Dutch, Hungarian opposition weighs on EU pandemic recovery plan

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WARSAW / BRUSSELS (Reuters) – Opposition from the Netherlands and the threat of a Hungarian veto have weighed on the chances of a deal on the eve of EU talks on a mass stimulus package to revive the savings hammered by the coronavirus.

FILE PHOTO: Flags of the European Union fly in front of the headquarters of the European Commission in Brussels, Belgium, June 25, 2020. REUTERS / Yves Herman / File Photo

The 27 EU national leaders will meet face to face in Brussels on Friday and Saturday for the first time since COVID-19 pushed the bloc into a sweeping lockdown, along with its deepest recession, predicted at 8.7 % this year for members of the euro zone.

They will haggle over their proposed 2021-2027 budget of just over $ 1 trillion and a linked stimulus fund of $ 750 billion in grants and loans designed to help rebuild southern states like Italy. where the virus has claimed the most lives.

“Does 1,750 billion euros seem like a lot of money to you? Believe me, this is the case for European heads… But it is worth it, ”said meeting chairman Charles Michel on Thursday, stressing that the EU’s economic response to the pandemic would exceed that of the European Union. United States or China.

The pandemic has presented an existential challenge for the EU, with some calling for decisive action to prove that the bloc remains a relevant international power and a bulwark against nationalism and protectionism, inside and out.

But a senior EU official involved in the preparations for the talks stressed that “serious differences” remained and that an agreement was not reached.

“We are not there yet,” said the official, citing the overall size of the package, the ratio between grants and loans, the governance of the stimulus package, the conditions of the rule of law on the money and climate goals as divisive opinions.

While heavily indebted southern countries call for solidarity, the Netherlands is leading the camp of rich but frugal net contributors to the bloc’s common coffers, weary of funding their peers whom they see as fiscal reckless.

Along with Austria, Denmark, Sweden and Finland, Dutch Prime Minister Mark Rutte wants to limit funding, favor loans over grants, demand economic reforms as conditions for accessing money and wants to keep his budget rebate of the EU.

Rutte also wants more powers for the Dutch parliament by deciding to allow the bloc’s executive European Commission to borrow on the market to finance the € 750 billion fund, and a unanimous vote of EU states to accept the requests for help.

“Let’s try to solve it, and let’s not talk about 26 to 1,” said a senior EU diplomat.

CARD CASTLE

Hungary, where Prime Minister Viktor Orban has tightened the noose around academics, media and civil society, has threatened to veto a fund-freezing mechanism for states that undermine the rule of law , a key point for rich net payers like The Hague.

All eyes are also on German Chancellor Angela Merkel, who heads the EU’s largest economy. As she turns 66 on Friday, she has bet everything on reaching a deal.

If anything, Michel is likely to offer to cut the package to try and make sure it gets approved and Denmark has launched a budget of 1.05 trillion euros, up from the 1,074 trillion discussed until here.

Southerners are seen to be ready to accept modest cuts in the name of a comprehensive deal, although a possible cut in humanitarian aid has already raised some concerns.

COVID-19 has hit Europe as it still struggles to overcome the echoes of some of its past crises from the financial crisis a decade ago, to an unchecked increase in immigration in the mid-2010s and to ‘a prolonged Brexit.

Quarrels between member states over money, medical supplies and border closures have exposed dissent in the world’s largest trading bloc. Following deadly conflicts, however, he managed to agree on half a trillion euros in immediate economic aid.

As EU leaders engage in obscure bargaining over their long-term economic recovery, a second senior diplomat in Brussels said the complex package was like “a house of cards that will collapse if you do. remove a “.

“Many crucial elements of the package have yet to be agreed,” the diplomat said. “We cannot afford months and months of negotiations … This is the critical moment.”

Reporting by Gabriela Baczynska, Francesco Guarascio, Robin Emmott, Elizabeth Pinneau, John Chalmers, Andreas Rinke, written by Gabriela Baczynska, editing by Nick Macfie

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