BRUSSELS / WARSAW (Reuters) – European Union leaders failed to agree on a massive stimulus fund to revive their coronavirus-affected economies on Saturday after two days of tense negotiations, but extended their summit for another day to try to resolve their differences.
When the 27 leaders returned to their hotels after a late dinner in the conference room in Brussels, a source close to the summit president, Charles Michel, said they would receive new proposals before they meet at noon (1000 GMT) on Sunday.
With the pandemic facing Europe as its worst economic shock since World War II, leaders gathered on Friday to haggle over a proposed € 750 billion ($ 856 billion) recovery fund and an EU budget to 2021-27 of more than 1 billion euros.
But a group of wealthy and fiscally “frugal” northern states led by the Netherlands blocked progress at the EU’s first face-to-face summit since spring closings across the continent.
They favor repayable loans instead of free donations for the most affected indebted economies, mainly on the edge of the Mediterranean, and they want to control how the funds are spent.
Hopes for a deal grew earlier Saturday when Michel proposed revisions to the comprehensive package designed to allay Dutch concerns. Under his new plan, the portion of the grants in the recovery fund would be reduced to € 450 billion from € 500 billion and an ’emergency brake’ would be added to the disbursement.
But the hope that this is enough quickly faded, and even before the leaders went to dinner, Italian Prime Minister Giuseppe Conte made it clear that the possibilities were bleak.
“We are at a dead end now. It’s more complex than expected, “Conte said in a video on Facebook.” There are many problems that remain unsolved. ”
The bloc executive’s budget commissioner reminded the leaders, who wore masks and kept away from each other, that COVID-19 was still among them and that they had to act.
“Just a solemn reminder: The Corona crisis is not over: infections are on the rise in many countries,” Johannes Hahn tweeted. “It is time to reach an agreement that allows us to provide the urgently needed support for our citizens and economies!”
An EU diplomat said the “frugal” pushed during the day for deeper cuts to the recovery fund and greater discounts for net taxpayers in the EU’s central budget, among other demands.
Other countries had their own demands in the negotiations intersecting different regional and economic priorities, calling into question an unprecedented act of solidarity for the EU under which the European Commission would borrow billions of euros in capital markets on behalf of all of them.
The exact size of the EU’s long-term 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, were not resolved when the leaders left on Saturday.
Hungary, backed by its Eurosceptic and nationalist ally Poland, has threatened to veto the entire package over a new mechanism planned to freeze countries that ignore democratic principles.
The EU is already grappling with the long-running saga of Britain’s exit from the bloc and has been hit by past crises, from the 2008 financial crisis to migration disputes.
Another economic shock could expose him to more Eurosceptic, nationalist and protectionist forces, and weaken his position against China, the United States or Russia.
Additional reports by Francesca Landini in Rome, John Chalmers and Francesco Guarascio in Brussels, Andreas Sytas in Vilnius and Andreas Rinke in Berlin; Written by John Chalmers; Editing by Sonya Hepinstall
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