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According to npr.org, the EU has a hard time passing the EU Budget which contains the pandemic relief funds for hard-hit nations.

The European Union's landmark stimulus plan to assist member states whose economies have been battered by the COVID-19 pandemic is now in crisis after Hungary and Poland blocked passage of the 2021-2027 EU budget.

The two Eastern European countries say they're vetoing the budget and coronavirus recovery plan over language in the measure that would dole out EU funds to member states on condition that they uphold the bloc's rule-of-law standards.

Since financial aid to ease the pain of the economical effects of COVID-19 pandemic seems urgent, I am wondering if there is any mechanism to circumvent Hungary and Poland. Basically, to have all the countries except Hungary and Poland (sort of EU-25) approve a slightly smaller budget where Hungary and Poland do not contribute and also do not benefit from.

I imagine the alternative of the currently discussed agreement is significantly complicated, but it would be strange to be no other way.

Question: Is there a way for the EU except for Hungary and Poland to use Pandemic Relief Funds without approval coming from Hungary and Poland?

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There are two things here.

  1. The upcoming EU 7 year budget (€1.1 trillion). It is not possible to circumvent Hungary and Poland in this case. What can happen is that if there is no agreement between the countries on the budget, the previous year's (2020) annual budget will be used without any modification (see the related question).
  2. The recovery package (€750 billion). It is possible to circumvent Hungary and Poland in this case, but this is quite difficult and raises the overall costs of the program. Namely, the 25 countries can make a deal between each other basically independently from the EU. For example, economists predict that this would raise the interest rates of the loan/bond from which they plan to get most part of the fund. Also in this case the debt would count towards the national dept of the various countries instead of the EU as an organization as opposed to the original aims of the recovery package to help the southern countries with already very high national debts.
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  • Interesting answer. +1. Ref. to "the debt would count towards the national debt of the various countries instead of the EU as an organization" sounds a little bit strange. Does "EU as an organization" is from a financial perspective much more different than the money put for EU by the countries themselves? Why EU-27 would be much more attractive for creditors than this ad-hoc "EU-25"?
    – Alexei
    Nov 19 '20 at 21:03
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Quoting George Soros at Project Syndicate (here and below highlight mine),

The rule-of-law regulations have been adopted. In case there is no agreement on a new budget, the old budget, which expires at the end of 2020, is extended on a yearly basis. Hungary and Poland would not receive any payments under this budget, because their governments are violating the rule of law.

Likewise, the recovery fund, called Next Generation EU, could be implemented by using an enhanced cooperation procedure, as Guy Verhofstadt has proposed. If the EU went down this road, the Orbán-Kaczyński veto could be circumvented. The question is whether the EU, with German Chancellor Angela Merkel perhaps leading the way, can muster the political will.

Soros talks about Procedure For Authorising Enhanced Cooperation, a provision from Lisbon Treaty (2009, effective Nov-2014) intended to unblock EU joint measures if no unanimous consensus found. The procedure includes voting by qualified majority of Member States, contrary to unanimous voting with veto power for each Member.

Enhanced cooperation is one option in the Treaty which allows a group of at least nine nations to implement measures if all Member States fail to reach agreement. Other EU countries keep the right to join when they want. The procedure is designed to overcome paralysis, where a proposal is blocked by an individual country or a small group of countries who do not wish to be part of the initiative. It does not, however, allow for an extension of powers outside those under the EU Treaties. The possibility was first introduced by the 1999 Amsterdam Treaty, with the 2009 Lisbon Treaty formalising the procedure and introducing the possibility for permanent structured cooperation (PESCO) in defence matters.

The adoption of the decision authorising enhanced cooperation requires a qualified majority of Member States within the Council and the consent of the European Parliament. The adoption of the new rules then requires unanimity by the Member States participating in enhanced cooperation and the consultation of the European Parliament. The other Member States are free to join the enhanced cooperation at any time.

It is worth noting that before today, the Enhanced Cooperation has never been involved to adopt the EU budget.

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    "Hungary and Poland would not receive any payments under this budget, because their governments are violating the rule of law." Some Hungarian law experts say that this would be an Ex post facto law making (a new rule applied on an earlier agreement, i.e. retroactive law making) and there is a chance that the EU court would outlaw it. It is quite risky from the leaders of the EU council to enforce rule of law with possibly breaking the rule of law. Nov 20 '20 at 9:17

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