By Jan Strupczewski and Kate Abnett
BRUSSELS (Reuters) - European Union leaders are likely to unblock on Thursday a stalled 1.8 trillion euro package to help revive the economy after the COVID-19 pandemic and agree on new, more ambitious CO2 emissions reduction goals to fight climate change.
During the two-day talks, leaders of the 27 EU countries will also discuss COVID-19 vaccines, resetting relations with Washington and sanctions on Turkey for drilling in contested waters in the Mediterranean.
But the focus will be on unblocking a historic joint EU borrowing of 750 billion euros to finance the post-pandemic recovery and the 1.1 trillion euro EU budget for 2021-2027 that focuses on digitalisation and fighting climate change.
Agreeing on the money is one of the conditions set for a deal on a proposal that the EU cut greenhouse gas emissions by 55% by 2030 compared to 1990 levels rather than the currently agreed goal of 40%.
"I am confident that we can find an agreement on a common package to allow for the swift implementation of both the multi-annual financial framework and the recovery fund," summit chairman Charles Michel said in a letter to leaders.
"An agreement on an enhanced emissions reduction target of at least 55% by 2030 is within our grasp."
Poland and Hungary have been blocking the financial package because access to the money is, for the first time, to be linked to respecting the rule of law. Since Warsaw and Budapest are under EU probes for undermining the independence of courts and media, they are at risk of losing billions from the EU.
But Germany, which holds the rotating presidency of the 27-country bloc until the end of the year, struck a deal with the two countries that will allow them to lift their veto.
Under the deal, EU leaders will issue a declaration, stating that the rule-of-law link to funds will be applied objectively and only to safeguard the proper use of EU money, rather than to punish countries under the separate EU rule-of-law probes.
The practical application of the regulation could anyway be delayed by about two years because Poland and Hungary can ask the EU's top court to decide if it is in line with EU treaties.
This could push the application of the new rules past the 2022 elections in Hungary, which some EU officials said Hungarian Prime Minister Viktor Orban was keen on.
Hungary's foreign minister Peter Szijjarto has already declared victory and Polish President Andrzej Duda spoke of a preliminary deal.
Ambassadors of EU countries in Brussels gave the agreement a positive initial review, although they left the final decision to leaders on Thursday.