EU leaders unblock 1.8trn euro budget, recovery fund

BRUSSELS: European Union leaders unblocked on Thursday a 1.8 trillion euro financial package to help the economy recover from the pandemic-induced recession after reaching a compromise with Poland and Hungary, the chairman of EU leaders Charles Michel said.

The agreement on the 1.1 trillion euro Multiannual Financial Framework (MFF) and the historic 750 billion euro recovery fund also paves the way for the 27-nation bloc to agree on more ambitious reductions of greenhouse gas emissions - by 55% by 2030 against 1990 levels, rather than by 40% as agreed now.

The new climate goals will be discussed by leaders later on Thursday.

"Deal on the MFF and Recovery Package. Now we can start with the implementation and build back our economies. Our landmark recovery package will drive forward our green & digital transitions," summit chairman Charles Michel said on Twitter.

During two days of talks, EU leaders also discussed COVID-19 vaccines and will talk about resetting relations with Washington and sanctions on Turkey for drilling in contested waters in the east Mediterranean Sea.

But the focus was on getting all 27 behind a historic plan for joint EU borrowing of 750 billion euros to finance the recovery and the EU budget for 2021-2027 that focuses on digitalisation and fighting climate change.

Poland and Hungary had blocked the financial package because access to the money is, for the first time, to be linked to respecting the rule of law. Since Warsaw and Budapest are under EU probes for undermining the independence of courts and media, they were at risk of losing billions from the EU.

But Germany, which holds the rotating presidency of the bloc until the end of the year, struck a deal with the two countries that allowed them to lift their veto.

"Germany has worked hard to bridge the differences and find solutions for the concerns of Poland and Hungary while at the same time upholding the rule of law mechanism as agreed with the European Parliament," Chancellor Angela Merkel said on arrival.

DECLARATION

Under the deal, EU leaders will issue a declaration, stating that the rule-of-law link to funds will be applied objectively and only to safeguard the proper use of EU money, rather than to punish countries under the separate EU rule-of-law probes.

To delay the practical application of the new regulation, Poland and Hungary can ask the EU's top court to check if it is in line with EU treaties, which could even take two years.

The Commission would then have to issue application guidelines for the law, which would delay it by a further few months, probably past the 2022 elections in Hungary, which some EU officials said Orban was keen on.