EU leaders to meet in Brussels to break negotiating deadlock

European Union leaders plan to meet physically in Brussels for the first time in months in a bid to break deadlock over a recovery plan intended to counter the economic damage of the coronavirus pandemic.

The European Commission has proposed a €750 billion recovery fund of grants and loans and a generous new seven-year budget, but member states disagree on the size of the package and how to split it between member states.

A group of so-called "frugal" states led by the Netherlands also oppose giving out grants that member states would not need to repay, while countries such as France insist this is essential to avoid burdening weaker economies with additional debt.

To break the deadlock, a summit will be held in mid-July, ending months in which leaders of the member states have conferred only remotely due to the health restrictions of the pandemic.

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"We agree that we need an exceptional response, that this crisis is unprecedented, and we need to focus on the sectors and regions most affected by the crisis," European Council president Charles Michel said after the 27 held a video conference on Friday.

“But . . . on some topics it remains very complex and very difficult. It means in the next days in preparation for the next physical summit, we will need to work very actively on difficult topics.”

Areas of disagreement include the size of the next EU budget and how it is allocated, and recovery funds should come with conditions.

Funds

Ireland is among a group of member states that have objected to the way of calculating how much funds member states should get from the recovery plan, which takes into account past economic data, meaning Ireland's strong performance before the pandemic works against it.

It has argued for a new calculation that would secure the Republic a more generous offer.

“Some member states believe that the criteria should be more linked to the effects of Covid-19,” Mr Michel said.

During the meeting European Central Bank head Christine Lagarde warned the leaders of a "dramatic fall" in the EU economy, and urged them to agree on the plan quickly.

“We must reach an agreement soon. The more time we waste, the deeper will be the recession,” said Spain’s prime minister Pedro Sánchez.

But Dutch leader Mark Rutte told journalists that the content of the deal was more important than speed, and warned that positions were far apart and he wasn't certain that agreement could be found in July.

Ursula von der Leyen, president of the European Commission, updated the leaders on the state of talks with Britain on its post-Brexit relationship with the EU, following her meeting with British prime minister Boris Johnson earlier this week.

‘Divergences’

She said there were “wide divergences” between the two sides on issues including fair competition between businesses, policing co-operation, and fisheries, and that work needed to continue to ensure implementation of the withdrawal agreement.

"Time is short however, and even if we find a deal, many things will change in our relationship with the United Kingdom, " Ms von der Leyen told journalists after the conference.

“Nobody can say with certainty where these negotiations will be at the end of this year. But I know for sure that we will have done everything to reach an agreement.”