Cut funds to EU members that violate rule of law -German proposal

By Andreas Rinke

BERLIN (Reuters) - European Union members that fail to meet EU standards on the rule of law could lose access to its financing under German proposals for the reform of the cohesion fund system seen by Reuters on Tuesday.

Such a move would be enormously sensitive in some countries that are net recipients of cohesion funding. Hungary and Poland, who have both received large sums, have repeatedly been criticised by Brussels for weak rule of law standards.

The seven-page German government document sets out broad considerations to guide Berlin's approach to upcoming Brussels negotiations on post-2020 changes to the system by which the EU supports development in its poorer member states.

"The possibility should be investigated of whether the receipt of EU cohesion funds could be linked to adherence to fundamental rule of law principles," the document states, suggesting that countries could see funds docked if they ignore the executive European Commission's reform recommendations.

Any such proposal would likely be fiercely contested by net recipients, but the position of Germany, as the single largest contributor to the EU's budget and cohesion funds, would carry weight in any discussions.

"The discussions around future cohesion policy can't be seen in isolation, but must be discussed in the context of the future multi-year financing framework of the EU and its role in the implementation of the EU's priorities," the document says.

Since the conservative Law and Justice party took office in Poland in 2015, it has been repeatedly criticised by the European Commission for a seemingly authoritarian drift, most recently with changes to the judicial system.

Hungary has been at loggerheads with the Commission almost permanently since the nationalist government of Viktor Orban took power in 2010. Most recently, it has been criticised for a higher education law that critics say targets a prestigious private university in Budapest.

(Reporting by Andreas Rinke; writing by Thomas Escritt; editing by Mark Heinrich)