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EU Covid-19 bailout

Tough talks ahead as EU leaders begin debating €750bn Covid rescue plan

Germany's Chancellor Angela Merkel, France's President Emmanuel Macron and President of the European Council Charles Michel talks prior the European Union Council in Brussels on July 17, 2020.
Germany's Chancellor Angela Merkel, France's President Emmanuel Macron and President of the European Council Charles Michel talks prior the European Union Council in Brussels on July 17, 2020. © AFP/Stéphanie Lecocq
3 min

European Union heads of state and government have begun two days of talks in Brussels in the first face-to-face EU summit since the Covid-19 lockdown. One key item tops the agenda – the post-coronavirus recovery plan of 750 billion euros.

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France's President Emmanuel Macron said on Friday that the European Union was facing a "moment of truth", as leaders gathered for the first face-to-face Brussels summit for five months, held under social distancing restrictions.

The leaders arrived at the meeting, all wearing masks – and for the first time in history without a single journalist present.

Germany's Chancellor Angela Merkel admitted as she arrived that she expected tough negotiations on the huge post-coronavirus rescue package.

'Very difficult negotiations'

"We are going into consultations with a lot of vigour, but I must also say that the differences are still very, very large. I cannot therefore predict whether we will be able to reach an agreement this time," she said.

"We have to face reality...we really need a great deal of willingness to compromise if we are to achieve something that is good for people and good for Europe in the face of the pandemic.

"That is why I expect very, very difficult negotiations."

Merkel and Macron are backing a recovery package made up of a mixture of loans and grants to member states to revive economies shattered by the virus and preventive lockdowns.

"It's our European project which is in play here," Macron warned, before meeting the Netherlands' Prime Minister Mark Rutte – who insists that any bailout be accompanied by tough conditions and an effective power of veto over national rescue plans. 

Summit host Charles Michel, the president of the European Council, has tried to create a sense of momentum after previous coronavirus-era videoconferences served only to underline the leaders' differences.

His draft plan foresees a recovery package, made up of 250 billion in loans and 500 billion in grants and subsidies that would not have to be repaid by the recipient member states.

Frugal four stand firm

The Netherlands has emerged as the most likely hold out against it, with Rutte's position backed to varying degrees by fellow northern European members Sweden, Denmark and Austria, which together make up the so-called "Frugal Four".

Before they sign off on any deal, they want guarantees that heavily-indebted countries like Spain and Italy will carry out labour market reform.

The south is flatly against the proposal.

The bailout package is in addition to the planned 1 trillion euro seven-year EU budget from 2021 to 2027 that the leaders must also agree in the coming weeks.

With every country having a veto, the talks promise to be long and difficult, and this extraordinary two-day summit in Brussels may not be the last.

 

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