Germany will take the EU helm for six months as the 27-member states debate a mass stimulus programme to kickstart growth on the continent amidst a series of feuds that could hold up the required unanimous agreement.
Lines in the sand against making access to EU funds conditional on rule of law standards have already been drawn by Poland and Hungary, whose populist, eurosceptic governments have outraged other member states and rights groups by placing media, judges and academics under closer state control.
“The plan for recovery must be based on solidarity, cohesion and convergence…while fully respecting our values, rights, and the rule of law,” said the note, seen by Reuters.
It was also signed by Slovenia and Portugal, which will take over the EU baton for six months each in 2021.
The 27 EU member states will first lock horns on June 19 over a recovery proposal by the bloc’s executive to raise an unprecedented €750 billion worth of debt to top up spending from joint coffers to be worth €1.1 trillion in 2021-27.
Under the scheme, the executive European Commission could recommend suspending or withdrawing funds from a country flouting the rule of law, with a majority of EU states needed to block any such punishment.
That system would make it harder for Warsaw, Budapest or any other perceived offender to avoid forfeiture, compared to an earlier plan that would require a majority to vote in favour of any sanction proposed by the Commission for it to be enacted.
Pressure from the European Union, rights groups and international watchdogs has largely failed, however, to prevent an erosion of democratic checks and balances in the formerly communist eastern members of the bloc in recent years.
Other disputes over the proposed stimulus package include divisions between the EU wealthier northern countries and the financially ailing south over how to raise the money, how to spend it and, eventually, how to pay it back.
It comes as the European Central Bank approved yet more stimulus on Thursday to prop up an economy plunged by the coronavirus pandemic into its biggest recession since World War Two.
Just months after a raft of emergency measures, the ECB said it would increase the size of emergency bond purchases by €600billion £530 billion) to €1.35trillion and that the purchases would run until the end of June 2021, six month longer than originally planned.
The ECB also said it would reinvest bonds maturing in its pandemic emergency purchase scheme at least until the end of 2022.
As the downturn runs deeper and longer than expected, governments are running record deficits to cushion the impact of the pandemic, putting a greater burden on the ECB to soak up this new debt and keep borrowing costs manageable.
The ECB has always made clear it will do its part and Thursday’s move should reassure both governments and investors that it will not tolerate a rise in yields that might foster doubts about the viability of European debt.
“The Governing Council continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry,” the ECB said in a statement.