The fraught wrangling over Europe’s financial response to the health crisis entered into its fourth day this morning after negotiations broke up at 6am in Brussels. French President Macron led a weekend assault on the so-called “Frugal Four” who have opposed the original €750 billion bailout, made up of €500 billion in grants and €250 billion in loans. The Netherlands, Austria, Denmark and Sweden fought hard to reduce the size of the package to €350 billion in grants with another €350 billion in loans in a total deal with €700 billion.
With the support of Finland, the nations also said their offer was condition on rebates to their EU budget contributions.
Mr Macron continuously criticised their position as he pushed for a deal closer to the original proposals, which were based on a Franco-German blueprint drawn up by Angela Merkel and himself.
The frugal leaders’ offer represented a significant change from their pre-summit position that no grants should be distributed under the fund.
France, Germany and Spain insisted grants should be ring fenced at no less than €400 billion.
In a bid to broker a compromise deal, European Council President Charles Michel this morning floated a new figure for €390 billion to be handed out to the worst-hit countries.
He eventually called talks off and ordered leaders to reconvene later this afternoon.
Diplomats praised the new figures and said the fresh offer could herald a breakthrough in the marathon talks.
Leaving the summit, Austrian Chancellor Sebastian Kurz, who supports a smaller fund, said he was “very happy” after “tough negotiations”.
If a deal is struck on the size of the package, EU leaders’ focus will shift to the thorny issue of how to govern the distribution of recovery funds.
Capitals will also need to decide whether to tie in cash hand outs to respect for rule of law, much to the disgust of Hungary and Poland.
Hungarian prime minister Viktor Orban threatened to veto the entire package if funding is linked to respect for the rule of law.
Budapest insisted potential sanctions to suspend any payments would need the unanimous support of all governments, handing him an effective veto.
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Failure to reach an agreement has sown panic amongst some leaders.
Italian prime minister Giuseppe Conte said failure to broker a compromise would lead to the “destruction of Europe’s single market”, according to diplomats.
With no end in sight, the European leaders summit in Brussels has already overtaken the bloc’s longest effort in Nice, France, twenty years ago.