EU leaders deadlocked over virus rescue package

A European Union summit to agree 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 in Brussels.

The 27 leaders 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, Merkel said there were still many divisions among the leaders.

“I still can’t say whether a solution will be found,” she said. “There is a lot of good will ... 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 to ensure countries carry out labor market reforms, while Austria, Finland, Denmark and Sweden want to see the up to 750-billion-euro (US$857 billion) 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 a plan to lift the countries hardest hit by the pandemic — most notably Spain and Italy.

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.”

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 yesterday.

A French diplomatic source said Macron and Merkel refused pressure by Rutte and his allies to cut the grants in the scheme to below 400 billion euros.