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EU leaders fail to find solution on budget and rule-of-law deadlock

EU leaders' talks on Thursday did not resolve the deadlock on their 1.8-trillion-euro (2.1-trillion-euro) budget and stimulus package, brought about by a showdown with Hungary and Poland on how to police the bloc's basic democratic standards.

EU leaders’ talks on Thursday did not resolve the deadlock on their 1.8-trillion-euro (2.1-trillion-euro) budget and stimulus package, brought about by a showdown with Hungary and Poland on how to police the bloc’s basic democratic standards.

“We need to stay united,” European Council President Charles Michel urged following the videoconference, “This financial package is essential for our economic recovery.”

Warsaw and Budapest are outraged by a new mechanism built into the next EU budget that would allow funds to be cut in some cases if member states are deemed by the European Commission and fellow EU countries to be flouting rule-of-law standards like the independence of the judiciary.

With the 2021-2027 budget due to begin on January 1, the move has almost certainly delayed the arrival of sorely needed cash – and drawn reprobation from fellow member states.

“The vast majority of member states agree with the compromise on the table,” Michel said “We will continue the discussions to find an acceptable solution for all.”

Initially scheduled to discuss how to jointly target the Covid-19 pandemic, the videoconference was overshadowed by the political crisis.

In an impassioned speech in the Polish parliament on Wednesday afternoon, Prime Minister Mateusz Morawiecki defended the veto of a separate decision – relating to how to fund the budget – needed to pass the whole package as a whole in protest.

“The rule of law and its breaches have become a propaganda truncheon; we reject such an approach,” Morawiecki said.

One day later, the 25 EU other leaders did not convince Warsaw or Budapest to drop their resistance to the new rule-of-law mechanism written to the next long-term budget, which they see as interference in their domestic affairs.

Several EU states have scolded Warsaw and Budapest in the previous days.

Germany’s Foreign Minister Heiko Maas said ahead of Thursday’s talks that his country – which holds the rotating EU presidency – would not reveal which ideas are on the table to resolve the issue.

“As the European Council presidency, it is our role to find a solution,” he said ahead of talks with other foreign ministers.

“We won’t start doing that publicly by publishing or rejecting existing proposals,” he said.

The proposed rule-of-law mechanism is viewed as primarily directed at countering democratic backsliding in Poland and Hungary.

Both countries receive considerable funds from the EU budget and have seen their economies boom since joining the world’s largest trade bloc in 2004. But their right-wing governments have clashed with Brussels in recent years.

Budapest is under scrutiny for concerns about judicial independence, but also for allegedly eroding media freedoms and for unchecked corruption due to links between business and politics.

Much of the European Union’s criticism is also directed towards political interference in the Polish judiciary. Warsaw has introduced a string of judicial reforms that critics argue politicize the system.

Both countries are subject to a slew of legal proceedings at the bloc’s top court that have so far had little impact.

The additional mechanism is seen as a way to overcome frequent deadlocks in attempts to sanction member states amid concern about the hollowing out of basic EU principles.

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