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'People are dying': EU leaders remain 'fundamentally divided' over €750 billion rescue deal

Frugal states are resisting pleas to agree to a plan to help the countries hardest hit by the pandemic.

Micheal Martin adjusts his protective as he arrives at yesterday's summit
Micheal Martin adjusts his protective as he arrives at yesterday's summit
Image: AP/PA Images

Updated Jul 19th 2020, 7:15 PM

European Union leaders remained fundamentally divided for a third day today over an unprecedented 1.85 trillion euro EU budget and coronavirus recovery fund.

And German Chancellor Angela Merkel warned they might not reach a deal despite the urgency imposed by the pandemic.

Luxembourg Prime Minister Xavier Bettel said in his seven years’ experience of European meetings: “I have never seen positions as diametrically opposed as this.”

The summit, which has been taking place since Friday, has seen the Netherlands and its “frugal” allies resist the pleas of Germany and France to agree a plan to help the countries hardest hit by the pandemic – most notably Spain and Italy.

The Dutch had demanded that EU Member States could hold a veto over national bailouts to ensure that countries carry out labour market reforms.

Austria, Finland, Denmark and Sweden, meanwhile, want to see the rescue package of loans and subsidies cut down to size.

Taoiseach Micheál Martin said today that members states on the frontline of the pandemic should not be burdened with extra debt. 

“Ireland believes that pouring more debt on debt is not the way out of this. Some member States find that very difficult so the grants element of this is very important,” he said.

“One has to make an assessment at some stage in this process that if the package is diluted too much, does it really represent the significant response that the Chancellor Angela Merkel and President [Emmanuel] Macron originally envisaged,” said Martin. 

A source told the AFP news agency that French President Emmanuel Macron and German Chancellor Angela Merkel refused pressure by Netherlands Prime Minister Mark Rutte and others to cut the grants in the scheme to below €400 billion.

The offer was supposedly made at a meeting of Macron, Merkel, Rutte and the other leaders of the ‘Frugal Four’ – Austria, Denmark and Finland – as well as Sweden’s prime minister.

But RTÉ reports that Taoiseach believes leaders had considered the “bigger picture” late last night.

“Given the enormity of Covid we need to put a package together that can respond to Covid. People have died, are dying from Covid,” he told the broadcaster.

Arriving for what she said was probably the “decisive” day of the extraordinary summit, Merkel said today there were still many divisions among the leaders.

“I still can’t say whether a solution will be found,” she said. “There is a lot of good will… but it may also be that no result will be achieved today.”

EU Council President Charles Michel reportedly worked through the night to draw up a compromise that could be satisfactory to all when the leaders reconvene at noon local time.

Europe is in the throes of a massive recession and leaders are trying to approve a plan that could quickly send EU cash to countries hit the hardest.

Michel, who chairs EU summits, was obliged to propose a fresh plan after previous versions were refused by the Netherlands on the grounds that they gave away too much cash as grants, instead of lending it as loans.

belgium-europe-summit Angela Merkel and speak with Sweden's Prime Minister Stefan Lofven and Finland's Prime Minister Sanna Marin Source: John Thys/PA Images

Rutte is also wary about the plan’s governance and insists that national governments get a veto on the spending plans of governments receiving cash from the Brussels package.

Underlying his concern is the reputation of Spain and Italy for lax public spending in the minds of voters in northern Europe, and Rutte wants them to reform their labour and pensions rules.

“We’re in a stalemate, it’s very complicated, more complicated than expected,” Italian Prime Minister Giuseppe Conte said.

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In a concession to Rutte’s demands, Michel’s latest plan includes a “super emergency brake” that gives any country a three-day window to trigger a review by all member states of another’s spending plans.

To further entice Austria, the Netherlands, Sweden and Denmark, Michel promised to hike the rebates they get on their EU contributions.

But the “frugals” are not the only problem. What EU officials call the “Rule of Law” issue will also be a stumbling block.

Hungary’s Prime Minister Viktor Orban – backed by Poland – could yet veto any attempt to tie budget funds to states upholding European legal standards.

“No political pre-conditions can be accepted,” said Zoltan Kovacs, a spokesman for Orban.

Contains reporting from © – AFP 2020 and Cónal Thomas

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