EU chief makes bid to break recovery fund deadlock

BRUSSELS (AFP) – European Union (EU) Chief Charles Michel unveiled on Friday his latest proposal for a EUR750 billion pandemic recovery fund in the hope of winning over more frugal member states.

Europe has been thrust into its biggest recession in history and Michel, who coordinates among EU government leaders, is hoping to win a green light for the package at a summit next week.

This will be the first in-person summit since the pandemic engulfed Europe in March and leaders will also seek approval of the bloc’s long-term budget.

But Michel’s proposals ran into immediate trouble as Finland, Sweden, Hungary and the Netherlands all voiced concerns.

As a sweetener for the so-called “Frugal Four” – the Netherlands, Sweden, Denmark and Austria – Michel proposed to revise the EU’s seven-year budget down to EUR1.074 trillion (USD1.2 trillion), EUR13 billion less than an earlier proposal.

Michel also said countries with long-held rebates on their European contributions would continue to get them, despite a big push to do away with these discounts.

Rebates are an EU custom made famous by former British Prime Minister Margaret Thatcher who four decades ago called for Britain to get “our money back”.

Michel also awarded more power to EU member states on how the recovery fund would be distributed, giving EU capitals a greater say over the spending plans of their neighbours. Michel did not cede ground on the main point of contention: whether aid should be handed out in the form of grants or – as the “frugals” demand – loans.

This drew a frosty response from Finnish Prime Minister Sanna Marin.

“Some right steps… but much work needs to be done on the recovery package,” she wrote on Twitter. “We need a lower overall level and better balance of grants and loans.”

And there was more scepticism from Swedish EU minister Hans Dahlgren, who said that while the level of the long-term budget was moving in the right direction, Stockholm would have liked to see it go down further, according to news agency TT.

Austrian Chancellor Sebastian Kurz warned that EU countries were “still very far apart” on the question of grants, saying the time left before next week’s summit must be used for intense talks.

Kurz on Thursday suggested he could back the package if aid was tied to certain conditions, such as climate protection, willingness to reform and rule of law.

But Hungarian Prime Minister Viktor Orban threatened to veto the package, and the EU’s long-term budget, if payments were linked to Budapest’s ongoing row with Brussels over rule of law concerns.

In The Hague, Dutch Prime Minister Mark Rutte demanded the EU “nail down” budget reforms to break the deadlock.