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Poland and Hungary face threat to EU regional aid over human rights concerns

EU eastern tensions

Poland and Hungary face threat to EU regional aid over human rights concerns

Brussels weighs use of powers that link cohesion funds to bloc’s values

Warsaw’s gay pride parade this year. LGBT+ rights have become a flashpoint in Poland © Wojtek Radwanski/AFP/Getty Images

Poland and Hungary face a new threat to EU regional aid as the European Commission prepares to wield powers linking billions of euros of funds to human rights standards in member states.

The commission is facing growing pressure from the European parliament and some capitals to use its financial leverage to bring member states to heel over breaches of EU values. Poland and Hungary are embroiled in disputes with the EU over rule of law issues including allegations of discrimination against LGBT+ people.

A move by Brussels to withhold any regional aid — known as “cohesion funds” — would be politically explosive. The money is meant to even out economic disparities across the union and help poorer, mainly eastern EU members catch up with their neighbours in the west.

“There is no real competence in terms of [the commission] being able to use issues like this to withhold cohesion money,” said a senior EU diplomat. “That’s a total game-changer. It is crossing a Rubicon.”

The EU’s latest €1.2tn budget, from 2021 to 2027, allocates Poland up to €121bn of cohesion, regional development and other EU funds, while Hungary has been allocated €38bn.

At issue are provisions related to the EU’s charter of fundamental rights that are now part of the union’s budget legislation. EU officials are required to check for compliance with the charter before distributing funds.

Officials in the commission, the EU’s executive, have been looking at the potential legal effect of these provisions across EU member states as they negotiate cohesion spending programmes.

Poland and Hungary are among those under scrutiny given their disputes with Brussels, including over LGBT+ discrimination, people briefed on the discussions told the Financial Times. Both countries are also subject to EU legal proceedings because of “a clear risk of a serious breach of EU values”.

The commission has not yet decided how to implement the tougher standards for distributing cohesion funds, and some officials expect the rules to be used only in narrowly targeted circumstances. But Vera Jourova, commission vice-president for EU values, told the FT that the commission was taking the new powers “very seriously”, adding: “We are working now internally to ensure how this will work in practice.”

Jourova said that the EU charter codified basic rights for citizens and that national governments, which administer cohesion funds, “now have to explain upfront how they take the Charter into account”.

“It makes perfect sense that EU taxpayers’ money should be spent where these rights are respected,” Jourova said. “We simply have to make sure that the authorities will not discriminate [over] who can benefit from EU funds.”

What do they think they’re [Brussels] going to achieve? That Poland is going to get down on their knees in front of them? Ridiculous

Tadeusz Koscinski, Poland’s finance minister

The discussion shows the EU’s widening array of financial tools to wield against countries that breach its principles.

This month the commission wrote to a number of regional authorities in Poland saying it was putting on hold funding under the REACT-EU cohesion programme, given their decision to create so-called LGBT-free zones in their areas. These freezes relate to the bloc’s previous seven-year budget, but Jourova said she could envisage a “similar path for the new programmes”. 

The commission is also in dispute with Poland and Hungary over funds meant to help EU countries recover from Covid-19. Brussels is refusing to accept the Polish and Hungarian recovery plans, worth tens of billions of euros, because of differences over how those countries implement the rule of law.

Separately, Brussels is preparing to deploy new powers to withhold payments to member states when a rule of law violation directly threatens the EU budget. Brussels is seeking fines reaching into millions of euros per week because of Poland’s refusal to abide by European court rulings.

Tadeusz Koscinski, Poland’s finance minister, told the FT that any moves by Brussels to withhold funds would backfire. “There is a dire danger that [the commission] are going to be turning Polish opinion against them,” he said.

“When politics gets involved in economies, that never ends well,” he added. “What do they think they’re going to achieve? That Poland is going to get down on their knees in front of them? Ridiculous.”

Speaking after publication on Friday, Hungary’s government spokesman told the FT that the EU resources were “not aid-type grants”.

“This money is due to Hungary, the European Union is obliged to extend it, considering mutual benefits on a contractual basis,” the spokesman said. “If Brussels interferes in next year’s Hungarian elections for political reasons and withholds Union resources, that would run counter to the treaties and would be unprecedented in the history of the Union.”

The spokesman initially told the FT that Budapest had not been informed that the commission would conduct such an investigation. “Planning of the use of 2021-27 cohesion funds is currently under way . . . we hope they will continue in a professional and constructive manner and the Hungarian plans will be accepted as soon as possible.”

Additional reporting by James Shotter in Warsaw and Marton Dunai in Budapest

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