EU leaders strike deal on historic coronavirus stimulus package

The 27 leaders of the European Union struck a deal Tuesday on a multi-billion-euro post-pandemic economic recovery package after four draining days of negotiations at a Brussels summit.

Comprised of a 750-billion-euro stimulus spending pot and a regular seven-year EU budget worth 1.074 trillion euros, starting from 2021, it is the largest such combined package ever agreed in the EU.

It will also see the European Commission raise debt on a large scale on behalf of member states for the first time.

"Extraordinary events, and this is the pandemic that has reached us all, also require extraordinary new methods. It took an extraordinary amount of time," German Chancellor Angela Merkel said.

"As exhausted as we all are here, we know that this is a historic moment for Europe," European Commission President Ursula von der Leyen said, calling it a "rollercoaster of feelings."

After days of seemingly fruitless talks, premiers hammered out two key compromises in the final hours: One on the composition of the recovery plan - to be doled out as 390 billion euros in grants and 360 billion euros in loans - and another on the inclusion of a mechanism linking access to funds with rule of law compliance.

EU budget negotiations are always fraught affairs, as each country jostles to push for a spending plan that will play best with their domestic audience.

But this time, the coronavirus pandemic raised the stakes by sending the EU hurtling towards what looks set to be the worst recession in its history and a patchy recovery that will worsen the already considerable divergences in employment rates and public debt within the bloc.

Marathon summit

The marathon EU summit was just short of breaking the record for the longest ever held.

The negotiations were defined largely by disagreement between a group known as the frugal four - Austria, the Netherlands, Sweden and Denmark - and states pushing for a higher proportion of grants.

Virus-stricken Italy, Spain and France need the cash fast, but the 'frugals' opposed paying funds out as grants from the offset, and insisted that the spending drive macro-economic reforms and be placed under close oversight.

Germany threw its weight behind an ambitious package, with Merkel working in tandem with French President Emmanuel Macron.

Merkel, a veteran of long-drawn-out summits in Brussels, said she was "very relieved" a deal had been made, and described it as a "good signal."

Standing beside her at a joint press conference, Macron described the conclusions as "truly historic."

The 390 billion euros of grants foreseen is a downward revision from the originally tabled 500 billion euros.

Italy, one of the hardest-hit countries by the coronavirus pandemic in Europe, said "selfishness and vetoes were threatening the future of Europe."

"But Italy was resolute: we will get 209 bn from the NextGenerationEU [fund]," Europe Minister Enzo Amendola, who attended the summit with premier Giuseppe Conte, tweeted.

In an apparent concession to the frugal states, some are to receive larger budgetary rebates - controversial reductions in contributions handed to those who pay more into the shared pot than they get out.

Dutch Prime Minister satisfied

Dutch Prime Minister Mark Rutte - one of the staunchest critics of previous proposals - was himself satisfied with the result, but was hesitant to call it a historic moment like some of his fellow leaders.

"It is important that Europe is a significant player in this world, and for this it's also necessary that Europe is stable," he said. "So am happy that this was successful."

Rutte had been among those insisting on EU oversight to make sure that countries accessing stimulus funds were spending it appropriately.

Under the deal, should there be concern about a country not spending the money as intended, the European Council could address the matter through an "emergeny brake" mechanism, with which the distribution of funds could be stopped.

Another major hurdle was cleared when Poland and Hungary signed off on the inclusion of a mechanism linking the payment of EU funds to compliance with the rule of law.

Both Budapest and Warsaw are facing a Article 7 procedure over rule of law concerns like press freedom or curtails to judiciary independence. It can ultimately see a member state stripped of its EU voting rights - a move that is unlikely because it requires unanimous support.

For Polish Prime Minister Mateusz Morawiecki, the end result was a success for his country. There would be "no direct link between EU funds and the rule of law," he said.

Rutte interpreted the result differently, noting the agreement stated that the EU commission would work on a system by which it would be able to propose measures if a country was in clear breach of the rule of law.

The budget and recovery package still have to be approved by the European Parliament, with Merkel predicting "very difficult discussions."