EU Council chief tables new proposal in recovery fund plan

Major disagreements remained on Sunday as EU leaders crunched numbers over dinner on the European Union's budget and recovery fund on the third consecutive day of negotiations.

Initially scheduled to meet on Friday and Saturday, the 27 leaders added an extra day to bridge the clefts between them, but EU diplomats remained uncertain in the evening whether they would succeed in doing so.

European Council President Charles Michel suggested to further reduce the part of grants in the European Union's recovery package, EU sources told.

Michel's new proposal foresees 400 billion euros in grants, down from 450 in his previous proposal and 500 in the initial package, EU sources say.

Finland with the frugal countries 

But the so-called frugal countries - Sweden, the Netherlands, Austria, Denmark and newest addition Finland - oppose the proposal and view 350 billion euros as their maximum for grants, an EU diplomat says.

These five countries have suggested paring back the overall size of a proposed EU recovery fund from 750 billion euros to 700 billion euros in a bid to break deadlock in leaders' talks, EU diplomats confirmed.

Under the suggestion, half this 700 billion euros would be paid out as grants, and half as loans, the sources confirm.

A previous suggestion by European Council president Charles Michel had foreseen 450 billion euros to be paid out in grants and 300 in loans.

But according to EU diplomats, this suggestion did not gain much ground with other EU countries. Italy, Spain, Germany and France saw 400 billion euros as the minimum amount of grants, the EU diplomat told.

Seven-year-budget

On the table still lies the original 750-billion-euro proposal to help countries deal with the economic havoc the coronavirus pandemic caused and a 1.074 trillion euro seven-year-budget for the EU.

While the heads of government were initially set to reconvene at 12 pm on Sunday, the political leaders only got to see each other in the big group in the evening after bilateral talks went on throughout the day.

The major issues hampering agreement so far include the overall size of the budget, how to supervise its expenditure, what balance of loans and grants the money should be paid out as, and how to embed a mechanism tying access to funds with compliance with rule of law standards.

Rule of law

Another big issue on the leaders' plates is the one of tying rule of law conditions to the budget, designed to indirectly target democratic backsliding in Poland and Hungary. Hungarian Prime Minister Viktor Orban refused to budge on his conviction to not accept any deal that included a rule of law mechanism.

He argued that such a mechanism, as suggested by some countries, especially the Netherlands, would require treaty amendments.

"So we have to clarify that if the deal is blocked, it's not because of me, but because of the Dutch guy, because he initiated something," he said.