EU Leaders Deadlocked on Recovery Fund as Talks Enter Fourth Day

European Union leaders failed to agree on a plan for a 750 billion-euro ($857 billion) stimulus package after negotiating through the night and will return on Monday afternoon in an effort to finish the job.

After hours of side meetings following dinner in Brussels, European Council President Charles Michel, who is running the summit, gathered the 27 leaders together just before 6 a.m. and proposed that the fund should include 390 billion euros of grants, with the balance made up of low-interest loans, EU officials said.

A French official said that their delegation now see a path to a deal. Talks will recommence at 4 p.m.

Michel’s initial proposal had included 500 billion euros of grants, while a group of four budget hardliners led by Mark Rutte of the Netherlands wanted the plan to be all loans. By dinner on Sunday, Rutte and his Austrian counterpart Sebastian Kurz had agreed to 350 billion euros of grants while Germany and France, backed by the majority, were demanding at least 400 billion euros.

“Tough negotiations just came to an end,” Kurz said in a tweet. “We can be very happy with today’s result. It will continue this afternoon.”

With investors already pricing in an agreement after a series of bold announcements in recent weeks, leaders are under intense pressure to bridge their differences. At times the discussions grew heated, with several officials saying the whole negotiation was on the brink of collapse during Sunday’s dinner session as familiar fault lines emerged between the richer northern nations and the southern countries worst affected by the coronavirus.

Rutte and his allies are trying to water down the handouts that the highly indebted southern countries sees as critical for shoring up their finances after the Covid-19 lockdown dragged them into the deepest recession in living memory.

Yet for all the frustration facing Rutte from the other side of the table, his opponents can’t afford to push him too far. The Dutch prime minister has just 75 deputies in his country’s 150-seat parliament so he’ll need opposition support to ratify any deal he strikes with the bloc.

The overall package under discussion is worth about 1.8 trillion euros. More than 1 trillion euros will be distributed in grants from the bloc’s regular budget with another 750 billion euros lined up for the emergency stimulus package. Germany contributes the lion’s share to the bloc’s budget.

Almost a third of this total will have to be committed to projects transforming the EU into a low-carbon economy. Expenditure that’s not consistent with the Paris Agreement on climate change won’t be approved, thus making the potential deal the biggest green stimulus the world has ever seen.

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