The European Union (EU) is facing a crisis after two member countries thumbed down its proposed €1.8-trillion budget that included a recovery plan amid the coronavirus disease 2019 outbreak (COVID-19).

Ambassadors of the 27-member state were not able to endorse the budget after Hungary and Poland blocked the approval over a provision that links the funding with adherence to the rule of law, BBC reported.

The package included a €750-billion COVID-19 recovery plan.

A new mechanism allows for the reduction of EU funds if member states severely violate rule of law principles.

Poland and Hungary which were partially backed by Slovenia claimed that such a rule was tantamount to a power grab by a “European oligarchy,” and that Brussels was trying to bully more conservative countries that don’t accept unmitigated immigration.

EU members have already agreed on the €1.1-trillion budget for the period between 2021 and 2027, along with the coronavirus stimulus package after a marathon four-day summit in July.

According to the report, the EU was underway with investigating Hungary and Poland for undermining the independence of courts, media, and non-government organizations.

The clause even threatened to cost them billions of euros in EU funding.

Both Hungary and Poland were criticized for violating democratic standards enshrined in the EU’s founding treaty.

Poland deputy foreign minister Pawel Jablonski said that the provisions in the budget were vague and wide that they would allow for “politically-motivated sanctions” against the two countries or any other member state.

“Poland and Hungary are being targeted for months now and we know very well that it would simply be used the very next day against us,” he said.

For her part, German Chancellor Angela Merkel said that the bloc “[has] to continue talking with Hungary and Poland.”

“There is consensus on the EU budget, but not on the rule of law mechanism,” she was quoted as saying in an interview with journalists.

However, she declined to comment on questions on how issues in both countries will be resolved.

According to Merkel, the veto of the budget was “a very serious problem,” adding that Germany will look into all available options to resolve the matter.

When asked if one of the options was threatening the two countries with taking away their voting rights, Merkel said: “For me, the word threat in this context is not a word at all. We have a duty to try and find a way.”

She said the bloc would discuss Turkey and its search for natural gas in contested regions of the Mediterranean at the next summit in December.

“Things haven’t developed the way we would have wished,” she said.

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