Summit chairman Charles Michel called the deal, reached at 5.15 a.m. (3.15 a.m. GMT), a pivotal moment for Europe.
Many had warned that a failed summit amid the coronavirus pandemic would have seriously cast doubt on the bloc’s viability after years of economic crisis and Britain’s recent departure.
Global stocks climbed to their highest since February and the euro briefly hit its strongest since March on news of the deal.
“This agreement sends a concrete signal that Europe is a force for action,” Michel told journalists with joy.
French President Emmanuel Macron, who campaigned for the deal with German Chancellor Angela Merkel, hailed it as truly historic.
Leaders hope the € 750 billion ($ 857.33 billion) stimulus fund and its related budget of € 1.1 trillion 2021-2027 will help repair the continent’s deepest recession since the Second World war after the closure of economies by the coronavirus epidemic.
German Economy Minister Peter Altmaier said that with the deal, the chances of a “cautious and slow recovery” in the second half of this year have increased significantly.
Although highly symbolic, the deal came at the cost of reductions in proposed investments in climate-friendly funds and did not set conditions for disbursements to countries, such as Hungary and Poland, considered a violation of democratic values.
In an unwieldy club of 27, each with veto power, the summit also revealed loopholes across the bloc that are likely to hamper future money decision making as richer countries from the north resisted helping the poorer south.
The Netherlands led a group of so-called frugal states with Austria, Sweden, Denmark and Finland, insisting that aid to Italy, Spain and other countries Mediterranean countries that have suffered most of the pandemic should be mainly in the form of loans, not non-repayable grants. .
“There have been a few clashes, but it’s all part of the game,” said Dutch Prime Minister Mark Rutte, describing a warm relationship with his Italian counterpart, Giuseppe Conte.
But Austrian Chancellor Sebastian Kurz said the negotiating power of the frugal was here to stay, suggesting that Europe’s traditional Franco-German engine would be challenged.
ALMOST A SUMMIT RECORD
Frictions peaked on Sunday night as Macron lost his temper with the frugal, diplomats said, and Polish Prime Minister Mateusz Morawiecki called them “greedy and selfish states.”
The feuds spun the summit, making it the second longest in the EU, just 20 minutes from a record set in 2000 in Nice, according to Rutte. “We would have broken the record at 6:05, but we finished at 5.45,” he said.
As part of the compromise, the Commission will borrow 750 billion euros using its triple A debt rating, disbursing 390 billion in grants – less than the 500 billion initially targeted – and 360 billion in cheap loans.
Given the difficulties, discussions over Hamilton’s timing in Europe – hailed as such by German Finance Minister Olaf Scholz on Monday in reference to Alexander Hamilton’s decision to federalize US state debts in 1790 – are overdone.
The summit agreement does not put the EU on the path to an American-style fiscal union, even if some see it as a first step.
Rutte’s negotiations won an emergency brake to temporarily halt cash transfers from the recovery fund if an EU state was found not to qualify for money-related reform.
Economists also got bigger discounts on the next EU budget, a reimbursement mechanism first won by Britain in the 1980s and which France had hoped to phase out after Brexit.
The stimulus package now faces a potentially difficult passage through the European Parliament and it must be ratified by all EU states. The first money is unlikely to reach the real economy until the middle of next year, economists say.
Additional reports from Reuters, Editorial staff by John Chalmers and Robin Emmott; Editing by Michael Perry, Jon Boyle and Nick Macfie
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