Aid Cutoff EU mulls financial threat for Poland on judicial reform

Germany and others are pushing for sanctions to get Warsaw to respect the rule of law and to take its share of refugees.
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The European Union may impose conditions on development assistance as a way of bringing Poland into line on what Brussels sees as a violation of the rule of law. Other attempts to persuade or pressure Warsaw to abandon its measures to bring the judiciary under control of the ruling party have made little impact.

The European Commission is also looking for ways to overcome Polish resistance to accepting refugees as part of the burden-sharing agreed to by EU leaders. “If we can’t go the financial route, we have little leverage,” said one EU official dealing with the issue. The leverage in Poland’s case would be considerable. The EU budgeting for 2014-2020 allocated a total of €86 billion in aid from the various structural and investment funds and a further €18.8 billion from member states.

But linking development aid to political conditions risks driving a further wedge between the prosperous western European countries and the new Eastern European members, who already feel like second-class citizens in the bloc. For this reason, the legislative proposal under consideration will also attach conditionality to agricultural subsidies, which could theoretically affect a western country like France.

Nonetheless, the proposed legislation would mark a further escalation in the tug of war between the EU establishment and the newcomers over the very nature of the European Union and the limits it imposes on sovereignty. For western nations, the move of former Soviet bloc countries toward “illiberal democracy” breaks with the fundamental values of the bloc.

The deal is far from done.

The rule of law is “one of the basic obligations that all are committed to who want to be member states of the European Union,” German Chancellor Angela Merkel reiterated to Polish Prime Minister Mateusz Morawiecki during his visit to Berlin last month.

The proposal to make EU assistance conditional is controversial even within the commission. Commission Vice President Frans Timmermans and Justice Commissioner Vera Jourova are pushing for the linkage, while President Jean-Claude Juncker and Budget Commissioner Günther Oettinger are said to be more hesitant.

The deal is far from done and some in the commission – notably Mr. Oettinger – would prefer to see a quiet understanding between Ms. Merkel and Mr. Morawiecki. If the Polish leader could make some concessions on judicial reform and immigration, the chancellor could retract the threat on payments.

The commission already took an unprecedented step late last year by invoking Article 7 of the EU treaties to open a censure process against Poland for its judicial reforms. The proceeding is more of a warning at the initial stage but could lead to suspension of EU voting rights. Polish officials rejected the action as political and hypocritical.

The proposed conditionality would be contingent on an Article 7 proceeding. However, it hasn’t been determined whether just triggering the proceeding, as the commission did last year, or its actual adoption by the European Council would allow the suspension of payments. The latter would be challenging since any member could veto the censure and Hungary has already said it would.

The commission wants to avoid that kind of contentiousness just as negotiations are getting under way for the seven-year financial framework starting in 2021. Unanimity is required for that procedure, which establishes the parameters of the annual EU budgets. Negotiations will be tricky enough as the EU-27 maneuvers around Brexit.

In the meantime, the European Parliament last week approved the commission move to trigger Article 7 by a large majority and urged the Council to determine quickly if Poland is breaching EU law. The Netherlands and Sweden are joining Germany in pushing for financial penalties. The proposal for conditionality on development aid is supposed to be ready by the end of May unless Poland blinks first.

Ruth Berschens and Till Hoppe are Handelsblatt correspondents in Brussels. Darrell Delamaide is a Handelsblatt Global editor in Washington, DC. To contact the authors: [email protected], [email protected], and [email protected].