Deadlock as EU’s Covid-19 bailout summit stretches into second evening

European leaders are attempting to reach a deal on a €1.85 trillion budget and coronavirus bailout fund

German Chancellor Angela Merkel talks with French President Emmanuel Macron before the EU summit at the European Council building in Brussels, on July 18, 2020. AFP

Tension continued to run high as EU leaders butted heads into a second evening over an unprecedented budget and bailout fund to battle the fallout from the coronavirus pandemic.

Leaders from the bloc’s members have been in deadlock for months over how and under what conditions vast sums of money should be given to the 27 EU nations.

The EU executive has proposed a €750 billion (Dh3.147 trillion) fund, partly based on common borrowing, to be sent as loans and grants to the worst-hit countries.

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

By the end of the afternoon on Saturday, after a day and a night of negotiating, Austrian Chancellor Sebastian Kurz said there was still no deal in sight but there was “movement in the right direction”.

Spain's Prime Minister Pedro Sanchez (R) speaks with Netherlands' Prime Minister Mark Rutte prior the start of the EU summit at the European Council building in Brussels AFP

The coronavirus and subsequent negotiations on conditions for the bailout have laid bare longstanding divisions in the bloc, principally between frugal northern members and southern nations that have been characterised as more fiscally profligate.

Italian Prime Minister Giuseppe Conte said discussions looked “more complicated than expected.”

In a video statement recorded from Brussels on Saturday, Mr Conte said the second day of talks as having gone through “a phase of stalemate.”

Earlier, Mr Conte struck out at proposals of a veto for member nations over how much recovery money is spent.

Italy, one of the countries which was hit hardest in Europe by the outbreak, has regularly called for a generous bailout without too many strings attached.

Mr Kurz, whose nation along with countries such as the Netherlands, Denmark and Sweden makes up the fiscally conservative bloc, has said he wants to see a higher proportion of loans and fewer grants in the bailout fund.

The frugal nations also want conditions such as economic reforms attached to EU handouts.

On Saturday, Dutch Prime Minister Mark Rutte, one of the most intractable leaders among the northern nations, met German Chancellor Angela Merkel, French President Emmanuel Macron, and Mr Conte for crisis talks. They were joined by the leader of the EU Commission, Ursula von der Leyen, and EU Council President Charles Michel.

The progress that has been made emanated from proposals from Mr Michel offering to reduce the proportion of grants and increase the number of loans, an olive branch to the northern nations.

How the funds should be tracked remains to be seen, though Mr Michel has proposed measures that would stop short of a full member veto on handouts.