EU countries stuck on rule of law-budget link

The conditionality was also one of the main hurdles EU leaders had to overcome at their summit in late July, when it took them five days to strike a deal on the budget and recovery package.

Having produced a vague compromise in July, divisions among EU governments remained between those who want the possibility to suspend EU funds if rule of law is not being respected in a given country, and those who want to narrow the conditionality down to fraud and corruption.

Ministers from Belgium, Denmark, Finland, the Netherlands, and Sweden spoke about the need for an "effective" mechanism.

"We really need a direct link between EU funding and adherence to the principles of rule of law," Dutch foreign minister Stef Blok said.

"This is more than only protecting the budget against fraud and corruption," he added.

While the ministers from Denmark and Sweden acknowledged that the basis of the final mechanism needs to be based on the deal struck by EU leaders, they also warned against moving an inch away from that.

"We simply can not accept any watering down of the mechanism," Finland's EU minister Tytti Tuppurainen warned.

Hungary and Poland, however, had threatened to block the €1.8 trillion budget and recovery fund, if the new conditions become too strict and have a broader link to the respect for the rule of law.

And a delay in unlocking the economic stimulus is a no-go for most member states.

Poland's EU affairs minister Konrad Szymański said on Tuesday that the legislation on rule-of-law conditionality should stick to the leaders' agreement.

"The European Council [EU leaders's summit] did not support the conditionality as proposed by the commission in 2018, otherwise we would see a clear reference to this," he said, referring to the European Commission's original, tougher proposal.

He said the new legislative proposal should "address the flaws" of the 2018 proposal.

"We cannot accept any mechanism that is not legally sound, circumvents treaties, undermines institutional balance, proposes disproportionate measures, and could be used to exercise political pressure on member states," he said.

Szymański was backed by Hungary's justice minister Judit Varga, who said the "only task is to stick to leaders' fragile compromise".

"Those who want more or bigger, they all risk that very fragile compromise and the rapid adoption of the whole package," she said.

Varga referred to EU commission president Ursula von der Leyen's recentstate of the union speech , in which the German politician said such conditionality should protect against fraud, corruption, and conflict of interest, but did not go further.

And all that leaves the German EU presidency stuck between a rock and a hard place.

Four big political groups in the European Parliament, the centre-right EPP, the Socialists and Democrats, the liberal Renew and the Greens have said they would not approve the budget and recovery package unless there is a strong rule-of-law link.

The German EU presidency plans to come forward with its own version of a possible compromise by the end of the month in talks with MEPs.

Meanwhile, Hungary and Poland are already under EU scrutiny for violating European rules and values.

On Tuesday, ministers also discussed the state of play of the two, so-called 'Article 7' sanctions procedures against Warsaw and Budapest.

The commission said the situation had not improved in either of the two countries and that serious concerns persisted.