German Finance Minister Wolfgang Schaeuble arrives for the weekly cabinet meeting at the chancellory in Berlin on September 6, 2017 | Tobias Schwarz/AFP via Getty Images Schäuble warns against tough sanctions for Hungary German finance minister rejects call for harsh punishment for Budapest over migration standoff.

German Finance Minister Wolfgang Schäuble warned against imposing strong sanctions on Hungary, despite their refusal to accept refugees under the mandatory EU relocation scheme.

The EU should make an effort to improve not worsen relations with countries that oppose its refugee policy, Schäuble told German newspaper Passauer Neue Presse.

The finance minister rejected cutting off funds to Hungary, saying: "It would be smart not to come out with the big guns right away." The EU needed to find the "right mix of consistency and patience," he added.

Earlier this month, Europe's top court dismissed a challenge by Hungary and Slovakia against the EU’s relocation policy for asylum seekers, upholding the EU’s right to oblige member countries to take in refugees. Budapest has since rejected the European Court of Justice's decision, causing consternation in Brussels and some European capitals.

German Chancellor Angela Merkel took a harder line earlier this week in an interview with Berliner Zeitung, in which she called Budapest's position "unacceptable."

When asked if Hungary’s refusal means it must exit the EU, Merkel responded that the issue “touches on one of Europe’s fundamental questions, because Europe is, for me, a common area of justice. We will have to talk about this at the European Council in October.”