European Union leaders reached a deal on a massive stimulus plan for their coronavirus-blighted economies at a pre-dawn meeting on Tuesday after a fractious summit that went through the night and into its fifth day.
Summit chairman Charles Michel tweeted “Deal” shortly after the 27 leaders reached agreement at a 5.15 a.m. (0315 GMT) plenary session.
French President Emmanuel Macron tweeted “A historic day for Europe!” after the deal was reached.
With masks and hygienic gel everywhere at the summit, the 27 leaders were constantly reminded of the potent medical and economic threat the virus poses to their continent, and grudgingly committed to a costly aid package for those hit hardest by Covid-19.
To confront the biggest recession in its history, the EU will establish a €750 billion coronavirus fund, partly based on common borrowing, to be sent as loans and grants to the hardest-hit countries. That comes on top of the seven-year, €1 trillion EU budget that leaders had been haggling over for months even before the pandemic.
“The consequences will be historic,” said Macron. “We have created a possibility of taking up loans together, of setting up a recovery fund in the spirit of solidarity.”
German Chancellor Angela Merkel, expressed relief that Europe had shown itself equal to “the greatest crisis in the history of the European Union”.
With Macron and Merkel negotiating as the closest of partners, the traditionally powerful Franco-German alliance struggled for days to get the quarreling nations in line, with threats of a French walkout, a Hungarian veto – and fierce opposition from the Netherlands and Austria opposed to too generous a package.
“When Germany and France stand together, they can’t do everything. But if they don’t stand together, nothing is possible,” said Macron, challenging anyone in the world who criticised the days of infighting to think of a comparable joint endeavor.
“There are 27 of us around the table and we managed to come up with a joint budget. What other political space in the world is capable of that? None other,” Macron said.
At first, Merkel and Macron wanted the grants to total €500 billion, but the so-called “frugals” – five wealthy northern nations led by the Netherlands – wanted a cut in such spending and strict economic reform conditions imposed. The figure was brought down to €390 billion, while the five nations also got guarantees that grants had to be linked to economic reforms.
“There is no such thing as perfection, but we have managed to make progress,” Macron said.
‘A Marshall Plan for Europe’
The package will send tens of billions of euros to countries hardest hit by the virus, most notably heavily indebted Spain and Italy that had lobbied hard for a major gesture from their EU partners.
Their call for solidarity was met with the fierce opposition from the “frugals”, who believed the stimulus package was unnecessary.
Spanish Prime Minister Pedro Sanchez hailed “a Marshall Plan for Europe”, that would boost Spain’s suffering economy by €140 billion over the next six years.
But Prime Minister Mark Rutte of the Netherlands denied that the advent of joint borrowing for the rescue heralded the start of what he had warned of before the talks – a “transfer union” with a permanent north south transfer of wealth.
“This is a one off, there is a clear necessity for this given the excessive situation,” he told reporters.
The frugals were also deeply apprehensive of sending money to southern countries that they see as too lax with public spending.
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To meet their concerns, payouts from the package will come with important strings attached – a hard pill to swallow for Rome and Madrid who deeply resisted anything resembling the harsh bailouts imposed on Greece, Portugal or Ireland during the debt crisis.
The frugals were also enticed with heavy rebates on their EU contributions, furthering a practice first offered to Britain decades ago, when it was still a member.
‘Rule of Law’
The recovery package will complement the unprecedented monetary stimulus at the European Central Bank, that has largely succeeded in reassuring the financial markets despite a catastrophic recession in Europe.
The stimulus payments will not be blank cheques to member states.
Spending will be closely controlled and must be devoted to policies seen as compatible with European priorities, including politically difficult economic reforms as well as the environment.
The European Commission, the EU’s executive arm, will be in charge of distributing the funds, with the 27 member states able to turn down a spending plan if a weighted majority of them decide to intervene.
The rescue package was agreed along with the EU’s long-term budget, bringing the agreed spending to 1.8 trillion euros through 2027.
The plan was nearly upended by Hungary and Poland due to a demand that EU payouts be tied to the “Rule of Law”, Brussels jargon for upholding laws on freedom of speech and an independent judiciary.
Budapest and Warsaw are under fire for offending EU norms, but a proposal to tie the EU budget to those concerns was watered down to the satisfaction of Hungarian Prime Minister Viktor Orban and his Polish counterpart.
The package now requires more technical negotiations among member states as well as a ratification by the European Parliament that could happen as soon as Thursday.
(FRANCE 24 with AFP, AP and REUTERS)