Hungary and Poland have blocked approval of the EU"s budget over a clause that ties funding with adherence to the rule of law in the bloc, writes BBC.
The package includes EUR 750bn (USD 888 bn) for a COVID 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 enshrined in the EU"s founding treaty.
The EU is currently investigating both countries for undermining the independence of courts, media and non-governmental organisations. The clause threatens to cost them billions of euros in EU funding.