By Jan Strupczewski and Marek Strzelecki
WARSAW/BRUSSELS (Reuters) - The European Commission could soon approve Poland's coronavirus recovery plan, but Warsaw might only get billions in EU money months later once it satisfies rule-of-law concerns and implements other agreed reforms, EU officials said.
The 27-nation bloc's 800 billion euro ($880 billion) post-pandemic recovery fund will finance the "green" and digital transformation of member states' economies between 2021 and 2026.
Countries will get their money once national plans on how to spend the cash are approved by the EU's executive arm and the bloc's finance ministers.
But Poland's plan, under which it could get 23.9 billion euros in grants and 12.1 billion in very cheap loans, has been stuck in the Commission since May 2021 because of accusations the ruling eurosceptic PiS party has been subjecting the country's courts to political control.
Releasing billions from the recovery fund hinge on each country applying the Commission's annual recommendations for reforms and for Poland these say the country must address the EU's rule-of-law concerns.
"There are certain rule of law issues which need to be addressed, which have been also now addressed in a European Court of Justice ruling and of course, we need to see how this European Court of Justice ruling is being implemented," Commission Vice President Valdis Dombrovskis said this week.
"It's clearly quite a fundamental question on the respect of rule of law, which we are discussing, but we are in constructive contact with Polish authorities. I hope we will be able to make progress on this quite rapidly," he said.
Since Russia's invasion of Ukraine last month that has sparked an inflow of more than 2 million refugees to cross into Poland, the Warsaw government has argued any conflict over other issues should be put aside.
The EU's top court has ruled the establishment of a disciplinary chamber in the Polish supreme court, appointed by ruling politicians, was unlawful and the chamber should be disbanded. Warsaw denies that and says its court overhaul aims to make the system more efficient and fair.
Poland's ruling party has so far refused to disband the chamber, holding up the Commission's approval of the recovery plan. Approval might come soon, a senior EU official said, but there would be no immediate disbursement of funds.
"The Polish national recovery plan will be approved by the Commission and if the Polish government passes a law that disbands the disciplinary chamber and reinstates judges who were illegally suspended, it will get the money from the recovery fund, of course if it also meets the other agreed milestones and targets," a senior EU official, who asked not to be named, said.
Had the Commission issued its approval last year, Warsaw would have been eligible, like all other countries, to get 13% of the total of the cash it cold get, so 3.1 billion euros in grants, in the form of a pre-payment.
But the option of receiving the pre-payment -- money EU countries get before even starting the agreed reforms to transform their economies -- ended last year.
Any approval now means EU disbursements to Poland will only be made once Warsaw delivers on the agreed targets -- one of which is likely to be addressing the EU's rule of law concerns.
"It's a tough balancing act - the rule of law can't be sacrificed for false sense of unity in the face of an armed conflict next door. But the Commission doesn't want to keep blocking the funds, given that the majority of the projects need to be approved this year," said another source familiar with the Commission's deliberations.
($1 = 0.9076 euros)