EU leaders fail to reach agreement after three days of summit negotiations

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European Union officials are signaling that despite this being the longest EU summit since the year 2000, when the Nice summit lasted for five days, EU leaders may actually be going home without reaching an agreement on the seven-year budget and the coronavirus recovery fund.

On Monday morning, President of the European Council Charles Michel presented the member states with a new version of the recovery fund with €390 million in grants and the rest in loans.

He then adjourned the meeting until the afternoon to give the EU leaders time to consider and discuss the proposal in smaller groups and to give the EU Council presidency the time to prepare a document which details the process and the rules governing the administration of the recovery fund.  

Polish Prime Minister Mateusz Morawiecki has been in regular contact with the leaders of the Visegrad States. During the summit, the position taken by Poland and Hungary against linking EU funding to rule of law compliance was also backed by Latvia and Slovenia.

The EU leaders are considering a package of funding which includes a recover fund of €750 billion and a €1 trillion EU seven-year budget.

The compromise that was on the table on Sunday envisages €400 billion in grants, a strengthened mechanism for supervising the disbursement of the grants, and the linkage of EU funds with rule of law compliance.

The proposed deal has been rejected by the group of “frugal four” states who want to reduce the budget by €25 billion via a rebate mechanism. The group which consists of the Netherlands, Denmark Austria and Sweden and supported by Finland are demanding that the recovery fund should consist of €350 billion in grant funding and €350 billion in loans.

The original European Commission proposal was for €500 billion in grants and €250 billion in loans.

The countries opposed to higher grants fear the continent taking on common debt and dragging down the stronger and more fiscally conservative countries.

In addition, Austria was to receive significant rebates for agricultural spending and the Netherlands was to benefit from a rebate for its participation in customs clearance. The way the funds were to be divided was changed in respect of the original proposal so that 70 percent would be based on historic GDP data from 2015-2019 and 30 percent from current data.

Dutch Prime Minister Mark Rutte, who is fighting for the demands the Netherlands, Austria, Finland, Sweden, Denmark, has become a major target of criticism, especially from Italy and Hungary. Hungarian Prime Minister Viktor Orbán even had to ask him why the Dutch prime minister hates him so much.

Germany, France, Spain and Italy, together with Central European states, are opposed to any reduction in grant funding below €400 billion. They believe that the reduction desired by the group led by the Netherlands would imply cuts in funding for the Green Deal and digitalization.

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