Reuters
- The top leaders of the European Union remain stagnant regarding the size and scope of a proposed bailout agreement for the bloc as it responds to the COVID-19 recession.
- An originally proposed € 750 billion ($ 860 billion) plan has failed to start as leaders continue to debate the components of the fund.
- According to reports, the fund was to include € 500 billion in grants and € 250 billion in loans.
- However, the amount of money awarded in grants has been a major stumbling block, with a group of frugal nations pushing to dramatically reduce that number.
- The talks will begin on the fourth day Monday, and leaders will agree on a proposal of 390 billion in grants.
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The top leaders of the European Union remain stagnant regarding the size and scope of a proposed bailout agreement for the bloc as it responds to the COVID-19 recession.
A European Unity summit aimed at discussing a common recovery fund took place over the weekend, but discussions have been extended to continue on Monday.
A € 750 billion ($ 859 billion) fund was originally proposed as part of the EU’s seven-year budget for the economic and social recovery of COVID-19.
The original proposal included a combination of € 500bn in grants and € 250bn to be distributed in loans, the EU said at the time it was launched in May.
The proposal was rejected almost immediately, as the Netherlands, Austria, Sweden and Denmark reportedly expressed concern over the € 500 billion grant amount, preferring a higher proportion of loans as part of the package.
Over the weekend, the group, sometimes known as the “Frugal Four,” suggested handing out a maximum of € 375 billion in grants, while nations like Spain, which is one of those most affected by the virus, argue that grants must be a minimum of € 400 billion, the BBC reported.
Belgian Charles Michel, President of the European Council, has proposed a commitment of 390 billion euros in subsidies, the Financial Times reported. Leaders will discuss that proposal later on Monday, the newspaper added.
Concerns have also arisen over whether the funds will be used only to address the COVID-19 crisis.
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However, Rabobank analysts say the amount is “out of scale” with what is being spent elsewhere.
“As always with Europe, a team, a dream, becomes a dead-end holiday whenever the issue of jointly issued debt or tax transfers between the countries of the bloc comes up,” said Jeffrey Halley, senior market analyst at OANDA.
Germany and France reportedly abandoned the negotiations from the start, a sign that things were not going well.
“The EU’s weak point has always been its inability to respond quickly to urgent situations and work together fiscally, leaving the ECB on par with the cracks,” Halley said.
Progress among EU leaders helped the euro climb to a 4-month high as the currency gained 0.3% against the dollar to trade at $ 1.15 on Monday.
Discussions are scheduled to start later on Monday afternoon.
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