While the advocate general's opinion is not binding, the Luxembourg-based European Court of Justice (ECJ) usually follows it when making its final ruling, which is expected early next year.
Contrary to arguments presented by Warsaw and Budapest, the opinion said the new policing mechanism does not overstep competencies of the EU and its central institutions in Brussels as laid out in the bloc's treaties.
A Polish deputy justice minister criticised the opinion.
"It was a naivety to trust EU institutions would be capable of self-restraint," Sebastian Kaleta said on Twitter. "This is an assault on the rule of law."
Hungary's self-styled "illiberal" Prime Minister Viktor Orban and his allied eurosceptic Law and Justice (PiS) party in Warsaw have battled liberal EU countries and the bloc's executive in Brussels over the rights of women, LGBT people and migrants, as well as the freedom of media, courts and academia.
While rights activists have sounded the alarm over damaging the rule of law, Orban and the PiS enjoy steady support on the back of broad public spending, nationalist rhetoric and conservative policies.
The EU has all but failed to force the two formerly communist member countries on its eastern flank to change tack, but last year agreed the new mechanism to withhold financing from the bloc's shared budget to those violating joint laws, including on human and citizen rights.
The tool is yet to be used and the eventual ECJ ruling will determine if it has any more teeth than those democratic safeguards previously in place.
Since joining the EU in 2004, Poland has been a leading beneficiary of the bloc's development funds, which are meant to help poorer member countries catch up with those better-off.
As the country of 38 million people gets richer, it would become a net contributor rather than a beneficiary of EU funds.
A lawmaker with junior coalition party known for its hardline rhetoric said last month that Poland could hold a referendum on leaving the EU in 2027 when the current long-term budget ends. Poland's premier dismissed any talk of a "Polexit".
(Reporting by Gabriela Baczynska; Editing by Alexander Smith)
Source: Reuters