Hungary to veto EU budget and recovery plan in major snag for bloc

By Marton Dunai and Pawel Florkiewicz

BUDAPEST/WARSAW/BRUSSELS (Reuters) - Hungary will veto the European Union's 2021-27 budget and its COVID recovery scheme if access to funds is made conditional on governments' adherence to the rule of law, a move which a senior EU official warned could create havoc within the bloc.

Ambassadors of EU governments in Brussels will discuss the budget, its financing and any funding conditions on Monday afternoon. Hungary's government spokesman reiterated on Monday Budapest would vote against the package, and Poland's justice minister said Warsaw could follow suit.

The nationalist governments in Budapest and Warsaw, which the EU accuse undermining the independence of courts, media and non-governmental organisations, risk losing access to tens of billions of euros in EU funds if the new conditions are introduced.

"If there is a Hungarian veto of the budget, there will be a crisis," a senior EU diplomat involved in the preparations for the ambassadors' meeting said.

He said informal discussions on the issue were already under way, including talks between the head of the European Commission, the chairman of EU leaders and Chancellor Angela Merkel, who is in charge of the German EU presidency.

Hungarian Prime Minister Viktor Orban has already sent a letter to EU institutions threatening to veto the budget and Polish Prime Minister Mateusz Morawiecki wrote a similar letter last week.

Asked if Hungary would veto the 1.1 trillion euro (988.68 billion pounds) budget and the 750 billion euro recovery plan that hinges on the passage of a law on financing it, called the Own Resources Decision, unless the rule of law conditions were reconsidered, Hungarian government spokesman Zoltan Kovacs said:

"Your deduction is correct."

In Warsaw, Zbigniew Ziobro, Poland's Justice Minister said this was "the decisive moment for what will happen in Europe... when Poland can declare a veto."

He said the move would be useful "to block this political project designed to limit Poland's sovereignty... I am convinced that, similarly to Prime Minister Orban, Prime Minister Morawiecki will use this right."

EU leaders decided in July that access to EU funds should be tied to a government's respect for the rule of law, a decision that was clarified in negotiations between EU governments in November, triggering protests from Poland and Hungary.

(Additonal reporting by Anita Komuves; writing by Jan Strupczewski; Editing by Toby Chopra and Raissa Kasolowsky)