done
under the so-called "enhanced cooperation" process envisaged by
EU law for projects that at least nine countries want to pursue
but others don't, the fund could be set up in a matter of weeks.
That would mean cash can start flowing in the middle of 2021 as
originally anticipated.
(Reporting by Jan StrupczewskiEditing by Mark Heinrich)
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