EU leaders at talks on budget, fund and COVID-19 rescue plan

Acrimonious European Union talks over an unprecedented $2.1 trillion (1.85 trillion euro) EU budget and coronavirus recovery fund entered a third day on Sunday.

On the table is a $2.1 trillion package for the EU’s next long-term budget and a recovery fund to haul Europe out of its deepest recession since World War Two.

The marathon negotiations, which are taking place amid the unprecedented crisis of the coronavirus pandemic, have underscored the deep fissures within the 27-nation bloc with the traditional Franco-German alliance struggling to get its way.

German Chancellor Angela Merkel warned that the summit of 27 leaders could still end without a deal. “Whether there will be a solution, I still can’t say,” Merkel said as she arrived early for the extra day of talks on Sunday at what had been planned as a two-day summit in Brussels.

“There is a lot of good will, but there are also a lot of positions. So I will join in working for it. But there may also be no result today (Sunday).”

The differences were so great that Sunday’s resumption of talks by the leaders was pushed back several hours as small groups worked on new compromise proposals.

The coronavirus pandemic has pitched the bloc into its worst recession ever and killed around 135,000 of its citizens.

The EU executive has proposed a 750 billion euro coronavirus fund, partly based on common borrowing, to be sent as loans and grants to the most needy countries. That comes on top of the seven-year 1 trillion euro EU budget that leaders have been haggling over for months even before the pandemic hit.

The proposed 750 billion euro recovery fund, which is to be raised on capital markets by the EU’s executive European Commission, would be funnelled mostly to hard-hit Mediterranean rim countries.

The summit also faced difficulty agreeing on rebates from the EU budget for rich net-payer countries, and on a proposed new rule-of-law mechanism that could freeze funding to countries flouting democratic principles.

All nations agree they need to help but richer nations in the north, led by the Netherlands, want strict controls on spending, while struggling southern nations like Spain and Italy say those conditions should be kept to a minimum.

French President Emmanuel Macron urged leaders to ‘take responsibility’ as Europe grapples with a severe recession caused by the virus and its lockdowns, saying a deal could still be found.

“But these compromises cannot be made at the cost of European ambition,” he warned.

“Not out of principle but because we are facing an unprecedented health, economic and social crisis, because our countries need it and European unity needs it.”

After his officials worked through the night, President of the European Council Charles Michel came up with a new proposal, and a diplomatic source indicated that a compromise might be found by cutting grants in the scheme from an initial suggestion of 500 billion euros down to 400 billion euros ($460 billion).

But a Spanish diplomatic source said that the two sides were so far apart that they were not even discussing details.

The full round-table gathering of all 27 leaders, supposed to begin at noon (1000 GMT), was pushed back to at least 4.00pm to give time for small group meetings in search of compromises.

“At this stage it’s not about weighing up one proposal or another but working out whether it’s realistically possible to reach a deal,” the Spanish source said.

Merkel and French President Emmanuel Macron walked out of heated talks late Saturday with a group of nations nicknamed “the frugals.”

“They ran off in a bad mood,” Dutch Prime Minister Mark Rutte said early Sunday after Merkel and Macron’s departure. The frugal nations held talks with EU summit host Charles Michel early Sunday but the chances of quick progress appeared remote. Merkel and Macron refused to water down their proposals of aid while Rutte and others also stuck to their demands.

“It is a decisive moment,” said an EU official, who asked not to be identified because the negotiations were ongoing.

Rutte is widely seen as the leader of the frugal nations. He has long been known as a European bridge builder, but this weekend his tough negotiating stance is being blamed for holding up a deal.

While Italian Prime Minister Giuseppe Conte says he has a good personal relationship with Rutte, he said the “clash is very hard.”

Rutte and his allies are pushing for labour market and pension reforms to be linked to EU handouts and a “brake” enabling EU nations to monitor and, if necessary, halt projects that are funded by the recovery fund.

“He can’t ask us to do specific reforms,” Conte said. “Once the aid is approved, each country will present its proposals.”

Another member of the frugals, Austrian Chancellor Sebastian Kurz, said he still believed a deal was possible, but there is a “long way to go,” the Austria Press Agency cited Kurz as saying. “I personally would think it a great shame if it were broken off,” he said.

Agencies