Germany Strikes Deal With EU Stimulus Holdouts, Poland Says

Poland and Hungary have agreed on a compromise with Germany to unblock the European Union’s $2.2 trillion budget and pandemic stimulus plan, a senior government official in Warsaw said.

The compromise would end a standoff that saw Budapest and Warsaw threaten to torpedo the EU’s 750 billion-euro ($909 billion) pandemic aid fund and the 2021-2027 budget over objections to attaching rule-of-law conditions to cash. They said the link threatened to cut their funding and undermine their governments, which are being probed for alleged violations of the bloc’s norms.

Polish Deputy Prime Minister Jaroslaw Gowin said an agreement had been clinched with Germany, which holds the EU’s rotating presidency, that would now be presented to the rest of the bloc. A deal could be finalized by Friday, he said.

“For now we have agreement between Warsaw, Budapest and Berlin,” he told reporters in Warsaw on Wednesday. “I believe this agreement will also include 24 remaining European capitals.”

The news was not immediately confirmed by Germany or by the two heads of governments in Poland and Hungary. Gowin, while deputy prime minister, has been the government’s biggest advocate of Poland dropping its veto threat.

A solution would offer a climb-down for Hungarian Prime Minister Viktor Orban and Polish counterpart Mateusz Morawiecki, who had backed themselves into a corner over their opposition to the cash being tied to democratic standards.

Gowin declined to go into details about the deal, saying only that it keeps “Poland sovereign and the EU united.”

The zloty jumped to the highest level against the euro since September on news of the EU deal. The forint also gained.

The deadlock threatened not only the 180 billion euros that Hungary and Poland were due to receive in the coming years but also payouts that are urgently needed to help ease the record recessions caused by the virus.

It also would’ve triggered an emergency budget for the EU from Jan. 1, which would’ve seen funding plunge in almost all areas and potentially put Poland and Hungary at the back of the line for development aid.

— With assistance by Richard Bravo, Marton Eder, and Zoltan Simon

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