- The two countries vetoed the deal after it was suggested that future stimulus disbursements will be linked with commitments to the rule of law.
- Poland and Hungary, under investigation for allegedly disrespecting these European values, believe this link has political motives and is part of a wider attack against the two nations.
- This dispute is problematic because it risks delaying the disbursement of much-needed funds across the region.
LONDON — European officials will be entering "intensive" negotiations in the coming days after Hungary and Poland blocked a deal on the region's $2 trillion stimulus plan — an impasse that's raising concerns over an economic recovery in the region.
The two countries vetoed the deal after it was suggested that future stimulus disbursements will be linked with commitments to the rule of law — a mechanism that upholds European values, including freedom of the press and independence of the judiciary.
Poland and Hungary, under investigation for allegedly disrespecting these European values, believe this link has political motives and is part of a wider attack against the two nations.
"It would be fine if this really would be about the rule of law, but in fact it's about politics. The government of Poland, the government of Hungary — we are conservative governments and we are constantly under attack from Brussels, from other European politicians," Paweł Jabłoński, deputy foreign minister of Poland, told CNBC's "Squawk Box Europe" on Friday.
He also said comments on Poland's rule of law commitments coming from some politicians in Brussels were "pure hypocrisy."
There has been a political clash in recent years between two opposing camps: Some nations believe their counterparts in Hungary, Poland and others are breaching European values by influencing the appointment of judges or restricting how the press works; but these countries argue they still respect the rule of law.
"It has always been the rule that the independence of the judiciary and the structure of the national judiciary is in itself a competence of member states," Jabłoński said, adding that other EU governments also appoint judges to the highest courts. Brussels has objected to the fact that judges in Poland could be subject to investigations and sanctions based on their rulings and that their judicial independence could be affected.
This dispute is problematic because it risks delaying the disbursement of much-needed funds across the region.
The EU is not only facing a health emergency, but one of the deepest economic crises in its history. The stimulus plan, which was first designed in July, is a combination of a 1.074 trillion euro ($1.27 trillion) seven-year budget and an additional buffer of 750 billion euros, to be raised from public markets. The money will be distributed for all sorts of investments across the 27 member states to prop up the economy.
"Nobody underestimates the difficulty of the situation, nobody underestimates the serious nature of the obstacle that we are facing," European Council President Charles Michel said at a press conference on Thursday.
He also said that "there is a determination in the coming days to work in an intensive way to overcome (the) difficulties."
The dispute comes at a tricky time for the EU as it also deals with Brexit trade negotiations with the U.K. Nonetheless, all parties involved believe a compromise will be found — though it is unclear when and how that will take place.
Speaking to Hungarian radio on Friday, Prime Minister Viktor Orban said the negotiations will continue and "in the end we will come to an agreement, that's how it usually goes," Reuters reported.
Jabłoński from Poland also told CNBC that "right now we are more less in a stalemate, but in general I think that the EU is a very creative organization."
At an event with CNBC's Karen Tso on Thursday, Spanish Deputy Prime Minister Nadia Calvino said the stimulus talks are naturally complicated.
"This a major package that needs to be agreed and it's not strange, you know, that we're in this kind of impasse situation," she said.
Failure to deliver the stimulus would not only threaten the economic recovery in the region but also spark concerns among investors, after financial markets praised the July announcements.