Poland’s slice of new EU budget may depend on rule of law: European Council

The head of the European Council Charles Michel presented a new draft budget of the European Union for 2021-27. Poland may receive around EUR 63 billion to rebuild the economy after the crisis caused by the coronavirus pandemic. However, the transfer of funds would be subject to compliance with the rule of law.

Mr. Michel proposed that the budget for 2021-27 be EUR 1.074 trillion and that the pandemic reconstruction fund should be worth EUR 750 billion. Importantly, the President of the European Council did not reduce the housing fund or the proportion proposed by the EC between loans (EUR 250 billion) and grants (EUR 500 billion).

It was declared that 70% of the funds are to be distributed in 2021-2022 on the basis of data on unemployment and GDP from 2015-2019, as the European Commission asked before. The distribution of another 30 percent shall be based on crisis data from 2020 and 2021. Funds would be allocated (which does not mean spent) in 2023. The entire envelope for reconstruction would be paid by the end of 2026.

To make the proposal more appealing for net-payer countries, the head of the European Council wants to maintain rebates on contributions for Denmark, Germany, the Netherlands, Austria and Sweden. The European Commission wanted rebates to disappear after Brexit.

The head of the European Council slightly softened the provisions on the mechanism: "money for the rule of law" in relation to the previous European Commission proposal.

In May 2018, the European Commission proposed the notion of the inverted majority, meaning that a majority is needed not to accept the decision, but to reject it. In this situation, the effort to find a majority to reject the withdrawal would be on the side of the country concerned.

Mr. Michel weakened this mechanism, stating that a qualified majority is needed to make a decision to withdraw funding - and this means that it is the European Commission that would need to seek support for its position in order to take away the financing from each country.