EU heads struggle to agree on economic recovery plan

BRUSSELS: European Union leaders struggled yesterday to close ranks on the main elements of a multi-billion-euro plan to breathe life into their economies ravaged by the coronavirus pandemic that plunged the bloc into its latest crisis.

Locked away in a room for more than seven hours, the 27 national EU leaders seemed no closer to a deal on the bloc’s 2021-27 budget, proposed at above one trillion euros, and a linked new recovery fund worth 750 billion euros, meant to help rebuild southern economies most affected by the pandemic.

Arriving for their first face-to-face talks in five months in Brussels earlier in the day, the 27 – all masked up – greeted each other with elbow bumps, and there were birthday gifts for German Chancellor Angela Merkel and Portuguese Prime Minister Antonio Costa.

But their display of bonhomie belied months of cross-continent quarrelling over the response to the coronavirus crisis. As Merkel went into the talks, she warned that a deal on financing the bloc’s economic recovery was far from certain.

“I must say that the differences are still very, very big,” she said. “I expect very, very difficult negotiations.”

Several hours and a lunch of cold fish cuts later, EU heads were hard-pressed to come together even on the building blocks of the package, including the overall size of the budget and the special stimulus scheme or the proportion of free grants versus repayable loans in the recovery fund, diplomatic sources said.

Dutch Prime Minister Mark Rutte led the thrifty camp of northern, wealthy countries demanding a smaller overall package, loans rather than grants for the debt-ridden south, economic reforms as a condition for getting funds, an expanded vetting process for granting aid, and keeping rebates for net payers to the bloc’s joint coffers.

“If they want loans and even grants then I think it’s only logical that I can explain to people in the Netherlands... that in return those reforms have taken place,” Rutte said.

He estimated the chances for a deal at fifty-fifty since, together with Denmark, Austria, Finland and Sweden, he was faced with countries from France to Poland demanding an end to reductions to the wealthy states’ budget contributions.

Rutte also said making EU handouts conditional on respecting democratic standards was key, an idea that prompted nationalist Hungarian Prime Minister Viktor Orban to threaten to veto the entire plan.

Diplomats and officials said a new proposal to bridge the gaps might come later and that leaders would resume today, with some expecting the summit could drag into tomorrow.

With EU economies in free fall, and immediate relief measures such as short-time work schemes running out this summer, the spectre of an autumn of deep economic malaise and discontent is looming.

The EU is already grappling with the protracted saga of Britain’s exit from the bloc and bruised by past crises, from the financial meltdown of 2008 onwards to feuds over migration.

Another economic shock could expose it to more eurosceptic, nationalist and protectionist forces, and weaken its standing against China, the US or Russia.

“The stakes couldn’t be higher,” European Commission President Ursula von der Leyen said. “The whole world is watching us.”

After bitter wrangling over medicines, medical gear, border closures and money, the EU has already agreed a half-a-trillion-euro scheme to cushion the first hit of the coronavirus crisis.

Countries on the Mediterranean now want the recovery financing to prevent their economies taking on ever greater burdens of debt.




Share this page Share on FacebookShare on TwitterShare on Linkedin

Discover the 'Made in France à Bahrain' Guide

'Made in France à Bahrain' - Edition 2021
is YOUR guide to the economic presence in Bahrain. Click here to view the online guide