Hungarian and Polish leaders have maintained their opposition to the EU's proposals for its long-term budget and Covid-19 recovery package, insisting the funds must be separated from rule-of-law conditions.
Speaking after a meeting with his Polish counterpart Mateusz Morawiecki, Hungarian Prime Minister Viktor Orban said: "The proposal on the table is unacceptable for Hungary," dismissing the proposed rule of law protections as instead representing "the rule of the majority".
The stand-off with the two countries has angered other EU member states, with many keenly awaiting payouts from the bloc's stimulus package to help economies shattered by the pandemic amid fears of worse to come.
In a joint statement after the meeting, Orban and Morawiecki fleshed out an idea previously floated by Orban to decouple EU payments from the row over the rule of law.
"Our common proposal is to facilitate the speedy adoption of the financial package by establishing a two-track process," the statement reads.
"We are seeking solutions which make the necessary financial resources available as soon as possible for all member states," the statement says.
The second "track" would involve a discussion "in the European Council whether a link between the Rule of Law and the financial interests of the Union should be established".
The proposal says if such a link were to be established, EU governments would have to discuss the modification of the bloc's governing treaties in order to accommodate it.
The statement also pledges that "neither Poland nor Hungary will accept any proposal that is deemed unacceptable by the other".
The two countries are accused by Brussels of rolling back democratic freedoms.
Poland is already subject to an EU investigative procedure over its efforts to trim the independence of the judiciary, as is Hungary for an erosion of democratic norms, such as press freedom, under Orban's rule.
The two countries have portrayed the rule of law proposals as an attack against them, a theme which Morawiecki continued when speaking alongside Orban.
"Today we are under attack, but tomorrow it could be Bulgaria or another country. We are using the veto not only for our country but also for the good of the EU as a whole," he said.
The current crisis has exacerbated tensions within the centre-right European People's Party (EPP) grouping.
But a senior EU diplomat rejected the idea of de-linking the budget and the rule of law.
"It is clear that there is absolutely no support for reopening the conditionality mechanism in the European Parliament or in the Council," the diplomatic source said.
"With their statement Poland and Hungary are moving deeper and deeper into isolation."
Orban's Fidesz party belongs to the EPP but many voices within the grouping have been critical of Fidesz and its record on the rule of law.