EU summit: Leaders urged to agree €1.8tn budget and recovery package

Split between northern and southern countries leads to budget impasse

French President Emmanuel Macron, center, leaves the European Council building early on Monday during an EU summit in Brussels. Photograph: Getty Images

French President Emmanuel Macron, center, leaves the European Council building early on Monday during an EU summit in Brussels. Photograph: Getty Images

 

European Union leaders were called on to achieve “mission impossible” and agree an unprecedented €1.8 trillion budget and pandemic recovery fund in talks that ran all night into their fourth day on Monday.

France and Germany have led efforts to agree a historic €750 billion recovery fund package to counteract a recession feared to be the worst in a century, which would be funded by borrowing by the European Commission distributed out to member states according to need.

But the 27 national leaders are wrestling with ideological divisions over the package, with a group of wealthy northern states including Austria, Denmark, the Netherlands and Sweden determined to reduce the size of the aid and claw back contributions to the EU budget.

At points the negotiations appeared close to failing. On Monday the leaders will consider a new compromise proposal that would reduce the amount of grants, which are unpopular with the so-called frugal northern states as they do not need to be repaid by national governments, but instead are proposed to be repaid through joint EU levies such as a plastics tax.

“We are not there yet, things can still fall apart. But it looks a bit more hopeful than at the times were I thought last night that it was over,” Dutch prime minister Mark Rutte said as dawn broke on Monday after the all-night talks.

The leaders will meet in smaller groups during the day before all 27 reconvene in the afternoon.

Very satisfied

“Hard negotiations have just come to an end, we can be very satisfied with today’s result,” the Austrian chancellor Sebastian Kurz wrote.

The standoff led to heated moments over the weekend as French president Emmanuel Macron urged the objectors to look at the big picture and the need for the whole trading area to thrive in order for all countries to do well, at one point reportedly castigating Mr Kurz for walking out to take a phone call and describing the Dutch of “taking the seat of the UK”.

The summit had been scheduled to end on Saturday, but determination to iron out differences drove the leaders to keep working on a compromise, aware that failure to agree could fuel disillusionment in the EU and spook financial markets. Reaching day four makes it one of the longest summits ever.

Illustrating the high stakes and the risk that the leaders could have a short window to resolve the issue before the coronavirus pandemic seizes their attention, two national leaders were forced to take time out of the summit to address a domestic spike in coronavirus cases.

Luxembourg prime minister Xavier Bettel left the summit to drive an hour and a half back to his neighbouring country to announce that coronavirus restrictions would be tightened again to curb the rising spread of the virus. In his absence he was represented by Belgian prime minister Sophie Wilmès, who earlier that day had chaired her own crisis meeting to address a spike in cases, in one of the hardest-hit countries per capital in the world.

To reduce the risk of the virus spreading within the summit, the national leaders are wearing facemasks decorated with their respective national flags, the number of people allowed into the building is drastically reduced, and a cleaning team swoops in to disinfect the area whenever there is a break.

Overall recession

Economic forecasts indicate an overall recession of 8.3 per cent this year in the EU but very different fortunes for different member states, driving the demands for a recovery package that will get help quickly to those countries struggling most, to counter the possibility that divergences in the bloc could increase and fuel debt crises as has happened in the past.

To try to bridge the divisions, EU Council president Charles Michel implored the national leaders to rise to occasion, reminding them that the pandemic has killed 600,000 people around the world and brought down an unprecedented recession and mass unemployment.

“Are the 27 EU leaders capable of building European unity and trust or, because of a deep rift, will we present ourselves as a weak Europe, undermined by distrust,” he asked as the negotiations ran into Monday morning.

“I wish that we succeed in getting a deal and that the European media can headline tomorrow that the EU succeeded in a Mission Impossible,” Mr Michel said.