Dutch demands for a veto over how Europe distributes its proposed post-pandemic recovery funding stymied progress among EU leaders late on Friday night as they held their first face-to-face summit for five months.
Mark Rutte, the Dutch prime minister, insisted that grants handed out under a planned Recovery and Resilience Facility should require unanimous approval from all 27 EU governments.
As leaders convened for a dinner session late on Friday, Charles Michel, the European Council president, aimed to break the deadlock with a compromise plan that offered an emergency brake on distributions of cash to help win over Mr Rutte. But the Dutch prime minister tabled a rival plan that would still in effect allow one country to wield a veto, leaving talks at an impasse.
Diplomats reported progress in other parts of the negotiation, however, including the method of allocating the recovery funding over the course of the next three years. Mr Michel offered to link a portion of payments to countries’ economic performances in both 2020 and 2021 for the first time.
EU leaders face a struggle to bridge deep divisions over Europe’s €750bn pandemic response given the wide array of open issues going into the discussions. The talks have been beset by differences over the size of the recovery fund, the conditions attached to payouts, and the formulas that will determine how money is allocated between member states.
Another issue is the extent of potential cuts to the recovery grants that have been proposed, with “frugal” states seeking to hack back at the size of grant payments. “The differences are still very large and so I can’t predict that we will achieve a result this time,” said Angela Merkel, Germany’s chancellor and holder of the EU’s rotating presidency, as she arrived at the summit. “It would be desirable but we also have to be realistic.”
Mr Rutte warned there was a “less than 50 per cent chance” of an agreement this weekend as he arrived for the Brussels talks. The Netherlands wants to keep a tight leash on potential grants over concern that the money might be misused by recipient countries.
In a bid to win over Mr Rutte, Mr Michel late on Friday put forward a draft text, seen by the Financial Times, which said the payment of funds would be halted if member states failed to reach consensus on approving a recommendation from the European Commission over national recovery plan. The matter would then have to be taken up by EU leaders to resolve, with no payments being disbursed before then.
Mr Michel’s text left unspecified the number of countries needed to trigger the brake. A rival plan from the Dutch government insisted that a single country should be able delay the process — giving one country a de facto veto. That has been fiercely opposed by other capitals that argue it would delay the distribution of funds needed to revive their economies after months of hibernation.
Diplomats said a revised proposal from the European Council president on how the grants can be shared out was gaining some traction, however. Mr Michel proposed in advance of the summit that 30 per cent of the payments would be held back until after 2021, when the pandemic’s impact on gross domestic product could be factored into allocation decisions.
Under a tweaked plan, also seen by the Financial Times, the 30 per cent share would be split into two components. Half would be linked to countries’ GDP performance in 2020 alone, and half to movements in output over both 2020 and 2021. It is designed to address concerns among some countries that they would end up losing out if they had robust recoveries in 2021.
Other questions to be resolved are the size of the recovery package and allied seven-year budget. Diplomats said tens of billions of euros in spending could be cut if demands from the Netherlands and other “frugal” states gained traction as their price for doing a deal on the region’s post-pandemic plans and budget. One diplomat said “several options” for reductions in the volume of the spending plans had been put forward during the early skirmishes on Friday.
One big question is whether to cut spending on other parts of the recovery package, rather than the €310bn of grants proposed by the commission. That would hit spending on EU investment support and a proposed tool to help recapitalise struggling companies. “The magical number for cuts has always been €100bn for the frugals,” said one diplomat.
Leaders have also been clashing over how to tie recovery money to respect for the rule of law. Hungary’s illiberal premier, Viktor Orban, has threatened to veto a deal that makes respect for fundamental values a precondition of the recovery fund — a position supported by Poland’s prime minister, Mateusz Morawiecki, during the summit.
Western European capitals are demanding tougher cash sanctions for member states such as Poland and Hungary that are accused of undermining the independent judiciary and freedom of the press.
Other outstanding issues included the question of whether member states will need to sign up to the EU’s ambitious climate goals to receive the aid. Poland, which is one of the biggest recipients of the recovery package, is the only country not to formally back Europe’s 2050 climate neutrality target.
Ms Merkel, along with Mr Macron, has backed EU plans to borrow hundreds of billions of euros to fund Europe’s recovery.
In their first physical meeting since February, EU leaders wore masks as they entered, greeted each other with “elbow bumps”, and travelled with a restricted number of aides to abide by social-distancing measures.
A failure to find a breakthrough this weekend would raise the prospect of another summit in Brussels before the end of the month.
Giuseppe Conte, Italy’s prime minister, said the negotiation was about more than “financial flows”.
“We are elaborating a response, an economic and social response, to all our European citizens in the common interest of the values that we share,” he said.
https://news.google.com/__i/rss/rd/articles/CBMiP2h0dHBzOi8vd3d3LmZ0LmNvbS9jb250ZW50LzUyZDY0MjI0LTczNmItNDlhMS1iNjJhLTAzZmM1ZGNiNDNmM9IBP2h0dHBzOi8vYW1wLmZ0LmNvbS9jb250ZW50LzUyZDY0MjI0LTczNmItNDlhMS1iNjJhLTAzZmM1ZGNiNDNmMw?oc=5
2020-07-17 22:09:00Z
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