EU leaders have reached a compromise with Hungary on Poland which will allow the €1.8 trillion budget and Covid-19 recovery fund to be unblocked, despite initial Dutch doubts.

Rutte told the Dutch parliament last month that the Netherlands could not accept any attempt to water down conditions for the EU’s new budget and coronavirus recovery fund, despite the threatened veto by Hungary and Poland.

The compromise deal is already the ‘lower limit’ for the Dutch and the conditions cannot be made weaker to appease the Hungarians and Poles. ‘This is crucial,’ Rutte told MPs.

Hungary and Poland had threatened to veto the deal because it links access to EU funds to respect for rule of law.

EU leaders have now agreed that the rule-of-law conditionality will only apply to the seven-year budget starting next year and the recovery fund, not for payments made from the current budget.

Leaders also agreed sanctions could only be triggered by the EU Commission after the European Court of Justice has ruled on the new mechanism.

According to website EUObserver, Dutch prime minister Mark Rutte had asked for clarification about whether the compromise would change the scope of issues that can come under scrutiny and if rule-of-law breaches could be punished retroactively as of January.

‘Rutte got all the clarifications,’ an EU source told the website.

Rutte told reporters later that Poland and Hungary wanted a different deal, ‘but that has not happened’.

‘Having independent judges is crucial,’ he said. ‘That has now been set down in legally-binding conditions.’

The European parliament still needs to give the green light for the long-term budget and national parliaments also have to agree for the €750 bn recovery fund to become operational.