Coronavirus: EU’s €1.75 trillion bailout budget on the line

The 27-member bloc is striving to reach a deal on €1.75 trillion budget and Covid-19 rescue fund

Germany's Chancellor Angela Merkel departs from a meeting at the EU summit, amid the coronavirus pandemic in Brussels, Belgium on July 20, 2020 AFP

EU leaders continued their fourth day of talks over an unprecedented budget and bailout fund meant to soften the economic blow from the coronavirus with cautious optimism.

The talks in Brussels over a proposed €750 billion (Dh3.147 trillion) fund, partly based on common borrowing, were meant to break up on Saturday.

However, stark divisions among members over what proportion of grants and loans should make up the fund as well as what strings should be attached to the spending hampered progress. The talks went through the night on Sunday into Monday.

The bailout will supplement a seven-year, €1trn EU budget that leaders were fighting over when the coronavirus pandemic first swept across the continent.

Talks in the Belgian capital paused early on Monday morning and were scheduled to resume later in the day.

Ahead of therestart, German Chancellor Angela Merkel said leaders now had a new basis for a deal.

"We worked out a framework for a possible agreement last night after long negotiations," she told reporters, arriving for the fourth day of talks in Brussels in what could be the bloc's longest ever summit," she said.

"This is progress and gives hope that an agreement can be reached today."

From left, Germany's Chancellor Angela Merkel, President of the EU Commission Ursula von der Leyen and France's President Emmanuel Macron before the start of the EU meeting in Brussels, on July 18, 2020 AFP

European Commission President Ursula von der Leyen was also upbeat about the chances of a deal.

French Finance Minister Bruno Le Maire said the future of Europe in the 21st century was at stake. "An agreement is possible. An agreement is a necessity," he told a French television.

Spain’s Foreign Minister Arancha Gonzalez Laya said on Monday her country would not reject conditions tied to the disbursement of the funds or strong governance to oversee these disbursements.

“Spain has clear ideas: we don’t reject conditionality. But we want transparency. Prime Minister Sanchez seeks to make Spain part of the solution,” she told the country’s Cadena SER radio network.

Talks in Brussels have come unstuck principally over disagreements between frugal mostly northern members and southern countries that have been characterised as more fiscally profligate.

Austria, the Netherlands, Denmark and Sweden, which make up the fiscally conservative group, have said they want to see a higher proportion of loans and fewer grants in the bailout fund.

Southern nations, which have on the whole been hit harder by the coronavirus have regularly called for a generous bailout without too many strings attached.

Dutch Prime Minister Mark Rutte, who has been one of the most intractable leaders from among the northern nations, seemed to be cautiously optimistic as the summit paused. "It looks more hopeful than when I thought during the night: 'It's over,'" he said.

Further divisions have also developed between eastern nations such as Poland and Hungary and Mr Rutte, who has said he wants a link between handouts and the rule of law. The provisions take aim at the right-wing, populist governments in Warsaw and Budapest.

Hungary’s Prime Minister Viktor Orban has taken the move personally. “I don't know what is the personal reason for the Dutch prime minister to hate me or Hungary,” he said.

Mr Rutte’s response could not be faulted for its pith. "We are not here because we are going to be visitors at each other's birthday party later,” he said in response to Mr Orban.

The EU Council President Charles Michel, German Chancellor Angela Merkel and French President Emmanuel Macron have been the driving force bringing the bloc together on a deal.

On Sunday night Mr Michel made an impassioned plea that leaders should not fail their union.

"I wish that we succeed in getting a deal and that the European media can headline tomorrow that the EU succeeded in a mission impossible," he said.