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July 22, 2020

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EU leaders seal stimulus deal

Source: Agencies | 00:05 UTC+8 July 22, 2020 | Print Edition

AFTER four days and nights of wrangling, exhausted European Union leaders finally clinched a deal on a massive stimulus plan for their coronavirus-throttled economies in the early hours of yesterday.

Leaders hope the 750 billion euro (US$857.33 billion) recovery fund and its related 1.1 trillion euro 2021-27 budget will help repair the continent’s deepest recession since World War II after the coronavirus outbreak shut down economies.

Summit chairman Charles Michel called the accord, reached at a 5:15am, “a pivotal moment” for Europe. French President Emmanuel Macron, who spearheaded a push for the deal with German Chancellor Angela Merkel, hailed it as “truly historic.”

In an unwieldy club of 27, each with veto power, the summit exposed faultlines across the bloc that are likely to hinder future decision-making on money as richer northern countries resisted helping out the poorer south.

The Netherlands led a group of “frugal” states with Austria, Sweden, Denmark and Finland, insisting that aid to Italy, Spain and other Mediterranean countries that took the brunt of the pandemic should be mainly in loans, not in non-repayable grants.

Frictions peaked on Sunday as Macron lost his temper with the frugals, diplomats said, and Polish Prime Minister Mateusz Morawiecki branded them “stingy, egotistic states.”

The bickering spun the summit out, making it the EU’s second-ever longest, just 20 minutes short of a record set in 2000 in Nice, according to Dutch Prime Minister Mark Rutte. “We would have broken the record at 6:05, but we ended at 5:45,” he said.

Under the compromise, the European Commission will borrow 750 billion euros using its triple-A debt rating, disbursing 390 billion in grants — less than the originally targeted 500 billion — and 360 billion in cheap loans to the hardest-hit countries.

The summit deal does not set the EU on the path toward a US-style fiscal union, although some see it as a first step.

Rutte’s negotiations won an “emergency brake” to temporarily stop transfers of money from the recovery fund if an EU state was seen as not meeting reform conditions tied to the money.

The frugals also secured larger rebates from the next EU budget, a payback mechanism first won by Britain in the 1980s and which France had hoped to phase out after Brexit.

While strong in symbolism, the deal came at the cost of cuts to proposed investment in climate-friendly funds and did not set conditions for disbursements to countries, such as Hungary and Poland, seen as breaching democratic values.

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