EU leaders stalled over COVID recovery plan after day of haggling

BRUSSELS (Reuters) – EU leaders failed to make progress on Friday on negotiations over a massive stimulus plan to bring to life the economies devastated by the coronavirus pandemic, returning to their Brussels hotels shortly before midnight to rest and try again in the morning.

Many of the 27 bosses declared on arrival at their first face-to-face summit in five months that a deal was crucial to rescue free-falling economies and underpin faith in the European Union, which has faltered during years of crisis in crisis.

But authorities said an economic camp of wealthy northern states led by the Netherlands remained firm on access to the recovery fund, facing opposition from Germany, France, the nations of southern Italy and Spain, and the states Eastern Europe.

The sums proposed for discussion include the EU budget for 2021-27 of more than 1 billion euros and the recovery fund worth 750 billion euros, which will go mainly to the countries on the Mediterranean coast most affected by the pandemic.

Diplomats said the 27 remained at odds over the overall size of the package, the divide between grants and repayable loans in the recovery fund and the attached rule of law chains.

But the main stumbling block was over background screening procedures to access aid, an EU official said, and Dutch Prime Minister Mark Rutte demanded that a country be able to block fund payments if member states fall back on economic reform.

“If you want loans and even grants, I think it stands to reason that you can explain to people in the Netherlands … that in return those reforms have taken place,” Rutte said, estimating the chances of a deal at fifty-fifty.

Polish Prime Minister Mateusz Morawiecki was even bleaker.

When the leaders parted for a day, he tweeted that they were divided over a set of problems, saying it was “highly likely” that they would not be able to reach an agreement on Saturday or even Sunday if the summit exceeds the two scheduled. days.

German Chancellor Angela Merkel, who celebrated her 66th birthday at the negotiating table in Brussels, was also cautious about the possibilities of a deal, foreseeing “very, very difficult negotiations.”

After the initial blows to the elbow between the leaders, all wearing face masks, and birthday gifts for Merkel and Portuguese Prime Minister Antonio Costa, tense evening meetings took place with Rutte and Hungarian Prime Minister Viktor Orban.

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Orban, whom critics accuse of stifling the media, academics and NGOs, threatened to veto the entire plan over a mechanism that would freeze countries that do not meet democratic standards.

With the EU economies mired in recession and immediate aid measures, such as short-term work plans, the specter of an autumn of hardship and discontent is drying up.

The EU is already grappling with the protracted saga of Britain’s exit from the bloc and is bruised by past crises, from the 2008 financial collapse 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.

“What is at stake could not be greater,” said the president of the European Commission, Ursula von der Leyen. “Everyone is watching us.”

Despite disputes over medicines, medical equipment, border closures and money, the EU has managed to agree on a half-trillion euro scheme to cushion the first blow of the crisis.

Mediterranean countries now want recovery financing to prevent their economies from taking on increasing debt burdens.

“The overall picture is that we are facing the biggest economic depression since World War II,” said Greek Prime Minister Kyriakos Mitsotakis. “We need … an ambitious solution because our citizens expect nothing less of us.”