European Union leaders met face-to-face Friday in Brussels for the first time since the coronavirus pandemic emerged on the continent five months ago, but they didn’t see eye to eye, and most seasoned observers don’t think they will, as they ended their second day of talks, with plans to resume Sunday.
The need to maintain physical distance meant there could be no public back-slapping, no shaking of hands, no friendly hugs as the leaders wrangled — and face masks were de rigueur at the largest gathering of heads of government and state since the start of the global pandemic.
The absence of the normal bonhomie at EU summits further underscored the cracks in a 27-member alliance that still has not managed to bridge deep rifts triggered by the 2008 financial crash, the subsequent migration crisis, and ongoing disputes over rule-of-law standards that have seen Brussels clash repeatedly over the judicial reforms being pursued by populist governments in Poland and Hungary.
Now the pandemic has widened some of those rifts and has given rise to new ones, as member states squabble over how best to recover from a virus that’s roiled the continent, left tens of thousands of dead, wrecked economies and left millions fearing for their livelihoods. The EU economy is projected to contract by 8.3 percent this year.
On Friday agreement remained elusive on a proposed €1 trillion ($1.1 million) seven-year budget for the EU and on an ambitious €750 billion ($826.5 billion) economic rescue plan for the hardest-hit countries. The recovery package is aimed at managing the biggest economic shock the bloc has ever had to confront in its history. In the run-up to the summit, negotiations over the plan, which were conducted for weeks via bilateral and group video conferences, became increasingly fraught.
Earlier this week, German Chancellor Angela Merkel expressed her doubts about a deal being struck at the summit, predicting negotiations would have to continue for weeks after the summiteers had packed their bags and headed back to their capitals.
And as Saturday dragged on, her gloomy forecast seemed likely as negotiations faltered, undermined the complex crisscrossing of rival regional and national economic and political priorities. That is complicating the European Commission’s bid, backed by Germany and France, to secure a mandate to borrow billions of euros on capital markets for the first time and to mutualize the debt. This is so all member states share responsibility to pay back the money funded mainly by future EU taxes, in addition to the customs duties and a small share of national sales taxes Brussels already receives.
At its heart, the division this time pits a group of four small north European countries, nicknamed the frugal four, against the powerhouses of Germany and France, whose leaders, Angela Merkel and Emmanuel Macron, along with the hard-hit countries of southern Europe, are pushing for a recovery plan that would see states, mainly the southerners but also France, bailed out with grants drawn from the proposed $750 billion recovery fund.
For weeks The Netherlands, Austria, Denmark and Sweden have argued that the fund is too large and the hard-hit countries should only receive repayable loans rather than grants. The Dutch prime minister, Mark Rutte, also wants a veto on how the money is spent by the recipients, and all four states blocking a deal want structural reform conditions placed on the cash received and for its expenditure to be heavily monitored and policed by the finance ministers of the bloc.
“I’m doing this for the whole of Europe, because it is also in the interest of Spain and Italy that they emerge from this crisis with strength,” Rutte told reporters Saturday. European Council President Charles Michel, who is chairing the summit, circulated amended proposals overnight Friday trying to squeeze out a compromise, especially over the conditions the frugal four want attached to any financial assistance.
A Dutch diplomat told Reuters: “The proposal on governance as put forward by Michel is a serious step in the right direction.” But he cautioned, “in the end, this is a package and there are many more issues to solve.” His boss, Dutch Prime Minister Mark Rutte repeatedly has told reporters that he believes there is a less than 50 percent chance of reaching an agreement on the recovery fund by Sunday.
For France, Italy, Spain, Portugal and Greece, the likely main recipients, the frugal four’s demands amount to an incursion into their own national sovereign rights. Their diplomats warn that the summit is emphasizing the lack of European solidarity. “It is getting harder to believe the EU will ever live up to the motto of the Three Musketeers — all for one and one for all,” an Italian diplomat, and a member his country’s negotiating team at Brussels, told VOA.
Hungary, backed by its populist nationalist ally Poland, has been threatening to veto the whole recovery package because of a proposed condition that would see countries perceived as flouting democratic principles blocked from any bail-out cash. Poland and Hungary are in the doghouse in Brussels because of judicial reforms they are enacting that the EC and some other member states view as eroding the independence of judges.
Hungary and Poland and some other central European states also fear that they will be short-changed and that Italy, France and Spain, the three European countries hardest hit by the virus, will receive the lion’s share of the grant money. They note all three have bigger economies than they do.
Some analysts — as well as some national leaders — insist a deal is essential for the bloc’s long-term survival. A view seemingly shared by Michel, who told the national leaders Friday the substance of the debate wasn’t just about money but of the future and unity of Europe.
Ill-natured squabbling leading up to the summit has prompted warnings from Italian Prime Minister Giuseppe Conte that the EU project itself could be placed in jeopardy unless the richer northern states are generous in helping those in the south. His country is seeing a marked change in public attitudes toward the EU with many Italians expressing anger at the lack of support they received from their neighbors as the pandemic took its toll of Italians in the north of the country.
Far from bringing Europe together in solidarity, the pandemic and its economic impact risk deepening fissures in a bloc already split over foreign, defense and migration policies and states’ rights. Economic inequality between member states also is likely to increase — whether the recovery package is agreed upon or not.
Richer states have been doling out huge amounts of state aid and subsidies to support their pandemic-struck businesses, giving them an even greater competitive edge over rivals in poorer countries, who can’t match the subsidies. That will aggravate, analysts say, the endemic imbalance within the eurozone between creditor countries in the north and debtor countries in the south.
Additionally, an uneven economic recovery across the bloc risks fueling populist anger and anti-EU sentiment in the countries that lose out. The recovery package may help to blunt that, but an overly generous bail-out risks triggering a backlash in northern states, with taxpayers in the frugal four countries and Germany questioning why their money is heading south.