Germany’s Merkel warns of the failure of the summit on the EU recovery fund

BRUSSELS (Reuters) – European Union leaders may not come to an agreement on a coronavirus stimulus plan on Sunday, German Chancellor Angela Merkel said when marathon negotiations reached a third day and accusations rose by the demands of rich but thrifty countries.

Germany and France, the EU’s power brokers, are seeking an agreement on an economic recovery package of 1.8 trillion euros ($ 2.06 trillion) to rescue the bloc’s economies facing their worst recession since the Second World War.

After two exhausting days of negotiations, a “frugal” group of wealthier northern states led by the Netherlands seemed no more willing to back down from demands for cuts to the package, underscoring the depth of the northern divide- southern EU.

“There is a lot of good will, but also a lot of positions. I will do my best, but it may not have worked, “Merkel said in Brussels when she arrived for a third day of talks.

Late Saturday, she and French President Emmanuel Macron left the final leg of the early-day informal talks, refusing to accept that the level of free subsidies for crisis economies in the package falls below the 400 billion euros.

Italian Prime Minister Giuseppe Conte had previously accused the Netherlands and its allies Austria, Sweden, Denmark and Finland of “blackmail”. Stockholm proposes to reduce the subsidies to 155 billion euros.

ANOVIATED DEPARTURES

In their first face-to-face summit since the spring outbreak of the coronavirus in Europe, leaders in face masks have framed the summit as a watershed moment for nearly 70 years of European integration.

If they don’t unite in the midst of an unprecedented health and economic crisis, serious doubts will arise about the bloc’s continued viability, officials and experts say.

Macron said there was a willingness to compromise, but it should not deter “from the legitimate ambition we must have,” referring to the level of money available in the € 750 billion recovery fund plan, to be financed with money raised in the capital markets.

Dutch Prime Minister Mark Rutte, who faces parliamentary elections in March 2021, was frank about the divisions with France and Germany on Saturday night.

“They walked away annoyed,” Rutte said of Merkel and Macron. “There are still big differences,” he said.

While the Netherlands and its allies held out, other obstacles remained, not least because Britain’s departure from the EU means others have to spend more money to fill the gap in the bloc’s joint coffers.

Hungary, backed by its Eurosceptic ally Poland, has threatened to veto the package on a proposed new mechanism, supported by the Dutch and most other EU countries, to freeze countries that do not respect democratic principles.

“There are very different positions,” Czech Prime Minister Andrej Babis told reporters. “The Netherlands insists that the rule of law must be one of the conditions for providing funds.”