BRUSSELS • An EU summit to seek agreement on a huge coronavirus economic rescue package could collapse without a deal, German Chancellor Angela Merkel warned yesterday, as bickering leaders began a third day of talks.
Leaders of the 27 member states have argued for two days over the scale and rules for the package, with the Netherlands leading a band of "frugal" allies in demanding lower budgets and tougher conditions for handouts.
Arriving for what she said was probably the "decisive" day of the extraordinary summit, Dr Merkel said there were still many divisions among the leaders, adding: "I still can't say whether a solution will be found. There is a lot of goodwill... but it may also be that no result will be achieved today."
The veteran German leader joined French President Emmanuel Macron and the summit host, European Council president Charles Michel, to prepare a new offer to break the logjam after Dutch Prime Minister Mark Rutte and his "Frugal Five" allies blocked a deal.
The Dutch want member states to have a say over national bailouts and ensure countries carry out labour market reforms, while Austria, Finland, Denmark and Sweden want to see the up to €750-billion-(S$1.2 trillion) package of loans and subsidies cut down.
The "frugals" have resisted the pleas of Germany and France, traditionally the bloc's most powerful members, to agree on a plan to lift the countries hardest hit by the pandemic - notably Spain and Italy.
Mr Macron urged leaders to "take responsibility" as Europe grapples with a severe recession caused by the virus and its lockdowns, saying a deal could still be found.
"But these compromises cannot be made at the cost of European ambition," he warned.
"Not out of principle but because we are facing an unprecedented health, economic and social crisis, because our countries need it and European unity needs it."
Mr Michel was forced to work through the night to draw up a compromise that could be satisfactory to all when the leaders reconvened in a plenary session at noon (6pm Singapore time) yesterday.
A French diplomatic source said Mr Macron and Dr Merkel refused pressure by Mr Rutte and his allies to cut the grants in the scheme to below €400 billion.
The leaders are trying to approve a plan that could quickly send EU cash to countries hit the hardest by the coronavirus, most notably Spain and Italy.
The Netherlands refused earlier versions of Mr Michel's plan because they gave away too much cash as grants, instead of loans.
Mr Rutte is also wary about the plan's governance and insists that national governments get a veto on the spending plans of governments receiving cash from the Brussels package.
Underlying his concern is the reputation of Spain and Italy for lax public spending in the minds of voters in northern Europe, and Mr Rutte wants them to reform their labour and pensions rules.
"We're in a stalemate, it's very complicated, more complicated than expected," Italian Prime Minister Giuseppe Conte said.
In a concession to Mr Rutte's demands, Mr Michel proposed a "super emergency brake" that gives any country a three-day window to trigger a review by all member states of another's spending plans.
On Saturday, Mr Michel proposed keeping the total recovery budget at €750 million but shifting the balance from grants to loans, which rise from €250 million to €300 million, a document seen by AFP shows. To further entice the "frugals", Mr Michel promised to hike the rebates they get on their EU contributions.
AGENCE FRANCE-PRESSE
