EU leaders have failed to unlock an agreement on a 750 billion euro ($ 860 billion) response to the coronavirus pandemic after a second day of fighting in Brussels and will return to try again on Sunday.
The leaders continued informal talks after negotiations broke down at 11 p.m. on Saturday as they tried to find common ground on the composition of the fund and the conditions attached to it. A crucial late-night meeting between Dutch Prime Minister Mark Rutte, Germany’s Angela Merkel and Frenchman Emmanuel Macron abruptly ended with a dispute over how much of the package should be disbursed in grants and how much in loans .
Germany and France are insisting that at least 400 billion euros be distributed and Rutte and four other tax hawks in Northern Europe are pushing for a much lower figure, a French diplomat said. After several attempts to find a compromise, Merkel and Macron left the meeting and returned to their hotel together for further discussions, the diplomat said.
“They’re going grumpy,” Rutte told reporters afterwards. “A compromise is possible tomorrow but there are still big problems. “
While investors are already weighing a deal after a series of bold announcements in recent weeks, executives are under intense pressure to bridge their differences before financial markets open on Monday.
However, the battle revealed the flaws in the heart of the EU. The fiscally hawkish countries of northern Europe are showing their resentment at the idea of paying for the pandemic while the southern countries most affected are struggling to contain their outrage at the lack of solidarity.
“We will continue because we have to solve it,” Italian Prime Minister Giuseppe Conte told reporters. “Delaying this is of no use to anyone. ”
Rutte and his allies in Austria, Denmark, Sweden and Finland are trying to water down aid that the heavily indebted South considers essential to consolidate its finances. If Saturday turned out to be less angry and more constructive than Friday’s meeting, it was still difficult to discern much progress. Conte called it a “dead end” while a German diplomat said the talks had reached a critical phase.
The 27 leaders met in person for the first time since February, when the first talks on the EU budget of seven trillion euros also collided with a wall. Now, with more than 100,000 Europeans dead from the virus and an economy to rebuild, investors expect the group to show unity to keep stocks rallying.
Saturday started with a new compromise proposal drafted by the President of the Council of the EU, Charles Michel, but over time the frustration grew. While Rutte, the hard lineThe leader of RS, welcomed a proposal to reduce the amount of subsidies to 450 billion euros instead of 500 billion euros, his allies Austria and Finland have lobbied so that the total drops further by setting up a clash with Merkel and Macron.
In an attempt to comply with another of Rutte’s demands, the new plan also included a mechanism that would give any country the right to hold back disbursements if it did not think the money was spent properly. The Dutch saw it as a step in the right direction, but the southerners feared that it would slow down the liquidity they need to start their economies. The leaders must agree unanimously for there to be an agreement.
The deliberations turn out to be a baptism of fire for Michel, former Belgian Prime Minister, and the President of the European Commission, Ursula von der Leyen, who drew up the initial plan. They did not take up their posts until December and were criticized by governments for managing the response to the pandemic.
Merkel and Macron pushed for a deal before the summer, but have yet to be able to weigh in to impose a result. The two largest economies in the block are considered crucial power brokers and they were photographed sitting on a sunny patio while looking for a breakthrough.
Adding to the complications is the number of secondary problems that are related to the fund.
Many leaders want to see access to finance tied to member states’ adherence to democratic standards, and this is something Poland and Hungary strongly oppose, as both are subject to legal proceedings from the EU due to a decline in the rule of law.
Leaders spent the latter part of Saturday discussing the latest proposal, seen by Bloomberg, which states that the rule of law “conditionality under the regime shall be genuine” and that when transgressions are identified, theThe European Commission will propose “appropriate and proportionate” measures. These measures will be approved by qualified majority rather than unanimity, meaning that Poles and Hungarians will not have a veto to bail out themselves as they do in other areas.
Adding a new layer of complexity, the Hungarian parliament adopted a statement this month calling on Prime Minister Viktor Orban to reject any stimulus package until the EU investigation into its democratic standards is withdrawn.
– With the help of Diederik Baazil, Richard Bravo, Viktoria Dendrinou, Katharina Rosskopf, John Follain, Maria Tadeo, Arne Delfs, Jan Bratanic, Jonathan Stearns, Morten Buttler, Boris Groendahl and Ania Nussbaum