In Depth

Inside the European Union’s €750bn coronavirus recovery package summit

EU27 leaders clash over size of spending plan and rule of law restrictions

European Union leaders have agreed a €750bn (£677bn) post-coronavirus recovery package following a fourth night of fraught talks in Brussels.

The money will fund grants and loans aimed at countering the impact of the pandemic, and is part of a €1.82trn (£1.64trn) seven-year budget agreed by the 27-member states.

The negotiations saw the bloc’s member states split into opposing sides, with nations hardest hit by the virus calling for more spending, while opponents “concerned about costs” haggled over the overall size of the aid package, the BBC reports.

The resulting compromise plan is the “biggest joint borrowing ever agreed by the EU”, according to the broadcaster, and was hailed by summit chair and President of the European Council Charles Michel as a “pivotal moment” for Europe.

What happened during negotiations?

The package will comprise €390bn (£352bn) worth of grants and €360bn (£325bn) worth of loans, and was agreed as “a compromise” with the so-called “frugal four” member states - Sweden, Denmark, Austria and the Netherlands - along with Finland, Euronews reports.

The plan was originally to hand out €500bn (£451bn) as grants and €250bn (£225.5bn) in loans, a distribution of funds “which was supported and pushed by a close Franco-German alliance”, says the news site. 

But the five more frugal nations pushed back against such a generous spending plan, reporting causing Emmanuel Macron “to bang his fists in anger”, according to Sky News

The French president told the hold-out member states that “he thought they were putting the European project in danger” by refusing to back greater borrowing, says the BBC.

Europe’s worst-hit countries, including Spain and Italy, had been “asking for a more flexible deal to help them deal with the aftermath of the coronavirus pandemic”, Sky News adds.

The compromise package was agreed after “the ‘frugal’ nations were reportedly won over by the promise of rebates on their contributions to the EU budget”, says the BBC.

Was spending the only issue?

As well as disagreements about how the funding should be distributed, the member states also clashed over how disbursements would be linked to the rule of law. 

Both Hungary and Poland - nations described by Hungarian Prime Minister Viktor Orban as “illiberal democracies” - threatened to veto the spending plan “over a proposal to freeze funds for states undercutting the rule of law”, Reuters reports. 

This plan was championed by the Netherlands’ Prime Minister Mark Rutte, who called for “strict control over how funds are spent”, as well as a guarantee that right-wing nationalist Orban would not continue “his perceived backsliding from democratic governance”, says the news agency.

Orban told reporters on Sunday that he could not understand “the personal reason for the Dutch prime minister to hate me or Hungary”, adding: “I don’t like blame games but the Dutchman is the real responsible man for the whole mess... The Dutch prime minister, he is the fighter.” 

Rutte previously told a news conference in the Hague on 10 July that events in both Hungary and Poland were “very worrying”, adding that “Europe is not only a market and a currency, but also a community of values”.

Despite Rutte’s efforts, however, the final package contains no mechanism to force countries to abide by any democratic rules, in what news site Emerging Europe labels a “victory over rule of law” for Hungary and Poland. 

So what happens next?

The commission will raise the funds for the spending plan by borrowing up to €750bn (£676bn) in the financial markets.   

Meanwhile, “member states will need to prepare national recovery plans pledging to reform their economies in order to unlock their allocated share of this funding, which will be distributed from 2021 to 2023”, the Financial Times says. 

After a contentious debate over how countries should be allowed to spend their allocation, the EU27 agreed that an “individual member state [can] raise objections if it feels [another country] is failing to fulfil its reform promises in return for the money it is receiving from the commission”, the newspaper reports.

And the reaction?

Speaking to reporters after the four days of gruelling negotiations, European Council President Michel welcomed the “good deal”, adding that “Europe is solid”. French leader Macron echoed Michel’s optimism, hailing a “historic day for Europe”.

German Chancellor Angela Merkel said that the deal “is an important signal beyond Europe’s borders that the EU... is able to take action”.

Italian leader Giuseppe Conte added that the plan “will allow [Europe] to face the crisis with strength and effectiveness”. Conte also noted that just under 30% of the total funding agreed will be sent to Italy, Europe’s second-worst hit country after Britain.

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