By Gabriela Baczynska and Jan Strupczewski
BRUSSELS (Reuters) - Any veto by Poland and Hungary of the European Union's new budget for 2021-2027 over upholding democratic standards would also freeze spending towards the bloc's more ambitious CO2 emission reduction goals, a senior EU diplomat said on Thursday.
The veto threat from the eurosceptic, nationalist governments in Warsaw and Budapest of the bloc's 1.8 trillion euro (1.63 trillion pounds) budget and the attached COVID-19 economic recovery fund has plunged the 27-nation EU into a fresh crisis.
As EU leaders are due to discuss the matter when they get together remotely on Dec.10-11, a senior EU diplomat warned the bloc's plan to have "net zero" emissions by 2050 was also at stake.
"I don't think it is feasible to agree on the climate conclusions and the enabling framework, which means money, without a long-term budget and recovery fund," the senior EU diplomat said. "These two come together."
Poland and Hungary - both ex-communist EU countries under investigation by the bloc for undermining the independence of their courts, media, academics and non-governmental organisations - have repeatedly rejected linking access to handouts from the bloc to the upholding of basic democratic principles.
At the same time, they are among EU countries sceptical of deeper cuts to greenhouse gas emissions and have demanded that the bloc offers them extra money to transform their energy mix if they are to come on board.
The diplomat, who spoke under condition of anonymity, said one cannot come without the other. The EU wants to spend 30% of its next long-term budget of 1.1 trillion euros on fighting climate change. Of the 750 billion euro recovery fund that comes on top of the budget, 37% is to go to green projects.
The financial package also foresees a Just Transition Fund that is to provide 100 billion euros to help poorer EU countries move away from carbon-intensive industries.
If the fund is granted final approval, Poland would be the biggest beneficiary and Hungary would also take out more than it would be due to contribute to it.
The leaders - due to discuss next week the executive European Commission's plan to raise ambition on reducing emissions to at least 55% below 1990 levels by 2030 - are also looking at ways to bypass Warsaw and Budapest's budget objections.
"Unless Poland and Hungary change their position very soon, we should start looking at alternatives," the diplomat said, suggesting Warsaw and Budapest might be cut out of EU aid.