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EU may approve Polish, Hungarian spending plans - with conditions - officials

By Jan Strupczewski

BRUSSELS, Oct 1 (Reuters) - The European Commission may approve in November EU-funded national recovery plans of Poland and Hungary, but will set conditions linked to respecting the rule of law for the release of EU funds, EU officials said.

The plans of Poland and Hungary and 25 other countries of the European Union are part of the bloc's 800 billion euro scheme to revive the EU economy after the coronavirus pandemic through grants and very cheap loans to be disbursed until 2026.

If approved, Poland could get 23 billion euros in EU grants and 34 billion in cheap loans, while Hungary can expect 7.2 billion euros in grants over the coming years.

But while the plans of 19 other countries have already been given the go-ahead and the first billions in pre-financing have been disbursed, Warsaw and Budapest have been waiting for a go-ahead for months.

The Commission's approval is stalled because the EU believes ruling parties in both countries are undermining the independence of courts, media and non-governmental organisations and, in Hungary, have a problem with corruption.

Poland's right-wing nationalist government also refuses to implement the verdicts of the EU's top court.

These shortcomings have been listed in what the EU calls Country Specific Recommendations issued to all EU members annually by the Commission. Addressing these recommendations is a condition for the approval of EU grants and loans under the recovery scheme.

To further strengthen the link between respect for the EU's principle of democratic division of power, the bloc agreed to protect EU money from misuse through a special rule-of-law mechanism that entered into force on Jan. 1.

Unhappy with the connection between observing the rule of law and access to EU money, Poland and Hungary challenged the mechanism in the EU's top court in March and the Commission said it would wait for the verdict before applying the law.

The verdict is expected by year's end or early in 2022.

But under pressure from the European Parliament, which wants the law implemented as soon as possible, the Commission is likely to launch initial legal steps under the mechanism in the coming weeks, EU officials said.

Access to billions of euros from the EU recovery fund is crucial for the highly euro-sceptic ruling coalition in Poland to shore up waning support before the next elections in 2023, as well as for the right-wing Fidesz party of Hungarian Prime Minister Viktor Orban, who faces elections in April 2022. (Reporting by Jan Strupczewski Editing by Mark Heinrich)