BRUSSELS – After nearly five days of intense haggling, European Union leaders stepped forward Tuesday to face one of the most serious challenges in the bloc’s history, and agreed on a landmark spending package to rescue their economies from the ravages of the pandemic.
The € 750 billion ($ 857 billion) stimulus deal, spearheaded by Chancellor Angela Merkel of Germany and President Emmanuel Macron of France, sent a strong signal of solidarity even as it exposed further deep flaws in a bloc reformed by the departure from Great Britain.
The deal was notable for its early developments: European countries will raise large sums by selling bonds collectively, rather than individually; and much of that money will be given to member countries most affected by the pandemic as donations that do not have to be repaid, and not as loans that would increase their national debts.
Those extraordinary steps reflected a difficult consensus among members: that the magnitude of the crisis they were facing required innovative measures to guarantee the bloc’s legitimacy, stability and prosperity.
“Europe has shown that it can break new ground in a special situation. Exceptional situations require exceptional measures, ”Merkel said at a press conference at dawn. “A very special construction of 27 countries from different origins is really capable of acting together, and it has shown that.”
But the lengthy negotiations in Brussels were also notable for their exceptional rancor, and it was clear that the combination of resources and sovereignty had come at a cost.
A strange type of political theater, never before visited at the summits of the European Union, marked the meeting, with leaders wearing masks and beating their elbows to greet. They were safely spaced in a large room, their retinues trimmed only for the most essential members.
When they met on Friday, it was their first in-person summit in the five months since the coronavirus took over Europe. The meeting was officially scheduled to last until Saturday. On Monday morning, exhausted and angry after negotiating all night, they were still arguing over the details. The start of Monday’s session was delayed twice and then extended until Tuesday morning.
As negotiations broke down over the weekend, so did many precautions that leaders and their teams took to protect themselves from the virus, which in most of Europe has been reduced to manageable levels, in any case. As the hours passed and the conversations heated up, they removed their diplomatic gloves, as did the masks. The working groups met in rooms much smaller and less ventilated than the 300-seat auditorium where the general meeting was convened.
While the importance of the deal should not be underestimated, the generosity of its size and the novelty of its mechanisms, the acrimony and drama of the four-day meeting betrayed the new divisions within the bloc. They also pointed out where fractures can be found in future crises.
The talks were shaped by the changing roles among members who were now scrambling to make their voices heard and by the absent leadership of Britain, which had often played the part of thrifty, tedious rule opponent, at summits. past.
This time, Merkel, unusually for a German leader, and with the rotating EU presidency, put her finger on the scales on behalf of the most affected southern countries and fought with the nations she once defended, the northern members who They have been less affected by the virus and are suspicious of the large sums that are thrown.
Where Friday’s meeting was marked by cheery greetings and even birthday celebrations for two leaders: Mrs. Merkel, now 66, and Prime Minister Antonio Costa of Portugal, who turned 59, on Sunday night’s dinner (a “cold plate” after several sumptuous meals), socially spaced but unmasked) was marked by screaming and an unpleasant atmosphere.
Macron, for example, yelled at Chancellor Sebastian Kurz of Austria for not only being a closed impediment to the rescue deal, but also for leaving the room to take a call. To the surprise of some leaders, the French president hit the table. Mr. Kurz tried to remain calm, and in a zinger he put Mr. Macron’s tantrum to sleep deprivation, diplomats said.
When that meeting ended without an agreement around 6 am Monday, Mark Rutte, the Dutch prime minister, told his country’s media that he did not care if other leaders mockingly called him “Mr. No” for blocking the agreement. (They did it.)
“We are here because everyone is taking care of their own country, not to go to each other’s birthdays for the rest of our lives,” he said bluntly.
It was Mr. Rutte who entered the void left by Germany’s turn and Britain’s departure to lead the so-called Frugal Four, which included their nation, as well as Austria, Sweden, and Denmark. Occasionally, the “frugal” became five with the support of Finland.
In the end, with a unanimous decision by the 27 nations necessary for a plan to go ahead, a bitter compromise prevailed. The ambitious plan promoted by Merkel and Macron was diluted, but it remained significant. The overall figure of € 750 billion was maintained, but an original proposal to offer € 500 billion in the form of grants was reduced to € 390 billion, with € 360 billion for loans.
In addition to raising cash and extending grants, the package will increase loans and deploy other, more traditional stimulus methods to halt and reverse the economic freefall that threatens the stability of the world’s richest bloc of nations.
Greece and other smaller economies that are still recovering from the last recession will also be seriously affected by the recession. But the heavy burden of debt in many of these nations makes them reluctant to accumulate even more debt, and their budgets are not enough to self-finance their recoveries. That led them to ask the European Union for help.
Along with the European Central Bank’s vast bond purchase program, trillion-euro national stimulus plans and other small EU support plans for banks, businesses and workers, European leaders hope to reverse the recession in 2021. and spend your way on a fast and powerful recovery.
They also agreed Tuesday on the bloc’s regular budget for the next seven years: € 1.1 trillion to finance normal EU policies on agriculture, migration and hundreds of other programs.
But the deal came at a high price on progressive targets tied to EU values and norms. To incorporate Hungary and Poland, EU leaders decided to dilute the warning, making funding conditional on the rule of law benchmarks that the illegal governments of the two nations are violating.
In another concession to Poland, the bloc’s most coal-dependent nation, a requirement that would have committed the country to carbon neutral by 2050 to draw on portions of the funds was removed.
Since its inception, the EU has struggled between maintaining the sovereignty of nation states and developing joint federal-style structures.
The deal reached Tuesday is significant because the most solvent EU nations will take out loans to finance recoveries from countries that would otherwise face onerous borrowing costs.
The Netherlands and Austria were hostile to the very idea of borrowing money and simply giving a lot of it to primarily benefit the weaker southern economies.
Under significant pressure in the country when elections are approaching next March, the Dutch Prime Minister, Mr. Rutte, called out for fewer donations to those nations, including Italy and Spain, which have been most affected by the pandemic but they also have a weak structure. unreformed economies.
The Netherlands and other wealthier nations with healthier public finances are concerned that commonly funded aid would simply go into a bottomless spending pit that does not really help these economies recover unchanged to facilitate cutting red tape, creating jobs and stimulate growth. .
A key argument in favor of offering grants instead of loans has been that Italy and other countries likely to receive aid are already over-indebted, and accumulating even more loans would only worsen their positions.
Mr Rutte successfully fought for larger than usual repayments, or repayments, for his own nation and other nations that are net contributors to the EU budget.
He and the others managed to secure another concession: Any country that wants to use the new funds will need to come up with a plan on how it intends to spend the money. The other EU nations will have the opportunity to review and object to the plan within three days of its submission and demand that it be amended.
Still, that mechanism did not achieve the absolute veto that Mr. Rutte had demanded, which the Italian and Spanish leaders denounced as an unacceptable intrusion on their authority.
The package will be sent to the European Parliament for ratification, and he is expected to face a serious challenge for failing to address concerns about how the Polish and Hungarian governments violate the bloc’s standards for democracy and the rule of law.
Monika Pronczuk contributed reporting.
