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The European Commission considers options for recovery fund without Hungary and Poland

The European Commission is assessing options to circumvent Hungary and Poland’s veto to the EU budget and the recovery fund, and could come up with a proposal early next year if their blockade remains, a senior EU official confirmed on Wednesday (2 December).

The Commission’s “central scenario” is that a solution will be found by late next week, when EU leaders will meet on 10-11 to discuss the two countries’ veto on the €1.8 trillion package which includes the €750 billion recovery fund to counter the economic fallout of the pandemic and €1.1 trillion multi-annual financial framework, the EU’s next seven-year budget.

Hungarian and Polish leaders, Viktor Orban and Mateusz Morawiecki, have insisted that they won’t give their blessing unless the Rule of Law conditionality attached to the EU funds is substantially watered down or scrapped.

If both member states persist with their veto, a senior EU official was “pretty confident” that a solution could be found and implemented “quite quickly” to “replicate the effects” of the recovery fund without them.

The Commission could come as early as January with a “bridge” solution based on EU law. The options being considered include enhanced cooperation among member states or a system of national guarantees to back the borrowing of €750 billion for the fund.

The official declined to enter into details, and did not clarify what would happen with Hungary and Poland’s portion of the recovery fund.

Even if member states are forced to use the bridge solution, recovery funds could still be channelled to member states by next summer as planned, once the ratification process of the mechanism is completed in member states.

Budapest and Warsaw’s opposition to the EU budget deal has further complicated the transition to the next EU’s seven-year budget and the adoption of the draft budget for 2021 under the next MFF.

The deadline for the European Parliament and member states to reach an agreement on the annual budget is 7 December.

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