EU breaks deadlock on budget, coronavirus recovery fund

Leaders have agreed to pass the new budget and coronavirus recovery fund, including holdouts Hungary and Poland. The two countries had blocked the passage over wording that tied the funds to upholding the rule of law.

European Union leaders on Thursday reached agreement on a long-term budget and coronavirus recovery package, after weeks of resistance from Poland and Hungary, according to EU Council President Charles Michel.

The two countries had blocked the €1.1 trillion ($1.3 trillion) seven-year budget and €750 billion recovery package over stipulations that tie the funds to upholding the rule of law.

"Now we can start with the implementation and build back our economies. Our landmark recovery package will drive forward our green and digital transitions,'' Michel said in a tweet.

No details of the agreement were immediately available, however ahead of the summit, EU diplomats and officials said there would likely be a declaration that the rule of law mechanism would only be used after a ruling from the European Court of Justice — a process that could take a year.

Germany, current holder of the rotating European Council presidency, said it had brought Poland and Hungary on board.

"Germany has worked hard to bridge the differences and find solutions for the concerns of Poland and Hungary while at the same time upholding the rule of law mechanism as agreed with the European Parliament," Chancellor Angela Merkel said on arrival to the summit.

The EU has repeatedly accused Poland and Hungary of undermining judicial independence and media freedoms.

Ahead of the summit, Polish Prime Minister Mateusz Morawiecki said the rules could be used to target other member states in future.

"We have to avoid any arbitrary and politically motivated decisions,'' he said. "Today, we fear that we might be attacked in [an] unjustified way, but of course in the future [it can be] any country."

Hungarian Prime Minister Viktor Orban said that they were fighting for "a victory for common sense."

"It is obvious that when our nations and so many millions of people are in real need because of (the) pandemic and the economic consequences of that, we have to behave reasonably,'' said Orban,

Both countries, accused by many European partners of sliding towards authoritarianism, are major net recipients of EU funds, whereas wealthier EU countries pay more into the budget than they receive.

The summit will now turn its attention to climate goals and potentially Brexit.

The EU is hoping to agree to reduce greenhouse gas emissions by 55% by 2030 against 1990 levels, rather than by 40% as is currently agreed, however the debate will likely be divisive.

Hungary and Poland had blockaded the budget for several weeks