Analysis: Poland holds its ground at EU summit over funds and rule of law

Poland has been highly active during the EU summit in Brussels. It is working with France and Germany to protect the amount available in grants through the recovery fund and with Hungary and other Visegrad states to ensure that the funds are not conditional on rule of law compliance.

A marathon EU summit which has been going since Friday is in danger of ending in failure. Officials are signaling that despite this being the longest EU summit since the year 2000, when the Nice summit lasted for five days, that EU leaders may well be going home without reaching agreement. The EU leaders are considering a package of funding which includes a recovery fund of 750 billion Euro and 1,074 billion Euro EU budget.

The compromise that was on the table on Sunday envisages 400 billion Euro in grants, a strengthened mechanism for supervising the disbursement of the grants and the linkage of EU funds with rule of law compliance. In addition, Austria was to receive significant rebates for agricultural spending and the Netherlands were to benefit from a rebate for its participation in customs clearance. The way the funds were to be divided was changed in respect of the original proposal so that 70 percent would be based on historical GDP data from 2015-2019 and 30 percent from current data.

The proposed deal has been rejected by the group of frugal states, sometimes called ‘misers’, who want to reduce the budget by 25 billion Euros via a rebate mechanism. The group which consists of the Netherlands, Denmark Austria and Sweden and supported by Finland are demanding that the recovery fund should consist of 350 billion Euro in grant funding and 350 billion in loans.

The original EC proposal was for 500 billion in grants and 250 billion in loans. Germany, France, Spain and Italy, together with Central European states are opposed to any fall in grant funding below 400 billion Euro. They believe that the reduction wanted by the group led by the Netherlands would imply cuts in funding for the Green Deal and digitalisation.

Polish PM Mateusz Morawiecki has been in regular contact with the leaders of the Visegrad States. During the summit the position taken by Poland and Hungary over linkage of funds to rule of law compliance has also been backed by Latvia and Slovenia.

New proposal on the table

On Monday morning the President of the European Council presented the member states with a new version of the recovery fund with 390 million Euro in grants and the rest in loans. He then adjourned the meeting until the afternoon to give the EU leaders time to consider and discuss the proposal in smaller groups and to give the EU Council presidency the time to prepare a detailed document which details the process and the rules governing the administration of the recovery fund.

According to Jacek Saryusz-Wolski MEP the stubborn resistance of the ‘misers’ group is not good news for Poland. He believes that the use of the rule of law issue is a chess-like gambit in order to divert discussion over the funds to one over perceived problems with Poland and Hungary. He calls it “cynicism guided by egotistic meanness”.

The senior MEP noted that there were at least six member states that were opposed to any linkage of funds to rule of law compliance. “There are more countries which do not want to see an instrument of ideological pressure...Everyone now knows that the rule of law is not the issue here but who will have the power over funds and stopping them”.

Mr Saryusz-Wolski believes that Poland has enough leverage through its power of veto and other member states' resistance to ensure that no linkage of funds to rule of law compliance takes place. The political pressure coming from the ruling party in Warsaw is for PM Morawiecki to refuse any compromise that includes such a linkage.

The senior MEP believes that “serious splits are emerging inside the EU and that egotistical interests are being revealed. The masks are falling.”