29 October 2021

Dispatch from Warsaw: Money talks – a reluctant Poland may have to defer to the EU

In Poland’s dispute over the rule of law with the EU, Brussels holds a powerful card.

As the EU’s dispute with Poland over its alleged undermining of the rule of law comes to a head, the bloc is hitting Warsaw where it hurts: its wallet.

Poland is by far the largest net beneficiary of EU funds, receiving some €12bn more than it contributed in 2018. It has also been allocated up to €36bn from the Next Generation EU fund, the money intended to kickstart Europe’s recovery from the Covid-19 pandemic. The EU has now frozen the payout of those funds pending an agreement on the rule of law.

Following an explosive October ruling by the Polish constitutional court that some EU law is not supreme over the Polish constitution, the funds allocated to Warsaw under the recovery fund were frozen by Brussels. Later, the Court of Justice of the European Union hit Poland with an unprecedented €1m-a-day fine for not suspending a judicial disciplinary forum that, the court ruled, is causing “serious and irreparable harm to the legal order of the European Union and to the values on which that Union is founded, in particular that of the rule of law”.

Together, the decisions deprive the member state most dependent on EU money of tens of billions of euros. (Both rulings can be enforced, as they will involve Brussels withholding money from payments to Poland and do not require Warsaw’s cooperation.) The Polish government, led by the conservative-nationalist Law and Justice (PiS) party, has reacted with fury to both decisions, accusing the EU of “judicial blackmail”.

There are, broadly, two possible paths Poland could now take, according to Małgorzata Szuleka, head of advocacy at the Helsinki Foundation for Human Rights. The first, she told me, is for a compromise, where PiS partially backs down on its most controversial reforms to the judicial system and some money is released by Brussels in return.

The second is that Poland doubles down, deciding to obstruct the functioning of EU institutions as much as possible, vetoing decisions that require unanimity, such as on taxation and defence issues. “The government has said it has made a list of all decisions requiring unanimity in the council [of EU member states], which they have threatened to block if the money is not distributed,” Szuleka said.

However, the EU faces a dilemma. Polish GDP per capita has more than doubled since EU accession in 2004, partly because of payments from the bloc. This growth is a key reason why EU membership is one of the only issues that virtually the entirety of Polish society agrees on, said Paulina Kieszkowska-Knapik, a member of the Free Courts Initiative, an NGO fighting for judicial independence.

Withholding payments from Poland might cause PiS voters to turn against the ruling party once they realise that the spat with Brussels is harming Polish citizens financially. Alternatively, they could rally around it, seeing the sanctions as punishment of a people, justified or not, for the actions of their government.

Complicating the picture is Poland’s migrant crisis at the border with Belarus. Other EU member states, terrified of the political consequences of another wave of mass migration, have said that Poland’s efforts to prevent migrants entering the country should be supported. That means the union needs to keep cooperating with Poland on some issues, even as it tries to punish the country on the rule of law. Maintaining that balance is likely to prove tricky.