Poland's Prime Minister, Mateusz Morawiecki welcomes the Prime Minister of Hungary, Viktor Orban during the Visegrad Summit at the Centre for the Meetings of Culture on Sept 11, 2020 in Lublin, Poland. (PHOTO / BLOOMBERG)

Poland and Hungary have agreed on a compromise with Germany to unblock the European Union’s US$2.2 trillion budget and pandemic stimulus plan, a senior government official in Warsaw said.

The compromise would end a standoff that saw Budapest and Warsaw threaten to torpedo the EU’s 750 billion-euro (US$909 billion) pandemic aid fund and the 2021-2027 budget over objections to attaching rule-of-law conditions to cash.

Polish Deputy Prime Minister Jaroslaw Gowin said an agreement had been clinched with Germany, which holds the EU’s rotating presidency, that would now be presented to the rest of the bloc. A deal could be finalized by Friday by the end of a two-day summit of European leaders in Brussels, he said. A German spokeswoman said a solution hadn’t been reached yet and all member states would need to sign off.

Polish Deputy Prime Minister Jaroslaw Gowin said an agreement had been clinched with Germany, which holds the EU’s rotating presidency, that would now be presented to the rest of the bloc.  A deal could be finalized by Friday by the end of a two-day summit of European leaders in Brussels, he said

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“For now we have agreement between Warsaw, Budapest and Berlin,” Gowin, the government’s biggest advocate of Poland dropping its veto threat, told reporters in Warsaw on Wednesday. “I believe this agreement will also include the 24 remaining European capitals.”

The deal was confirmed by a Hungarian official familiar with the state of talks who commented on the condition of not being named. An EU diplomat said officials were waiting for final confirmation that an arrangement had been reached.

A solution would offer a climb-down for Hungarian Prime Minister Viktor Orban and Polish counterpart Mateusz Morawiecki, who had backed themselves into a corner over their opposition to the cash being tied to democratic standards. EU ambassadors will meet on Wednesday to discuss the budget situation, according to an official.

Gowin declined to go into details about the deal, saying only that it keeps “Poland sovereign and the EU united.”

“We know that this veto from Hungary and Poland exists because the financial framework is connected to the rule of law principle,” German deputy government spokeswoman Martina Fietz said in Berlin when asked about whether a deal had been reached. “The chancellor has made clear this morning that she cannot say yet whether a solution will be achieved.”

The zloty jumped to the highest level against the euro since September on news of the EU deal. The forint also gained.

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The budget holdouts said the link threatened to cut their funding and undermine their governments, which are being probed for alleged violations of the bloc’s norms.

The deadlock put at least 180 billion euros that Hungary and Poland were due to receive in the coming years, as well as also payouts that are urgently needed to help ease the record recessions caused by the virus.

It also would’ve triggered an emergency budget for the EU from Jan. 1, which would’ve seen funding plunge in almost all areas and potentially put Poland and Hungary at the back of the line for even the limited development aid that would be available in this case.