Orbán: Summit will be 'D-Day' on rule-of-law blockade

"I am confident that we can find an agreement on a common package to allow for the swift implementation of both the multi-annual financial framework and the recovery fund," European Council president Charles Michel said in a letter sent to EU leader ahead of the summit.

The meeting of EU ambassadors on Wednesday late afternoon (9 December) examined the draft council conclusions aimed at clarifying the rule-of-law conditionality. Legal experts in capitals are "digesting" the draft, one EU diplomat said.

Poland's deputy prime minister Jaroslaw Gowin told reporters on Wednesday that a deal was within reach between his country, Hungary and the German EU presidency.

However, Hungary's prime minister Viktor Orbán posted a video on his Facebook page as he left for Brussels, saying Thursday will be the "D-Day".

After a meeting between Polish and Hungarian leaders in Warsaw on Tuesday evening, it seemed that a proposal, cooked up by the German EU presidency, would satisfy the two hold-out capitals.

"We are waiting for a final confirmation," an EU diplomat said.

The text under discussion reiterates that the rule-of-law conditionality - which could lead to suspension of EU funds - would focus on fraud, corruption and conflict of interest.

The conditionality's legal text itself - which had already been agreed by 25 member states and the European Parliament - also names breaches of rule of law linked to EU funds, a potentially broader scope.

Warsaw and Budapest also argued the mechanism could be used to influence the countries' migration and gender policies - which this part of the declaration tries to alleviate.

Crucial delay

The text would also restate that the conditionality would be fair, impartial and not discriminate between member states.

The EU would only start applying the new mechanism with the next long-term budget to be kicked off in 2021, the draft said, and not for the current budget whose payments still run for three years.

Crucially, it would also essentially delay the activation of the rule-of-law conditionality until the European Court of Justice rules on it, as Poland and Hungary are expected to challenge it the EU's top court. Such a ruling could take months or even years.

The EU Commission, according to the draft, is to develop "guidelines" with member states on how to use the rule-of-law conditionality - incorporating into that any ECJ ruling - and would not propose any sanctions before those guidelines are ready.

This could potentially be a big win for Orbán who faces elections in 2022. Hungary leads the EU's anti-fraud agency's list of member states where irregularities have been found in EU funds between 2015 and 2019.

The German EU presidency's compromise, however, would not amend the mechanism itself, which has been an important condition for supporters of the new rule-of-law tool, such as the Netherlands and its allies.

Pressure on Hungary and Poland has been mounting as the EU Commission has said it was preparing plans to go ahead with the recovery fund without Warsaw and Budapest, and a provisional budget would mean significant losses in investment for the two countries.