Sven Giegold
Member of the European Parliament – Greens/EFA Group

Speaker of the German Green Delegation

Budget blockade by Hungary/Poland: EU Council Presidency should start “enhanced cooperation” to ensure corona aid flows

Today, Hungarian Prime Minister Viktor Orbàn and Polish Prime Minister Morawiecki meet in Budapest to discuss their approach to their EU budget blockade. So far, the two countries are blocking the disbursement of urgently needed funds from the Corona recovery programs because they do not accept the rule of law mechanism. The EU heads of state and government do not want to talk about this again until December. According to the legal assessment of the renowned EU constitutional law expert Prof. Dr. René Repasi (see below), the blockade can already be overcome now with the help of the rules on enhanced cooperation (Art. 20 TEU, Art. 326 to 334 TFEU).

MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:

“The EU is not powerless in the face of the blackmail attempts by Poland and Hungary. There is a provision in the EU treaties that allows aid to be paid out quickly despite the blockade. The other 25 countries can go ahead by means of so-called enhanced cooperation. Enhanced cooperation is the better alternative compared to a blockade or intergovernmental solutions outside the EU treaties. The European Parliament is also involved in enhanced cooperation, so European democracy is not weakened. Under enhanced cooperation the 25 countries can decide on the recovery programme including financing it with common bonds without Hungary and Poland. This would allow the disbursement of aid to begin quickly. Hungary and Poland would not receive any funds from the programme and would have to explain to their citizens why they are left empty-handed. At the same time, the rule of law mechanism could be decided by a qualified majority in the Council of Ministers. There Poland and Hungary have no right of veto. Unlike the recovery programme, however, the rule-of-law mechanism would then also apply to Poland and Hungary, and the budget funds would from now on be more strongly tied to the rule of law. The EU budget itself would not be hopelessly lost either. Poland and Hungary would continue to block the new budget, but the old budget can be rolled forward on a monthly basis until a solution is found. The German Council Presidency should now initiate enhanced cooperation so that corona aid can flow quickly. The economic crisis will not wait for Poland and Hungary.“

“The advantages of such a model are obvious: the money for the recovery could flow quickly, the rule of law mechanism would be adopted and the budget would be secured. It is a matter of relieving some of the pressure. But the governments in Warsaw and Budapest would have to justify to their citizens and companies why they are not getting support for the time being. This would very quickly crumble the image of the self-appointed fighters for national sovereignty.“

“Enhanced cooperation is a much better instrument than a purely intergovernmental agreement outside the EU treaties. The latter is what Dutch Prime Minister Rutte had proposed as a solution. Rutte’s proposal means an unacceptable weakening of the European Parliament. With enhanced cooperation, the Parliament remains at the negotiating table. In the negotiations so far, the Parliament has proven to be a reliable counterweight to national individual interests. Anyone who wants a truly European solution must not leave the European Parliament out in the cold.”

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Assessment of Prof. Dr. Rene Repasi on how to use enhanced cooperation to get out of the stalemate:

The current blockade of the EU budget because of the veto of Poland and Hungary that these Member States raised because of the proposed Rule-of-Law mechanism can be overcome if the part of the budget, which was established to counter the Covid-19 crisis, Next Generation EU, is adopted under enhanced cooperation. The Treaties allow a subgroup of Member States to create a deeper integration amongst themselves under Article 20 TEU and Articles 326 to 334 TFEU. Poland and Hungary have a veto over the entire package because the Own Resources Decision that equips the EU with the new funds it needs to finance Next Generation EU requires unanimity under Article 311(3) TFEU. Moving the own resources needed to finance Next Generation EU together with the entire Next Generation EU into an enhanced cooperation would take away the bargaining power of Poland and Hungary as the Own Resources Decision for Next Generation EU under enhanced cooperation would only need to find unanimity amongst the participating Member States. The Rule-of-Law Mechanism can then be adopted by qualified majority amongst all EU Member States. The only part of the package that would suffer from the Polish and Hungarian veto is the MFF and the regular general Union budget, which can, however, still run under emergency rules.

The conditions for making use of enhanced cooperation are that (1) the legal bases are not exclusive Union competences and (2) the enhanced cooperation does not undermine the internal market and the economic and social cohesion of the Union. Is it suggested to move Next Generation EU into enhanced cooperation, which is established on legal bases that are not exclusive Union competences. The Council would, first, have to authorise the participating Member States to establish an enhanced cooperation. According to Article 329(2) TFEU a qualified majority amongst all EU Member States is sufficient for that. Afterwards the participating Member States only vote amongst each other. They would have to adopt a new Own Resources Decision, which covers the own resources that are needed for the EU in order to finance Next Generation EU under Article 311(3) TFEU in conjunction with the rules on enhanced cooperation. This requires unanimity and votes in the national Parliaments of the participating Member States. The programmes financed by Next Generation EU would then also have to be adopted under enhanced cooperation. Next Generation EU would then become a dedicated budget line in the general budget of the Union, which can exclusively be used for the participating Member States. This use of the enhanced cooperation is certainly not the standard case, for which it was originally invented. But Article 332 TFEU shows that differentiated integration in the field of budget law is possible as this article states that all expenditure resulting from an enhanced cooperation is to be borne by the participating Member States.

The path of enhanced cooperation is furthermore to be favoured over any kind of intergovernmental Treaties such as the ESM-Treaty as Parliaments normally play no role in such Treaties. Next Generation EU has, however, to meet high standards of democratic legitimacy so that the European Parliament cannot be excluded from it by moving Next Generation into an intergovernmental Treaty. Enhanced cooperation provides for a path that involves all Union institutions.