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Post-Covid Economy

EU talks on Covid-19 stimulus deliver no deal as divisions remain

European Commission president Ursula von der Leyen, April 2020.
European Commission president Ursula von der Leyen, April 2020. REUTERS/Christian Hartmann
Text by: Agencies
3 min

European Union leaders have failed to strike a quick deal on an unprecedented stimulus package to promote economic recovery in the face of the coronavirus crisis, with members states still divided over its final amount and terms.

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Member states agreed during a four-hour video summit that there was a need for a quick response on reaching a deal this summer, but divergences remain on the proposed 750 billion euro bailout, destined mainly for worst-hit nations like Italy and Spain, and how it will be disbursed. 

Officials and diplomats expect a deal could come in July, but probably only after face to face meetings.

"It is essential to take a decision as soon as possible," EU Council President Charles Michel said, announcing plans to call an in-person summit mid-July. 

European Commission President Ursula von der Leyen, head of the EU's executive arm, said she hopes a deal can be secured before the EU closes for an August summer holiday.

The 27 national heads of state began their video conference at 0800 GMT on Friday to discuss recovery for the bloc that has lost over 100,000 lives to Covid-19 and faces an unprecedented economic downturn.

The European Commission, the executive arm of the EU, estimated in May a contraction of 7.4 percent in gross domestic product in 2020.

Collective responsibility

“Our ultimate goal is to reach a deal as soon as possible. There is still quite some way to go towards an agreement, so we will need to work hard in the coming days and weeks,” European council chairman Charles Michel said.

"We have a collective responsibility to deliver."

"It's a crisis without precedent that has had an enormous impact – economic, social and also on the viability of the EU," said a senior EU diplomat.

"To show that Europe protects, we cannot take any longer on this, as delays will only make things more difficult and more expensive."

However, member states disagree on the type of bailouts being proposed and the conditions they come with.

Larger EU countries such as Italy and France are calling for grants without too many conditions, while others want only conditional loans.

Sweden, Denmark, Austria and the Netherlands, the so-called "frugal four", believe the proposed recovery fund is too big and allocation of the money is not sufficiently linked to the pandemic.

Eastern EU countries say too much money will go to the south and want to maintain an earlier spending focus on agriculture and closing development gaps with the richer west.

Wealthy net payers to EU coffers, including the frugal four and Germany, want to retain past rebates on their contributions that others want scrapped and there is no agreement on how to eventually repay the Commission borrowing.

There have been suggestions, particularly from France, to tax tech giants as a way to increase revenues and repay for some of the new debt, but this has also divided nations and put the US on its guard.

France 24 correspondent, Dave Keating says the spectre of a Brexit deadline is also looming over the talks, putting bloc members under pressure.

The UK has said there will be no extension to the transition period, leaving only a few months left to draw up a free trade deal.

(with wires)

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