But the big problems, including the overall size of a recovery package, the combination of grants and loans offered to the worst-affected EU states, and the terms of assistance, have yet to be solved.
Europe’s top executives meet Friday and Saturday in Brussels for their first in-person summit since the Covid-19 crisis began. It is the first major gathering of world leaders since the pandemic began and will involve smaller delegations, filtered fresh air, and abundant disinfectant.
Last week, the President of the European Council, Charles Michel, presented a compromise offer, the plan of which included some elements intended to appease the group of nations known as the “Four Frugal”: Austria, the Netherlands, Sweden and Denmark. Those countries had opposed the idea of granting subsidies and now want strict conditions to be imposed on them.
Under Michel’s plan, the loans would be repaid from 2026, and Denmark, Germany, the Netherlands, Austria and Sweden would retain existing repayments in contributions to the EU budget for the next seven years.
European Central Bank President Christine Lagarde said Thursday that “an ambitious and coordinated fiscal stance remains critical,” and the ECB assumes that a major deal will be approved. This, he said, must happen “quickly.”
The European Commission said earlier this month that it expects the EU economy to shrink 8.3% in 2020, considerably worse than the 7.4% drop predicted two months ago.
Some progress on key issues is expected at this summit, but analysts believe another meeting may be necessary to reach an agreement.
“Despite all efforts, member states remain too far apart on key issues to reach an agreement this week,” said Berenberg Bank economist Florian Hense in a research note. “The bones of particular dispute are the conditions that countries must meet in exchange for receiving money and who must have the last word on the money that is disbursed.”
The main opposition now comes from the Netherlands, which wants the countries receiving the recovery funds to commit to reviewing their economies.
“If the loans are to be converted to some extent into grants, then the reforms are even more crucial and the absolute guarantee that they have been carried out,” Dutch Prime Minister Mark Rutte said in Brussels on Friday.
He estimated the chances of reaching an agreement on the recovery fund for Sunday at less than 50%.
“But let’s be optimistic, you never know,” added Rutte.
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