Poland Softens Tone in Clash With EU Over Democratic Backsliding

  • Premier Szydlo meets senior EU commission official in Warsaw
  • Investors demand higher yields to hold Poland’s bonds

Poland’s Prime Minister Beata Szydlo said she ready to resolve a months-long crisis over the country’s Constitutional Tribunal, taking a softer tack in a clash with the European Union over whether the country is backsliding on democratic standards.

Szydlo, who last week condemned an EU probe into rule-of-law in Poland as the biggest threat to sovereignty since communism, told European Commission First Vice President Frans Timmermans Tuesday that her government is “always ready for dialogue.” While it was a softening of her declaration that her government would “never bend to ultimatums ” from Brussels, the largest opposition party said her comments showed there’d been “no breakthrough” in relations with the 28-member club.

“We are ready to implement changes,” Szydlo said at a televised news conference in Warsaw, without giving details or taking questions. “We’ve been in talks with the EU for a while now, and this dialogue will continue.”

The dispute centers on changes to the court by Szydlo’s ruling party that triggered the EU’s first-ever probe into rule-of-law in a member state. The two sides are close to an understanding that respects Poland’s sovereignty and right to make its own political decisions while also satisfying the EU’s requirement that members adhere to the bloc’s democratic standards, Deputy Foreign Minister Konrad Szymanski said earlier in the day. Timmermans said he was “certain that this dialogue will end very quickly as the problem will be solved.”

Downgrade Trigger

The EU’s executive started its investigation in January after the Law & Justice party overhauled the tribunal, making it more difficult for the court to strike down new laws. The move, which strained Poland’s relations with partners in the EU and the U.S., was also cited by S&P Global Ratings when it imposed the sovereign’s first-ever credit downgrade this year.

Polish assets have underperformed regional peers since last October’s election, with the extra yield investors demand to own 10-year government bonds over similar German debt near a two-year high. The zloty has weakened 3.7 percent against the euro this year, the worst performer in the EU’s emerging east.

Timmermans will debrief the commission’s other members in Brussels on Wednesday, EU spokesman Margaritis Schinas told reporters. He refused to comment on how close the two sides were to an agreement, saying it wasn’t appropriate to “frontload an opinion while you’re engaging in a process of constructive dialogue and you aim to find a solution.”

Opposition parties also met in Warsaw Tuesday to discuss the crisis around the top court, which ruled Law & Justice’s overhaul as illegal in March. Szydlo’s administration has refused to publish the ruling -- thereby preventing it from taking effect -- saying it was only an “opinion” by an incomplete panel of judges. President Andrzej Duda, a former Law & Justice member, hasn’t sworn in three justices picked by the previous parliament, opting instead to appoint judges selected by his party.

“The prerequisite for any compromise is having the verdict published by the government and the justices sworn in by the president,” Grzegorz Schetyna, leader of the opposition Civic Platform party, told reporters. “This is no breakthrough.”

‘Never Bend’

Szydlo told lawmakers in Warsaw last week that the probe could “break apart” the EU. Parliament passed a non-binding resolution “in the defense of sovereignty of Poland and the rights of its citizens,” the first such move since the ex-communist country of 38 million people joined the bloc in 2004.

Her comments followed a European Commission statement giving Poland until May 23 to show “significant progress” in resolving the conflict or face an expansion in the rule-of-law investigation. If the probe is prolonged, authorities in Warsaw will have two weeks to submit feedback before the start of a potential process of “constructive dialogue” aimed at “finding solutions to the concerns set out in the opinion,” the commission said in a statement on May 18.

If the concerns aren’t “satisfactorily resolved within a reasonable time,” the commission may issue a recommendation, another step in a procedure that in theory could end with Poland being stripped of its EU voting powers. Such a proposal would need approval by all other member countries, something that Hungarian Prime Minister Viktor Orban, a political ally of the Law & Justice party, said he would never allow.

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