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EU leaders reach deal on coronavirus recovery package

World Tuesday 21/July/2020 17:34 PM
By: Times News Service
EU leaders reach deal on coronavirus recovery package

EU leaders agreed early Tuesday to an unprecedented €1.8 trillion ($2 trillion) aid and budget deal aimed at helping hard-hit bloc members recover from the economic fallout of the novel coronavirus pandemic.

The package includes a €750-billion fund to be sent as loans and grants, as well as a seven-year €1 trillion EU budget.

European Council President Charles Michel tweeted a brief message minutes after leaders adopted the plan: "Deal!"

"We did it. Europe is strong, Europe is united. This is a good deal, this is a strong deal and most importantly this is the right deal for Europe right now," Michel said. "I believe this agreement will be seen as a pivotal moment for Europe's journey."

The breakthrough comes after more than four days of wrangling, with talks often stretching into the early hours.

European Commission President Ursula von der Leyen thanked German Chancellor Angela Merkel for "steering" negotiations towards a European solution.

"Europe as a whole has now a big chance to come out stronger from the crisis. Today we have taken a historic step that we can all be proud of," said von der Leyen. "Tonight is a big step toward recovery."

Merkel described the agreement as an "important signal," and said she was "very relieved" that EU leaders were able to cooperate. It was good "that we pulled ourselves together in the end," she said.

That sentiment was echoed by French President Emmanuel Macron, who called it a "historic day for Europe."

"There is no such thing as a perfect world, but we have made progress," said Macron.

However, the European Parliament will still have to agree to the package.

A historic shift

DW correspondent Marina Strauss said the deal had taken so long because the positions of each side had been so far apart, but that the result was monumental.

"We have something historic to tell here because it's the first time in history that the EU takes up mutualized debt. It used to be a taboo up until now."

Jannis Emmanouilidis, from the European Policy Centre, said the deal had been hard-fought but important for the bloc's credibility.

"You needed to have an agreement on the recovery fund in order to showcase that you are collectively able to deal with all the multiple consequences of this crisis. Just imagine for a minute if we had not had this deal. This would have made the situation much worse. It would have created a lot of uncertainty and we know that uncertainty in times of crisis is poison for economic recovery."

Terms of the package

The package includes the biggest-ever joint borrowing by the 27 members of the bloc, and an initiative to send tens of billions of euros to countries hardest hit by the virus — most notably heavily indebted Spain and Italy, which had both called for major financial assistance from the EU.

Spanish Prime Minister Pedro Sanchez hailed "a Marshall Plan for Europe," that would see €140 billion sent to Spain over the next six years.

Italian Prime Minister Giuseppe Conte said that Italy was "satisfied" with the results of the plan, which would see 28% of the total funds, or €209 billion directed towards Italy. That figure includes €81 billion in grants and €127 billion in loans.

"We are satisfied with the approval of an ambitious relaunch plan, which will allow us to confront the crisis with strength and effectiveness," said Conte.

Greece will also receive €72 billion under the plan, in a move that Prime Minister Kyriakos Mitsotakis caled a "national success."

He said the funds would be disbursed carefully in Greece with meticulous planning.

"We have no intention of spreading the money around with the carefree attitude of the nouveau-riche," Mitsotakis said. "We have no intention of wasting this significant European capital now at our disposal. We will invest it to the benefit of all Greeks."

To meet the concerns fo the so-called frugal four — the Netherlands, Austria, Denmark and Sweden — which see Italy and Spain as being too lax with public spending, the assistance includes a number of conditions and major strings attached. The southern countries had previously called for conditionless financial assistance, without additional obligations.

The frugals also won heavy rebates on their EU contributions. The deal additionally allows for the distribution of €360 billion in loans, repayable by the receiving member state, and €390 billion in the form of grants to pandemic-hit countries — a lower figure than the initial €500-billion grant proposal made by France and Germany.

Days of haggling

Negotiations were bogged down by major disagreements concerning grants, loans and whether economic and financial reforms should dictate access to the funds. The 27 member states had been largely divided into two camps. Germany and France spearheaded efforts to collectivize debt in order to raise much-needed funds for countries such as Italy and Spain, which bore the brunt of the pandemic in the EU.

In the other camp, the frugal four, together with Finland had called for a strings-attached approach that would have made access to funds conditional on tough market reforms.

That camp also support stringent measures that would have blocked funding for countries that did not adhere to EU rules on the rule of law. That could have jeopardized funding for countries such as Hungary and Poland who are the target of a European Commission investigation over rule of law violations.

EU nations have struggled to coordinate a response to the coronavirus pandemic, which has claimed some 135,000 lives on the continent. The bloc's economy is projected to contract by 8.3% this year.