Poland has little to lose by vetoing EU budget and recovery fund

By admin
4 Min Read

In his letter to leaders of EU institutions, Polish Prime Minister Mateusz Morawiecki has told them that “Poland cannot accept the current version of the rule of law mechanism which makes it conditional on political and arbitrary criteria”.

Morawiecki is referring to the EU signaling it will place sanctions on countries like Hungary and Poland for their conservative positions on migration, Christian values, family policy, and multiculturalism. 

Morawickie’s position has led Poland’s opposition parties to argue that the prime minister is committing “treason” by denying the country the resources he himself managed to negotiate as part of the EU budget settlement.

In fact, the prime minister did not write that Poland would veto the budget. However, he did argue that the mechanism negotiated with the European Parliament by Germany, which currently holds the EU’s presidency on a rotating basis, was contrary to the conclusions of the European Council and EU treaties.

Therefore, if such measures continue to be pursued, Poland would have little choice but to veto them.

However, should the veto actually be used, it does not mean that the EU will not be funded in 2021. In fact, it will simply revert to the budget for 2020, the last of the seven years in the 2014-2020 financial perspective.

It would actually result in settlement which is actually more beneficial for Poland than that proposed for the 2021-2027 budget. This is because Poland’s share of Cohesion funds is now smaller as a result of the fact the country has become wealthier and its GDP is now eight percent higher in relation to the EU average than it was previously.

It is the case that a veto of the budget effectively vetoes the €750 billion recovery fund.

Poland was to receive €60 billion — €26 billion in grants, the rest in loans — but the fund as a whole is to operate on a loan basis with all countries having to share the debt financing for the fund to be activated. It is the reason why the member states have for the first time ever agreed to introduce EU-wide taxes to service the debt interest, estimated to be €15 billion per annum.

The fund, which is to operate on the basis of solidarity, is mainly for the benefit of Southern Europe, which constitutes the countries that were the hardest hit by the first wave of the pandemic and ones with the most precarious national debt levels. These are also the countries which have witnessed falls in GDP of over 20 percent in the second quarter of 2020 and which are set see a GDP annual decline of over 10 percent.

Poland’s GDP is set to fall by two to three percent and the country has considerable capacity to borrow money on the markets. It can raise what it needs on the markets without the protection of the European Commission. If the recovery fund is not activated, the country will however avoid having to pay EU-wide taxes it was never a great advocate of in the first place.

This is why Poland does not have to fear the loss of EU funds. The opposition are just being hysterical.

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