No agreement seems to have been reached on the rule-of-law mechanism until tonight

HUNGARY - In Brief 07 Dec 2020 by Istvan Racz

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A short while ago, foreign minister Szíjjártó told Reuters in Brussels that Hungary and Poland are holding themselves to their intention to veto the 7-year EU budget and the recovery package attached to it.Also today, an unnamed diplomat at the EU has told Reuters that the two countries have been given time until tomorrow to tell if they are ready to give up their intention to veto the fiscal package. The EU has refused to renegotiate the conditionality mechanism, and the only concession on their part could be the issuance of a legally binding statement that they would not use the mechanism to force Hungary and Poland to take in illegal migrants.Should Hungary and Poland uphold their veto decision, the EU would start to go ahead with the recovery package without the participation of the two countries, using one of the alternative techniques which came up as possible solutions. At least one of the latter would maintain access for Hungary and Poland as well if they decided later on to accept the conditionality mechanism, but it is more likely that the vetoing members would lose access to the recovery package permanently. For Hungary, this would mean the loss of €8.2bn (0.7% of GDP for the 2021-2027 period) in grants and €11.3bn (1% of GDP) in preferential loans.The Hungarian/Polish veto would leave the main 7-year budget blocked. In this case, the EU would start next year with an emergency budget (called the preliminary budget), which is usually estimated to be about 15-25% smaller than the full fiscal plan, which would be available upon unanimous approval by members. Hungary and Poland would be hit more than this reduction, as cohesion policy programs, which are the mai...