Hello and welcome to Europe Express.

The EU’s brand new tool allowing it to freeze money in the event of rule of law violations may soon make their first appearance. EU officials say the first steps could be taken before the end of October, setting up a complex and lengthy process that will take several months before any funding is potentially withheld. (Reminder: this is the much contested mechanism that Budapest and Warsaw opposed last year, holding the EU’s post-pandemic recovery plan hostage for several months).

In brighter news, Kosovo and Serbia managed to patch up their latest skirmish (over license plates) which had rekindled tensions in recent weeks. The EU-brokered deal comes just in time for next week’s summit in Slovenia with EU and Western Balkan leaders.

Funding freeze

Brussels is preparing to take the first steps by rolling out its new rule of law conditionality mechanism as early as this month, in an escalation of its battles over EU values, according to officials familiar with the discussions, writes Sam fleming in Brussels.

Poland and Hungary are among those affected, but the committee is examining several member states where it is sufficiently concerned that possible breaches of the rule of law could threaten the use of EU funds.

Discussions are still ongoing within the committee as to exactly when and how to trigger the mechanism, and no final decision has yet been taken in the politically charged process. But some officials believe the first communications could take place in a matter of weeks as the committee responds to intense pressure from the European Parliament for swift action.

This would mark the first steps towards the application of new legislation that entered into force earlier this year allowing the committee to withhold payments of EU money when it finds that violations of fundamental principles endanger the EU budget.

The new rules were the subject of a fierce battle late last year as Poland and Hungary threatened to veto the EU’s seven-year budget, including the EU Next Generation relaunch of 800 billion euros, due to the scheme. The budget was finally adopted, but in March Hungary and Poland challenged the rules in the European Court of Justice. The court will hear their case on October 11 and 12 – and a judgment is not expected until next year.

The European Parliament has pushed the committee to speed up its use of the new rules, demanding information on its first cases by October.

Any committee decision using the new mechanism would ultimately have to go to the board. But unlike older (and weaker) sanction mechanisms that require unanimity from member states, decisions to freeze funds in this case are taken by qualified majority. This means that countries like Hungary and Poland would have a harder time getting enough support to veto this decision.

The conditionality mechanism, overseen by Budget Commissioner Johannes Hahn, is one of a growing set of tools the committee can deploy in its bickering with member states accused of flouting key values, including independence of the government. justice and the fight against corruption.

Hungary and Poland are both awaiting approval of their stimulus fund liquidity offers, as the commission seeks to insert more stringent conditions into their plans requiring them to comply with rule of law requirements. In addition, the committee is examining how to use stricter rules requiring officials to check compliance with key EU values ​​before approving Member States’ offers for cohesion funding.

And the commission asked the court to fine Poland for its disregard of legal judgments as it tries to push Warsaw to overhaul its judiciary. (A separate ECJ order requiring Warsaw to pay € 500,000 each day it refuses to comply with any of its judgments has so far been ignored by the government).

Existing Article 7 disciplinary proceedings against Poland and Hungary for alleged violations of EU laws and values ​​have remained blocked, mainly due to the unanimity rule in the council which allows both country to protect each other.

“The committee has new tools when it comes to protecting the EU budget and the rule of law and it is important that we use them – we have to be credible”, said Vera Jourova, Vice-President of the EU Values ​​Committee, warning that the existing rule of lawsuits had not gone far enough. “We are determined to use the new conditionality mechanism wherever we see fit. “

De-escalation of the Balkans

Kosovo and Serbia agreed yesterday to defuse border tensions that have kept Pristina and Belgrade on high alert for the past two weeks over the issue of the display of vehicle license plates in countries of the other writes Marton Dunai in Budapest.

“We have an agreement!”, Rejoiced on Twitter Miroslav Lajcak, the special envoy of the EU in charge of normalizing relations between Belgrade and Pristina.

We have a deal! After two days of intense negotiations, an agreement on de-escalation and the way forward has just been reached. I thank Besnik Bislimi and Petar Petkovic for their availability to negotiate and come to an agreement for the good of the people. pic.twitter.com/OuhuUWvuG0

– Miroslav Lajcak (@MiroslavLajcak) September 30, 2021

Lajcak said he made the deal with Kosovar Deputy Prime Minister Besnik Bislimi and Serbian Petar Petkovic, the top Kosovo official in Belgrade.

Kosovo unilaterally declared independence from Serbia in 2008, a move that was recognized by a majority of European Union member states but vehemently rejected by Belgrade, which regards Kosovo as a historic part of the country.

Today, a large majority of Kosovo is of ethnic Albanian origin, but in four northern counties the majority of the population is still Serbian. Serbia has mandated cars from Kosovo to replace license plates with temporary Serbs, a decision Pristina issued in September.

Ethnic Serbs blocked border crossings in response, prompting the government in Pristina to send special police. Belgrade sent tanks and warplanes into what looked like a dangerous escalation of the conflict last week.

Under the agreement reached in Brussels, the special police will be abolished as well as the roadblocks on Saturday. EU peacekeeping units (KFOR) will replace local police and stay for two weeks to prevent tensions from resuming.

From Monday, neutral stickers will replace the temporary plates on both sides on a provisional basis.

An EU-chaired tripartite working group will seek to find a permanent solution to the license plate problem and is expected to present its findings within six months.

Charter of the day: Not just truck drivers

As of January, EU and non-EU citizens coming to work in the UK must have a job offer, at a defined skill level and salary level, from an approved employer. The requirements are lower for a list of shortage occupations established by the government, for health workers, researchers and a quota of seasonal agricultural workers. Even though visa applications to bring in skilled workers under the revamped regime are approaching pre-pandemic levels, few are coming from the EU. Roads to the UK for low-skilled workers are largely closed. (More here)

What to watch today

1. European Prosecutor Laura Kovesi answers questions from MEPs in the Budget Control Committee

2. The Conference on the Future of Europe launches its third citizens’ panel, on climate change and health

Smart readings

• Climate winners and losers: In its monthly publication, the Munich-based CESifo research network examines how climate and energy policies affect the EU and low- and middle-income economies. This edition includes an analysis of the impact of carbon pricing on equity in Germany and a report by Bruegel on the prolonged Brexit limbo for the European financial sector.

• How Germany can strengthen Europe: In this article, the European Council on Foreign Relations proposes four ways in which Germany can strengthen the EU. This is about completing the single market, including banking union, setting up a “resilience office” to extract details about China’s digital transformation and build resilience to China.

• French robocops: If man can’t beat the machine, why not join it? This is the subject of this article from the French Institute of International Relations (IFRI) which explores Man Machine Teaming, a technology currently being deployed in the French Air Force.

Germany post-election, unwrapped

Join the Europe Express team on Monday for a subscriber-only webinar on the outcome of the election in Germany and its implications for Germany and the rest of the world. Register for free on ft.com/germanwebinar

Recommended newsletters for you