The main stumbling block will be overcoming the reluctance of mainly the Netherlands, Austria, Sweden and Denmark

Decisive EU summit on reconstruction fund kicks off

REUTERS/FRANCOIS LENOIR - European Council meeting, Brussels, Belgium, 17 July 2020

European Union leaders began Friday's summit to try to agree on the EU budget for 2021-2027 and the rescue fund to boost the economy after the pandemic, with widely divided positions and strong conditions from the Netherlands and other so-called "frugal" countries. The EU heads of state and government will meet a priori on Friday and Saturday to try to close a recovery plan of up to 1.85 trillion euros that would come from the EU budget for 2021-2027 and a recovery fund financed by the joint debt issue.

The main stumbling block will be overcoming the reluctance of mainly the Netherlands, Austria, Sweden and Denmark. Dutch Prime Minister Mark Rutte said on his arrival at the summit that he was not "optimistic" about the possibility of reaching an agreement this weekend and called for "concrete reforms" as a condition for negotiating and supporting a post-pandemic reconstruction fund based on "subsidies".

Another leader of the "frugals", Austrian Chancellor Sebastian Kurz, was "very optimistic" about the prospects of an agreement, but "if not at this summit, then at the next one", pointing to a possible new meeting in two weeks, as he does not see the remaining differences as "insurmountable". On the reconstruction fund, Kurz said that Austria wants to "resize" the volume (currently 750 billion euros) especially in the area of non-refundable direct transfers, which are proposed at the moment with 500 billion euros. On the EU budget for the period 2021-2027, Kurz stressed the importance of discounts (cheques). According to the latest proposal by the President of the European Council, Charles Michel, Austria would receive a discount on its Community contributions of 237 million euros.

El presidente del Consejo Europeo, Charles Michel, saluda a la canciller alemana Angela Merkel en Bruselas, el 17 de julio de 2020

For his part the President of the Spanish government Pedro Sanchez warned that all European leaders are "obliged" to reach an agreement. Madrid wants it to be distributed mainly in the form of direct subsidies and does not want harsh conditions or vetoes from other member states.

French President Emmanuel Macron stressed that "the European project is at stake for many" and stressed that the crisis caused by the coronavirus "requires much more solidarity and ambition". "We came to the negotiations with a lot of momentum, but I must say that the differences are still very big and I cannot predict whether we will have a result this time," stressed German Chancellor Angela Merkel.

La canciller de Alemania, Angela Merkel y el presidente de Francia, Emmanuel Macron, en Bruselas, el 17 de julio de 2020

Czech Prime Minister Andrej Babis, representing one of the countries in the so-called Visegrad Group (along with his Polish, Slovak and Hungarian counterparts), regretted the criterion of the 2015-2019 employment level to distribute the fund as "having nothing to do with the pandemic" and called for it to be based on GDP. He also called for investment in "traditional industries" such as the car industry to be taken into account.

European Commission President Ursula von der Leyen called on the EU to seize the opportunity presented by the fund and to strengthen its plans for a green pact and digitalisation.

"It won't be easy, but our chances are growing," Hungary's ultra-nationalist Prime Minister Viktor Orbán said in a video posted on his Facebook page. Hungary wants to ensure that the payment of European funds from the 2021-2027 EU budget is not made conditional on respect for the rule of law.

For his part, Estonian Prime Minister Jüri Ratas called for "fairer direct payments in agriculture" and better transport connections for the Baltic States.