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Economy

EU Strikes Deal on Landmark Budget, COVID-19 Recovery Fund

December 10, 2020

BRUSSELS — European Union leaders have sealed an agreement on a massive long-term budget and coronavirus recovery package, EU Council President Charles Michel said Thursday, after they overcame objections from Hungary and Poland.

"Now we can start with the implementation and build back our economies. Our landmark recovery package will drive forward our green and digital transitions," Michel said in a tweet during an EU summit in Brussels. 

The 1.82 trillion-euro ($2.21 trillion) long-term budget and recovery package is considered vital for many European countries whose economies have been devastated by the virus. Poland and Hungary had agreed to the deal in July but later vetoed it over a new mechanism that would allow Brussels to cut off EU funds to countries that violate Europe's democratic standards. 

THIS IS A BREAKING NEWS UPDATE. AP's earlier story follows below. 

Hungarian Prime Minister Viktor Orban said Thursday that the European Union is on the brink of sealing an agreement on a massive budget and a coronavirus recovery package, signaling that it has almost overcome objections from his country and Poland about tying EU funds to upholding the rule of law.

"We are just one inch from reaching a consensus," Orban told reporters as he arrived at EU headquarters in Brussels for a two-day summit, adding that all sides are fighting for "a victory for common sense."

"It is obvious that when our nations and so many millions of people are in real need because of (the) pandemic and the economic consequences of that, we have to behave reasonably," said Orban, whose nationalist government has been accused of undermining judicial independence and media freedoms.

The 1.82 trillion-euro ($2.21 trillion) long-term budget and recovery package is considered vital for many European countries whose economies have been devastated by the virus. Poland and Hungary had agreed to the deal in July but later vetoed it over a new mechanism that would allow Brussels to cut off EU funds to countries that violate Europe's democratic standards.

Polish Prime Minister Mateusz Morawiecki warned that it's a case of us now, you tomorrow.

"We have to avoid any arbitrary and politically motivated decisions," he said. "Today, we fear that we might be attacked in (an) unjustified way, but of course in the future (it can be) any country."

The apparent breakthrough comes just days after it appeared that Poland and Hungary's 25 EU partners might go it alone and create a new coronavirus recovery package without them.

Ahead of the two-day summit, EU diplomats and officials said the solution would take the form of a declaration clarifying that the rule of law mechanism would not be used against any country without a ruling from the EU's top court, the European Court of Justice, first. That process could take a year.

"A compromise is currently being found. I hope it can be finalized in the coming hours," French President Emmanuel Macron said Thursday.

But Dutch Prime Minister Mark Rutte still has questions, like his neighbors in Belgium and Luxembourg. He plans to seek legal advice, particularly as to whether the compromise would violate the agreement previously reached between EU member countries and the European Parliament. 

Rutte said he also wants to be sure that any court ruling "can retroactively establish that violations have occurred."

Luxembourg's prime minister, Xavier Bettel, said it's normal for Hungary and Poland to want to have judicial review.

"But nothing must change in the rules. Nothing. If we start diluting, or to say that we don't care about values or justice; no. If we want rule of law we must have a mechanism that works," Bettel said.

Daniel Freund, the Green group negotiator on the rule of law in the European Parliament, said that the compromise being discussed would put the system "on hold for 1-2 years."

"Europe's rule of law is in crisis," he said, adding that EU members should not be pressing the European Commission to avoid enforcing "existing laws while judicial independence is abolished in Poland or billions of EU funds end up with Orban's family and friends."

If the leaders fail to adopt the budget for 2021-2027 before the end of the year, the bloc will have to function on limited resources, with a maximum of one-twelfth of the budget for the previous financial year to be spent each month.

Many projects for Poland and Hungary — which are already being formally investigated by the EU for their potential violations of the rule of law — could be held up.

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