EU leaders meet on Friday for the first face-to-face summit since the coronavirus crisis, with low expectations of a deal on a €750bn (£670bn) post-Covid stimulus package. The main issue is how much of the recovery fund will be handed out in grants and how much in loans. They also need to agree on a seven-year budget worth another €1.07 trillion. The Brussels meeting is due to continue on Saturday but EU leaders may need longer to reach a deal. A French official said an agreement this weekend was possible but certainly needed to be wrapped up by the end of the summer.
Southern states including Italy and Spain want an urgent decision “not weakened by a lesser compromise”, in the words of Italian Prime Minister Giuseppe Conte. They need to revive economies battebumerkelred by a devastating pandemic that claimed 35,000 lives in Italy and a further 28,400 in Spain. The Frankfurt-based European Central Bank has already forecast an 8.7% slump in the eurozone economy this year because of the pandemic. But economies that only recently pulled out of a financial crisis want grants rather than taking on further debt. The recovery plan, backed by France and Germany, for €500bn in grants and subsidies and €250bn in loans, is being resisted by several “frugal” Northern European countries, led by the Netherlands. The EU recovery fund is already controversial as the money would be borrowed on the financial markets, to be paid back some time after 2027. It’s made up of a number of different instruments, but the biggest part of it would be geared to supporting green and digital investment and reform. Some 30% of the funding could be tied to climate projects.
The frugal states, which include Austria, Sweden, Denmark and to some degree Finland, want some control over how the money is handed out. The Southern states say that will hold the process back. There is also pressure to whittle down the size of the €750bn fund, so the solvency instrument devised to revive companies after lockdown could be under threat.
One of the main issues for EU leaders is whether any country can have a veto over money being handed out to a member state for recovery purposes. Ahead of the summit, a French official said the Netherlands was the only one of the so-called frugal states seeking strict control of conditions for paying out funds. But Finland too wants conditions attached to EU funding, both from the recovery pot and from the wider 2021-27 EU budget.
The task facing EU leaders is to agree not only on the size and terms of the recovery fund, but the overall EU budget too.
Source: BBC
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