* Hungary, Poland are blocking EU budget, recovery fund
* PM Orban remains opposed to linkage of cash, principles
* Poland, in U-turn, says its stance also unchanged
BUDAPEST, Dec 4 (Reuters) - Hungary and Poland dug in their
heels on Friday in a dispute with the European Union over
efforts to link the disbursement of 1.8 trillion euros of funds
with rule-of-law provisions, dashing tentative hopes that a
compromise could soon be agreed.
Hungary and Poland have for weeks blocked the release of
funds from the EU's seven-year budget and a post-COVID
development fund, cash sorely needed by member states trying to
emerge from their coronavirus-induced recession.
Warsaw and Budapest, both under investigation by the EU for
undermining judicial and media independence, object to the
bloc's attempt to make the funds conditional on respect for the
rule of law and democratic norms.
Poland's Deputy Prime Minister Jaroslaw Gowin said on
Thursday an acceptable compromise could be for EU leaders to
issue a declaration that assured Warsaw and Budapest that the
mechanism would only be used to safeguard EU funds and not to
exert pressure in other areas of policy.
However, on Friday both countries rejected that idea.
"For us, this solution - attaching some statement like a
reminder on a sticky note attached on a piece of paper - won't
work," Hungarian Prime Minister Viktor Orban told public radio.
"Hungary insists that these two things should be separated."
Polish Prime Minister Mateusz Morawiecki backed him.
"We say clearly that we are not able to accept the budget
for the next seven years if at the same time that regulation is
adopted. Our partners see that our position does not change,"
Morawiecki told a news conference.
Orban said there was no rush to get an agreement on the EU
budget this year, adding: "Leave the legal status quo unchanged
and everything will go smoothly and quickly."
No agreement on the 2021-2027 budget framework would mean
the EU switching to emergency financing - known as 'provisional
12ths' because in each month the bloc would not be able to spend
more than 1/12th of what it spent in the previous year.
The European Commission has said that would entail radical
cuts in the amount of money that EU budget beneficiaries such as
Poland and Hungary receive.
To avoid that scenario and to be prepared for when the two
countries lift their veto, EU governments and the European
parliament agreed on Friday on an annual budget for next year
based on the now still vetoed 2021-2027 framework.
The chairman of EU leaders, Charles Michel, said on Friday
the bloc could not compromise on respect for rule of law, which
he said was in its DNA, though he "wanted to remain optimistic"
that the standoff can be resolved quickly.
Portugal, which takes over the rotating six-month EU
presidency from Germany next month, said it was unacceptable for
two countries to block a decision that was very important for
the EU as a whole on such a premise.
($1 = 0.8226 euros)
(Additional reporting by Krisztina Than in Budapest, Alan
Charlish in Warsaw and Jan Strupczewski in Brussels; Editing by