Hungary and Poland have blocked approval of the EU’s budget over a clause that ties EU funding with adherence to the rule of law.
The financial package includes €750 billion for a coronavirus recovery fund.
Ambassadors of the 27 member states meeting in Brussels were unable to endorse the budget because the two countries vetoed it.
Hungary and Poland have been criticised for violating democratic standards outlined in the EU’s founding treaty.
The EU is currently investigating both countries for undermining the independence of courts, media and non-governmental organisations.
EU states had already agreed on the €1.1 trillion budget for 2021-2027, and the coronavirus recovery package.
Ambassadors voted through the clause that linked EU funds with respect for the rule of law, because it only required a qualified majority, the German EU presidency said.
But the budget and the rescue package needed unanimous support and were then blocked by Poland and Hungary.
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