The dispute over the spread of authoritarianism in the eu erupted on tuesday after hungarys prime minister viktor orban called for the resignation of a top brussels official who had branded his country a sick democracy.

Mr orbans demanded european commission vice-president vera jourovas resignation in a letter to commission president ursula von der leyen as didier reynders, the eus justice commissioner, warned that rule-of-law breaches were damaging trust between member states as well as investors faith in some countries courts.

The commission is preparing on wednesday to launch its first-ever audit of the performance of all 27 member states in areas including judicial independence, corruption and media freedom with countries including hungary likely to face familiar criticisms in the assessments.

Mr orbans intervention raises the stakes on the week of an eu summit at which member states are set to discuss proposals to link bloc budget payments to compliance with the rule of law.his government has threatened to veto the budget mechanism, as budapest steadily erodes checks and balances in the judiciary and cements control over much of the media.

The premier accused ms jourova of a direct political attack against the democratically elected government of hungaryin her comments inan interview withder spiegel last week. he added that the government would suspend all bilateral contacts with ms jourova.

The commission said that ms von der leyen worked closely with ms jourova on the rule-of-law agenda and had full trust in her. our concerns about the rule-of-law situation in hungary are well known, the eu executive added.

In an interview with the financial times on monday, mr reynders said it was right that the eu was embarking on a 750bn joint borrowing programme to raise funds to power recoveries across the union. but this needed to be coupled with adherence to rule-of-law principles.

You need to justify the solidarity, because we are in the same union and because the union is founded on values, he said.

The debate over rule-of-law violations in states including hungary and poland is hampering the passage of the eus upcoming budget and recovery fund, as capitals clash over how to link payments of european funding to respect for eu principles.

The german eu presidency submitted proposals for this so-called rule-of-law mechanism on monday, which immediately attracted opposition from a number of northern european states as well as meps who complained the proposal was too soft. diplomats played down hopes of any near-term breakthrough at an eu summit later this week.

In another apparent riposte to the commission, hungary and poland on monday announced a plan to set up a separate institute to assess the rule of law in eu member states.

Peter szijjarto, hungarys foreign minister, said the initiative would help ensure the countries were not taken for fools, adding that the commissions work due to be published on wednesday was likely to be a political statement. mr szijjarto said budapest and warsaw had had enough of some western european politicians using us as a punchbag.

Mr reynders attempted to put a positive spin on the announcement, describing it as maybe the first positive effect of the commissions rule-of-law report.

Both hungary and poland are the first targets of long-running so-called article 7 eu disciplinary proceedings over alleged breaches of eu laws and values.

But the process is widely seen as lacking teeth because the imposition of sanctions such as the suspension of eu voting rights requires unanimity. both budapest and warsaw have said they will protect each other.