In our Brussels Edition newsletter this morning: All eyes on Budapest, where the leaders of Poland and Hungary meet at 11 am CET, as pressure builds on them to relent on their opposition to the EU's budget and jointly financed stimulus: bloomberg.com/news/newslette…
One Polish official signaled that without any plan to draw up a counterproposal, the meeting is unlikely to provide the breakthrough many are waiting for. In Brussels, diplomats will decide on the next steps after today's meeting bloomberg.com/news/articles/…
One idea making the rounds in Brussels is to end the ongoing Article 7 rule of law procedure against Hungary and Poland (the Council concluding that there are no grounds for sanctions), in effect providing a clean slate before the new mechanism for the budget kicks in
This idea isn't officially part of the discussion (at least as of last night), as Hungary and Poland still insist on delaying or amending the rule-of-law conditionality for the disbursement of funds. This will not fly with other governments - especially frugals.
Not sure whether the idea to end Art. 7 procedures before the budget conditionality kicks in would fly either. In addition to causing media uproar, it would send a signal that the rest of the EU can be blackmailed. Greece tried this in 2015, and then the U.K - it didn't work.
What is certain is that if there's no compromise in sight, there's pressure to go ahead and formally adopt the rule-of-law conditionality (which only requires qualified majority) and then wait for Hungary and Poland to climb down the tree
If they don't, then the rest will go ahead with other options for bypassing their veto, by setting up a mechanism outside the EU budget for the recovery funds. This will allow much needed cash to flow towards the south while waiting for Poland and Hungary to relent.
... Meanwhile, the EU would be running on an emergency monthly budget, which probably means a partial shutdown a of Jan. 1. Leftovers from the current budget will be subject to rule of law conditionality, which means Hungary and Poland will risk losing access to those also.
In many ways, the standoff reminds me of what Tsipras tried (and miserably failed) to do in 2015. But won't go into that because this thread will get really long.
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