EU summit: Merkel warns of no deal on coronavirus recovery fund

European Union leaders may not reach a deal on a coronavirus stimulus plan on Sunday, German Chancellor Angela Merkel warned as marathon negotiations ran into a third day and acrimony mounted over the demands of rich but thrifty countries.

“There is a lot of goodwill, but also many positions. I will make every effort but, it is possible that there is no result,” Merkel said in Brussels as she arrived for a third day of talks on Sunday.

Germany and France, the EU’s powerbrokers, are seeking a deal on a 1.8 trillion-euro ($2.06 trillion) economic recovery package to rescue the bloc’s economies, which are facing their worst recession since World War II.

After two exhausting days of negotiations, a “frugal” group of richer, northern states led by the Netherlands appeared no longer willing to back down from demands for cuts to the package, underscoring the depth of the EU’s north-south split.

Meanwhile, Hungarian Prime Minister Viktor Orban said there were four broad divisive themes in the talks on the recovery package but that the gathering was determined to seal a deal on Sunday.

“We are aware that we have to make a deal, we are negotiating under the pressure that a deal is a must,” Orban told reporters.

He listed the contentious issues as: the size of the new recovery fund; the proportion between grants and repayable loans as part of that; the scale of rebates on the core EU budget for rich net payers; and the rule-of-law strings attached to handouts from the bloc.

Late on Saturday, Merkel and French President Emmanuel Macron left the day’s final stretch of informal talks early, refusing to accept that the level of grants to ailing economies be lowered to less than 400 billion euros.

Italian Prime Minister Giuseppe Conte had earlier accused the Netherlands and its allies Austria, Sweden, Denmark and Finland of “blackmail”. Stockholm proposes to cut grants to 155 billion euros.

‘Make-or-break’ moment

In their first face-to-face summit since the outbreak of the coronavirus in Europe, leaders wearing face masks have framed the summit as a “make-or-break” moment for nearly 70 years of European integration.

Failure to come together amid an unprecedented health and economic crisis would raise serious questions about the continued viability of the bloc, officials and experts say.

Macron said there was a willingness to compromise, but that it should not deter “from the legitimate ambition that we need to have,” referring to the money available in the planned 750 billion-euro recovery fund, which is to be funded by money raised on capital markets.

Dutch Prime Minister Mark Rutte, who faces parliamentary elections by March 2021, was frank about the divisions with France and Germany on Saturday night.

“They walked away annoyed,” Rutte said of Merkel and Macron. “Large differences still remain,” he said.

While the Netherlands and its allies held out, other obstacles remained, not least because Britain’s departure from the EU means others have to pay more to cover the gap in the bloc’s coffers.

Hungary, backed by its eurosceptic ally Poland, has threatened to veto the package over a newly proposed mechanism, supported by the Dutch and most other EU countries, to freeze out countries flouting democratic principles.

“There are very different positions,” Czech Prime Minister Andrej Babis told reporters. “The Netherlands insists that rule of law must be one of the conditionalities to provide funds.”