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EU leaders 'far apart' on trillion-euro COVID-19 recovery package deal

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French President Emmanuel Macron makes a statement as he arrives for an EU summit at the European Council building in Brussels, Friday, July 17, 2020.
French President Emmanuel Macron makes a statement as he arrives for an EU summit at the European Council building in Brussels, Friday, July 17, 2020.   -   Copyright  AP Photo/Francisco Seco, Pool
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European Union leaders gathered in Brussels on Friday for their first face-to-face summit in months to thrash out a post-coronavirus economic recovery package.

The good news is that the leaders of the 27 member states agree that a common response is needed. But the bad news is that they disagree on how the money should be handed out.

The Commission has proposed a recovery fund totalling €750 billion and has backed a joint Franco-German motion that most of the money — €500 billion — be dished out as grants to the member states most economically impacted by the COVID-19 pandemic. There is also the trillion-euro EU budget, also known as the Multi-annual Financial Framework (MFF) at stake.

The plan would be financed by a common debt — a first for the bloc.

But no sooner was the plan announced than cracks in the bloc's unity once again started to appear.

Southern member states — Italy and Spain in particular — are all for it but they are opposed by the so-called "Frugal Four" — Austria, Denmark, Sweden, and the Netherlands — which want the amount to be handout out as grants and are wary of pooling debt with less solvent countries.

Dutch premier Mark Rutte said that he could 'understand' that southern countries are asking for help, but added, "I think it is only reasonable for us to ask for a clear commitment to reforms."

While the Austrian Chancellor tweeted that there had been 'positive steps' but their positions on the long-term EU budget 'remain far apart'.

Another issue which is proving divisive, linking EU funding to the respect of rule of law. Hungary's Viktor Orban has threatened to veto over this.

Speaking to Euronews correspondent Shona Murray, the Irish prime minister Michael Martin said that Orban's opposition to the rule of law conditionality was a 'significant challenge', adding that Europe is about values, freedom of speech, free media.

Unanimity is needed for the package to be approved so leaders have been holding rounds of talks ahead of the crunch summit.

Angela Merkel, who is celebrating her 66th birthday on Friday, met with Guiseppe Conte and Pedro Sanchez earlier this week, respectively her Italian and Spanish counterparts.

Merkel, who assumed the bloc's six-month rotating presidency earlier this month, told the EU parliament that "Germany is prepared to show extraordinary solidarity".

French President Emmanuel Macron meanwhile met with Conte and Portuguese leader Antonio Costa — who also celebrated his birthday at the summit — on Thursday. Earlier this month, he visited the Netherlands' Mark Rutte.

Arriving at the summit, Macron said he that the meeting was "a moment of truth for the ambition of Europe." He added that the health, economic and social crisis across the bloc requires "much more solidarity and ambition."

EU leaders must also find common ground on the bloc's next seven-year budget — known as the Multiannual Financial Framework (MFF), which EU Council leader Charles Michel wants to amount to just under €1.1 trillion.

While EU diplomatic sources were divided over the chances of clinching a deal this weekend, the ball is now in the court of European Council president Charles Michel who brokers the talks.

"I know it will be very difficult," he said arriving at the summit, "because it's not only about money, it's about people about European future, about our unity. And even if it's difficult, I'm convinced with political courage it's possible to reach a deal."

According to one EU diplomat leaders have been 'locked in intense discussions since 10.25 this morning. It's too soon to say what direction the negotiations are taking'.

The summit is 'on a break' until dinner at 20:00 CET. There will be 'consultations in smaller formats' with European Council President Charles Michel.

Such smaller format talks are made in a bid to break the gridlock.

EU leaders sat down for dinner just after 21:00 CET.

Talks broke off for the night and resume again at 11.00 CET.

As the negotiating room is prepped for another day of talks, weighing on the minds of leaders is the economy in free fall, rising infections across Europe and the spectre of social unrest in the autumn as the coronavirus fallout begins to bite.