EU wins court battle against Hungary and Poland over ability to withhold funds

17 Feb 22

A Polish and Hungarian legal challenge against the European Union has failed, allowing the bloc to withhold billions of euros of funding if member countries fail to meet democratic standards.

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Ursula von der Leyen Shutterstock 1956188716

European Commission president Ursula von der Leyen. Image © Alexandros Michailidis/Shutterstock

The European Court of Justice ruled on Wednesday that the so-called conditionality mechanism, introduced in December 2020, supports values “which define the very identity of the European Union” and must therefore be defended.

It said the mechanism was intended to protect EU money, rather than to penalise breaches of the rule of law per se.

The mechanism can only come into play if “those breaches affect or seriously risk affecting the sound financial management of the union budget or the protection of the financial interests of the union in a sufficiently direct way”, the ECJ said in its judgement.

European Commission president Ursula von der Leyen said the bloc’s executive body has been “monitoring the situation in all member states” since December 2020, and promised to act “with determination” when she found breaches.

“This mechanism ensures that the Union budget will be protected and implemented in line with the principles of sound financial management, for the benefit of all European citizens,” she said.

The Commission has already been withholding funding for Poland, having so far not accepted its request for €36bn of the EU’s Covid-19 recovery package, citing concerns of democratic backsliding.

It has treated similarly Hungary’s request for €7.2bn from the same fund, although talks over anti-corruption measures reportedly mean a deal is closer than for Poland.

Both countries have clashed with the EU in recent years over the two national governments’ perceived slip into authoritarianism, with particular tension arising around the independence of public institutions such as universities and the judiciary.

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