Breaking down the €137 billion in EU funds that Brussels has unfrozen for Poland

The hefty figure made headlines when Ursula von der Leyen teased the announcement during a visit to Warsaw last week.

“We are impressed by your efforts and those of the Polish people to restore the rule of law as the backbone of your society. A society where everyone plays by the rules. A society where people and businesses can trust the institutions and can hold authorities to account,” von der Leyen said speaking next to Polish Prime Minister Donald Tusk.

The Commission has now formalised the move, giving the green light to two separate decisions that allow the Polish government to access the long-coveted pot of cash, which the country urgently needs to finance green, digital and development projects.

The main reason for the unfreezing is the commitment to restore judicial independence part of the Tusk-led coalition’s political mission to reset Brussels-Warsaw relations.

But the release does not mean that Poland will automatically obtain such a huge amount of money or that the rule of law is up and running once again.

Euronews breaks down the numbers.

Recovery funds: €59.8 billion

After the EU agreed to establish a record-breaking €750-billion fund (€807 billion in current prices) to cope with the economic shock of the COVID-19 pandemic, each member state was asked to request a share of their allocated grants and loans.

Poland’s national recovery plan was first approved in June 2022 and later amended to cover almost €60 billion in funds: €34.5 billion in low-interest loans and €25.3 billion in non-repayable grants.

However, unlike other countries (except Hungary), Poland was denied access to the money. Until now, only €5.1 billion has been disbursed in so-called “pre-financing,” a sort of liquidity boost with no strings attached to kick-start energy projects.

The remaining amount stayed firmly blocked as a consequence of the sweeping reforms introduced by the previous hard-right government of Law and Justice (PiS), which rearranged the relations between courts, appointed party-friendly judges to top positions and, most controversially, empowered the disciplinary chamber of the Supreme Court to punish magistrates according to the content of their rulings.

The overhaul, Brussels said, severely damaged the country’s judicial independence, hindered the application of EU rules, and put at risk the bloc’s common budget. The standoff further exacerbated after a 2021 bombshell ruling by Poland’s Constitutional Court that directly challenged the primacy of EU law.

In response, the Commission imposed two “super milestones” on the recovery and resilience plan as an overarching condition to release the loans and grants. These were:

1. To reform the disciplinary regime for judges and replace it with a new body.
2. To review the cases of the judges affected by the disciplinary chamber.

Crucially, the milestones compel Poland to shield judges from retaliation when they ask the European Court of Justice (ECJ) to issue a preliminary ruling, an often-used procedure to ensure EU law is properly interpreted and enforced.

Warsaw made the first overture in mid-2022 when it put forward a new law that shut down the contentious disciplinary body and established instead a chamber of professional liability with lesser powers, which some scholars decried as superficial.

Although the plans were noted by Brussels, they did not pick up pace until Tusk came into office and offered additional changes, including a ministerial order to discontinue unjustified proceedings against judges and a formal commitment to respect the primacy of EU law and abide by the ECJ ruling that struck down the disciplinary chamber.

Altogether, the reforms are considered sufficient to fulfil the two “super milestones” and allow the first disbursement of COVID-19 funds to Poland, worth €6.3 billion in grants and loans. The Commission’s decision will be ratified in the Council in the coming weeks.

With access unblocked, Poland is expected to submit two more payment requests throughout this year and could very well receive up to €23 billion by the end of 2024 if certain investments and projects are carried out. The country has until mid-2026 to receive the remainder of the recovery and resilience cash.

Cohesion funds: €76.5 billion

This is the other side of the coin – but it’s not that different.

The worrisome decline of judicial independence also led the Commission to freeze a wider envelope that Poland had been allocated under the bloc’s common budget for the 2021-2027 period: €76.5 billion in funds from cohesion, maritime and migration policies.

This was done under the so-called “horizontal enabling conditions,” which govern the general use of EU funds and compel all 27 member states to comply with the EU Charter of Fundamental Rights at all times. As judicial independence is one of these fundamental rights, the Commission triggered the mechanism to block access to all €76.5 billion.

In practice, this meant that Poland, the largest recipient of cohesion funds, was unable to request reimbursements for development projects on the ground.

Tusk’s government moved quickly to turn the page and sent in January a “self-assessment” arguing it had made enough efforts to fulfil the horizontal enabling conditions. These include the aforementioned changes to undo the effects of the disciplinary regime, fresh amendments to the Human Rights Ombudsman, and the introduction of a system to submit complaints in cases of inappropriate spending.

The Commission says the fixes are enough to unblock all €76.5 billion. The Polish government is expected to ask for an immediate reimbursement of €600 million, with more to come in the coming months.

The money will be progressively doled out until 2027.

Additionally, Poland has asked to join the European People’s Prosecutor Office (EPPO), which will add an extra layer of supervision on both the cohesion and recovery funds.

So, all is well now?

Financially speaking, things are looking brighter for Poland, that’s for sure. But the country remains under Article 7 procedure, the EU’s “nuclear option” to address the most serious breaches of EU values. Only Poland and Hungary are subject to this procedure.

Warsaw presented earlier this month an “action plan” of nine bills to restore judicial independence, from the highest tribunals to ordinary courts, and exit Article 7 by the end of June at the latest. 

The Commission has warmly welcomed this blueprint and took it into account when making the decision to unfreeze the €137-billion pot of cash.

The “action plan” is, however, still a draft ambition and faces the veto threat of President Andrzej Duda, who is politically aligned with the PiS party. It’s unclear at this stage how many of the nine bills will reach the finish line.

Speaking on condition of anonymity, Commission officials acknowledged that Poland is only half way on its road to re-establishing the rule of law and more must be done.

“Remember how much ink has been spilled on an important matter like the disciplinary regime? It’s very visible and manifest that judicial independence is being strengthened,” an official said, referring to the steps that Tusk’s government has already taken.

“That does not mean the rule of law is fully restored and everything is fine. There are other important things to be done, as set out in the action plan.”

The official insisted that Brussels has tools in place to halt payments, from either cohesion or recovery funds, should there be a “reversal of commitments.”

“If at any point,” another official cautioned, “we, as the Commission, see this is no longer the case we can, of course, block the funds again.”

Jakub Jaraczewski, a researcher at Democracy Reporting International, a Berlin-based think tank, regretted that the Commission failed to wait for all legislation to bring tangible effects and partially based its decision on “promises” made by Warsaw.

“What the new Polish government has done in those few months warrants praise, but much work remains,” Jaraczewski said on social media. “By placing politics first, the Commission opens itself to the argument that this whole rule of law story was really about getting the PiS government out”