Dutch welcome new ideas on EU recovery fund, but are far

BRUSSELS (Reuters) – The Dutch welcomed new proposals for a massive EU stimulus fund on Saturday in a second day of negotiations between the bloc’s leaders, though a final deal on how to revive growth stifled by the pandemic of coronavirus remained away.

Conversations on Friday stalled over who should control how the money is spent, as Prime Minister Mark Rutte held out against his EU counterparts after 13 hours of negotiations at a summit in Brussels.

With the pandemic affecting many European economies their worst economic shock since World War II, leaders are seeking to agree on a recovery fund of 750 billion euros ($ 856 billion) and an EU budget for 2021-27. more than 1 billion euros.

“I am doing this for all of Europe, because it is also in the interest of Spain and Italy to come out of this crisis with force,” Rutte told reporters early Saturday, referring to the two EU countries most affected by the crisis. pandemic.

Many of the 27 leaders, wearing masks at their first face-to-face meeting since February, had their own demands on the negotiations that crossed different regional and economic priorities.

But the Dutch position highlighted deep divisions in the bloc, as the executive European Commission seeks a mandate to borrow billions of euros from capital markets for the first time.

Fiscally conservative countries such as Austria, Denmark, and Sweden hold firm that any new debt must be strictly controlled.

The European Parliament must also approve any agreement made by the leaders.

Bulgarian Prime Minister Boyko Borissov said he saw a route to compromise by involving EU finance ministers in monitoring the new debt, rather than just the European Commission.

However, EU lawmaker Guy Verhofstadt rejected on Twitter the participation of finance ministers, yet he was concerned that parliament might be sidelined.

“The recovery fund cannot be a pretext to undermine democracy in the EU,” he said.

NEW PROPOSALS

The leaders of France, Germany, the Netherlands, Spain, Italy and the Commission also held talks, meeting in a format that was once used to discuss Greek debt relief, an issue that haunted the bloc for years.

European Council President Charles Michel, who chaired the summit, then circulated new proposals seen by Reuters that sought to resolve the Dutch demands.

“In the end, this is a package and there are many more problems to solve. But Michel’s governance proposal is a serious step in the right direction, ”said a reactionary Dutch diplomat.

“There are a lot of problems left and if we get there it will depend on the next 24 hours.”

The exact size of the new EU budget and to what extent to use payments as leverage for reforms, or whether to withhold money from countries that do not meet democratic standards, had not yet been resolved.

A senior diplomat said: “The key question now is whether … we can move on to other matters. The volume will still need to be debated, and that is before entering the rule of law.”

Hungary, backed by its Eurosceptic and nationalist ally Poland, threatened to veto the entire package over a new mechanism planned to freeze countries that ignore democratic principles.

Under the new proposals, the share of grants in the recovery fund of € 750 billion would be reduced to € 450 billion from € 500 billion.

They also call for an ’emergency brake’ on the disbursement of funds, to appease states that want grant-related conditions and would prefer to see the countries most affected by the coronavirus crisis take loans.

The proposals would also increase cuts in the EU’s multi-year budget for Austria, Denmark and Sweden.

“We are not at the end of the negotiation, but this at least provides a basis for the negotiation,” said a second EU diplomat.