German presidency tries to end EU's rule-of-law battle

But it is not only a debate with the parliament: member states have been at odds on what EU leaders actually agreed as an outline for such a conditionality at their July summit - and the German compromise seems to divide EU countries along the same lines.

Hungary and Poland have both pushed back against a mechanism that tightly links EU funds to respect for the rule of law, while countries such as Denmark, Finland, the Netherlands, and Sweden have been arguing for a strong tool.

Hungary and Poland, the two countries which are currently under rule-of-law probes, have said they wanted to see a 'toothless' rule of law mechanism agreed, before giving the green light to the recovery package.

Member states that are in need of a swift economic stimulus due to the pandemic, such as Italy and Greece, are now getting nervous.

Germany and France - the architects of the recovery fund - are battling on.

French EU affairs minister Clement Beaune said last week he was planning to visit several countries, including the Netherlands, to overcome political obstacles to approval of the package, while the German EU presidency put pressure on the parliament to speed up talks.

All in the small print

The draft presidency rule-of-law proposal, obtained by EUobserver and other news organisations, tunes the original 2018 EU Commission proposal towards those who reject a strong mechanism.

The draft has replaced the original broad scope of "generalised deficiencies" in the rule of law (or the risk of them) on the EU's financial interests, to trigger the process.

Instead, the draft talks about "breaches of the principles of the rule of law" and no longer considers risk as a sufficient trigger. It rather talks of "the effects of that breaches on the respective union funds" when considering the proportionate measures to be taken.

This compromise proposal suggests that a qualified majority of member states will decide on any measures within a month after the commission proposes taking action.

The original commission plan argued for reversed qualified majority, so that a majority of member states would be needed to overturn the commission's decision.

The proposal also outlines an "emergency brake".

In case the member state under scrutiny thinks the procedure is partisan and not evidence-based, it can request the European Council president to take up the issue at the next summit of EU leaders. But the process should not exceed three months following the commission's proposal.

EU ambassadors will discuss the proposal on Wednesday.

'Delicate compromise'

The draft needs to be supported by a qualified majority of member states to become an official council position after which it needs to be agreed with the parliament.

In theory, that means that the German EU presidency could go ahead without the approval of Warsaw and Budapest - but that is politically very risky.

One diplomat from a country that wants a strong mechanism said the proposal "still seems to be quite some way off compared to our understanding of the July compromise on the rule of law".

But another official who works closely on the matter said that "what didn't find the support of the heads of state government at that time, will certainly not find it now," and that "it is important that all sides stick to the delicate compromise reached" at the July EU summit.

The official said the draft gives a legal form to the "hard-won and delicate European compromise", and will - for the first time in EU history - create a mechanism linking EU funds to the rule of law.