Poland’s Rogue Court Ruling Puts EU in a Multibillion-Euro Bind
(Bloomberg) -- Poland’s defiance of European Union laws escalates the country’s fight with Brussels and is likely to prompt another delay in delivering billions of euros in funding.
The European Commission is now in a difficult spot after Thursday’s ruling by Poland’s Constitutional Tribunal that the constitution overrides some EU laws. Officials had been preparing to move ahead with conditional approval of Poland’s delayed recovery plan, but the attack on the EU’s core principles means it now needs to regroup.
“You cannot enjoy the benefits of EU membership while openly and intentionally burning down the EU legal order to get a bargaining chip in talks with Brussels,” said Lucas Guttenberg, deputy director of the Jacques Delors Centre in Berlin. “You can escalate, but the EU has to draw a line at some point and that line has now been crossed.”
The EU has been battling Poland, alongside other renegade Hungary, over numerous issues, including the rule of law, LGBTQ rights and climate policy and so far it’s led to little by way of concrete punishment. But the EU has new budgetary authority it can use to withhold funds and this latest defiant challenge by Poland is putting pressure on Brussels to flex those powers -- a move that could eventually jeopardize as much as 100 billion euros ($116 billion) in EU funding.
It’s not clear how hard Poland intends to pursue this challenge, since the country remains deeply dependent on EU funding. Its prime minister has said Poland has no interest in leaving the bloc.
For now, the ruling forces the commission to reassess discussions it’s been having to sign off on Poland’s delayed recovery plan as soon as November, with strings attached. A breakthrough would give the nation access to 23.9 billion euros of grant money from the bloc, but that funding could now be postponed further.
The EU has also hinted it may soon trigger a so-called conditionality mechanism, which withholds payments from the budget -- as well as its 750 billion-euro recovery package -- to member states accused of democratic backsliding.
“EU law has primacy over national law, including constitutional provisions,” European Commission President Ursula von der Leyen said in a statement on Friday. “We will use all the powers that we have” to ensure this.
Von der Leyen is under pressure to take a stand against Poland’s defiance, but she also has to consider how Warsaw could act to obstruct other plans, since many EU initiatives depend on unanimous support from member nations.
If Brussels metes out significant financial punishment for Poland, it could prompt Warsaw to block key commission proposals being now discussed by member states, including a sweeping plan to address climate change.
‘Playing With Fire’
But a number of EU member nations are pushing the bloc to take a strong stand against countries like Poland and Hungary that continually defy Brussels.
“The primacy of EU law is key for European integration and unity. If this is broken, Europe as we know it can’t exist any longer,” Luxembourg Foreign Minister Jean Asselborn said Friday, in reaction to the Polish ruling. “This Polish government is playing with fire. This means that it could lead to a breaking point, not just legally, but also politically.”
At the same time, other EU countries have their own spats over the relationship between EU and national laws. Last year, Germany’s top tribunal accused EU court judges of having overstepped their powers when they backed the European Central Bank’s quantitative-easing policy. The commission in June started infringement proceedings against Germany.
Polish Prime Minister Mateusz Morawiecki sought to strike a conciliatory tone after Thursday’s ruling, saying in a Facebook post that his country will remain in the EU despite the standoff. “Poland’s place is and will be in the European family of nations,” he said.
He has a difficult task navigating a government where the key decisions flow from the ruling Law & Justice leader and the country’s most powerful politician, the populist Jaroslaw Kaczynski. The ruling coalition has a slim majority in parliament and relies on votes from increasingly Eurosceptic party of Justice Minister Zbigniew Ziobro.
It was under Ziobro that Poland set up a mechanism for disciplining judges for the content of their rulings and started transferring judges critical of the government to other courts. Both measures were recently struck down by the EU’s top court. Earlier this year, Ziobro said Poland shouldn’t remain in the EU at any cost, as it leaves the country susceptible to “blackmail” over democratic values.
Still, the loss of even some EU funds could be painful for the $635 billion economy, the bloc’s largest outside the euro area. On top of 36 billion euros from the pandemic fund that now hang in the balance, Poland was expecting to receive 72.3 billion euros through 2027 in regional aid, which is meant to help poorer areas catch up with their neighbors in the west.
While Morawiecki said earlier this week that Poland’s finances are strong enough to ride out any holdups in EU financing, the funds have been key in transforming the country since it joined the EU in 2004 and made it among the region’s fastest growing economies.
“I would highly doubt that the leverage is on the Polish side,” said Guttenberg. “If you are a net beneficiary of the EU budget it’s also a lot of cash that you could potentially lose.”
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