Cohesion Fund

German Budget Proposal Stirs EU Controversy

Poland’s Prime Minister Beata Szydlo and German Chancellor Angela Merkel during the welcome ceremony in Warsaw
A new ice age in German-Polish relations? Picture source: Reuters

Only a few days after German Chancellor Angela Merkel implored European leaders to take their fate into their own hands, old rifts are threatening to throw a wrench into the much-needed show of unity.

An official seven-page German government proposal has drawn a sharp rebuttal by neighbor Poland, which says the proposal violates existing European Union law. The spat comes at a time when the EU is trying hard to demonstrate unity ahead of the departure of one of its largest member states, Great Britain, and growing tensions with its main western ally, the United States.

Under the German government proposal, first seen by news agency Reuters and other media on Tuesday, EU member countries failing to meet standards on the rule of law could be cut off from the block’s funding program, also known as the Cohesion Fund System. The cohesion fund supports development in the union’s poorer member states and could hit net aid recipients such as Poland and Hungary particularly hard, as both have been accused of violating rule of law principles.

The official position paper, confirmed by the government on Wednesday, is part of Germany’s considerations on a future EU budget plan. The seven-year plan, starting in 2020, will be the first multi-annual financial plan following Britain’s exit from the union. It is still unclear how the then 27-nation block will make up for the gap left by Britain, a main contributor to EU funding.

“The possibility should be investigated of whether the receipt of EU cohesion funds could be linked to adherence to fundamental rule of law principles,” the document seen by Reuters states, suggesting that countries could see funds docked if they ignore the executive European Commission’s reform recommendations.

“Proposals to withhold structural funds for selected member states is simply contradictory to EU treaties.”

Beata Szydlo, Polish Prime Minister

The commission has clashed with Poland and Hungary on multiple occasions over concerns about the rule of law. It has launched a probe into Warsaw’s adherence to democratic standards and threatened to activate Article 7 of the EU treaty, which includes the possible suspension of Poland’s voting rights in the European Union. The commission accuses the governing Law and Justice Party, a nationalist movement, of weakening the independence of Poland’s judiciary.

Warsaw keeps rejecting such claims, with Poland’s Foreign Minister Witold Waszczykowski instead claiming that the Commission’s first vice president, Frans Timmermans, was waging a “personal crusade” against the country.

Poland’s Prime Minister Beata Szydlo also did not wait to shoot back at the German government proposal. “Proposals to withhold structural funds for selected member states is simply contradictory to EU treaties,” she told reporters on Wednesday. Poland is receiving some €86 billion ($96.6 billion) from various EU cohesion funds in the current seven-year EU budget that runs through 2020.

Hungary’s government under nationalist Prime Minister Viktor Orban has clashed with the EU Commission almost permanently since he came to power in 2010. The spat had intensified during a massive influx of migrants in 2015 and 2016, when Hungary decided to seal its borders and enforce rigid migration laws, setting it up for a clash with other European countries, foremost with Germany. The government in Budapest has also drawn the ire of EU officials when it passed a law in April, aimed at closing a leading university founded by the Hungarian-American financier and philanthropist George Soros after the fall of communism in Hungary. But commission officials in April said they saw no “systemic threat to the rule of law,” instead calling for an intensified dialogue.

Hungarian officials did not yet comment on Berlin’s proposal for a shakeup in funding laws, but the revelations are likely to add more tension to an already divided European continent.

Tina Bellon is a New York-based editor at Handelsblatt Global. To contact the author: T.Bellon@extern.vhb.de

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