EU leaders emerged from a marathon four-day and four-night summit Tuesday to celebrate what they boasted was a historic rescue plan for economies left shattered by the coronavirus epidemic.
The 750-billion-euro ($858 billion) deal was sealed after intense negotiation that saw a threat of a French walkout and a Hungarian veto — and fierce opposition from the Netherlands and Austria to too generous a package.
“These were, of course, difficult negotiations in very difficult times for all Europeans,” EU Council Chief Charles Michel, whose job was to guide the tortuous talks over more than 90 hours.
We did it! We have reached a deal on the recovery package and the European budget for 2021-2027.
This is a strong deal. And most importantly, the right deal for Europe right now. #EUCO pic.twitter.com/c6fQ5ppwpf
— Charles Michel (@eucopresident) July 21, 2020
The package was made possible by the crucial backing of Germany and France and includes the biggest ever joint borrowing by the 27 members of the bloc, something that had been resisted by Berlin and the so-called “frugal” northern states for generations.
The deal is a special victory for French President Emmanuel Macron who came to office in 2017 committed to strengthen the European Union but had struggled to deliver against member states with less ambition for the seven-decade-old EU project.
“This is a historic change for Europe,” Macron told reporters in a joint press conference with German Chancellor Angela Merkel, who said Europe had shown itself equal to “The greatest crisis in the history of the European Union.”
But there was criticism from some that the compromises made to get the deal were too great, with teenage climate campaigner Greta Thunberg tweeting her disappointment.
“As expected the #EUCO resulted in some nice words, some vague distant incomplete climate targets nearly impossible to track and a complete denial of the climate emergency,” she tweeted.
The package will send tens of billions of euros to countries hardest hit by the virus, most notably heavily indebted Spain and Italy that had lobbied hard for a major gesture from their EU partners.
Their call for solidarity was met with the fierce opposition of the “Frugals,” a group of northern nations led by the Netherlands, who believed strongly that the stimulus package was unnecessary.
Spanish Prime Minister Pedro Sanchez hailed “a Marshall Plan for Europe,” which would boost Spain’s suffering economy by 140 billion euros over the next six years.
But Dutch Prime Minister Mark Rutte denied that the advent of joint borrowing for the rescue heralded the start of what he had warned of before the talks — a “transfer union” with a permanent north-south transfer of wealth. “This is a one-off, there is a clear necessity for this given the excessive situation,” he told reporters.
The frugals were also deeply apprehensive of sending money to southern countries that they see as too lax with public spending.
To meet their concerns, payouts from the package will come with important strings attached — a hard pill to swallow for Rome and Madrid who deeply resisted anything resembling the harsh bailouts imposed on Greece, Portugal, or Ireland during the debt crisis.
The frugals were also enticed with heavy rebates on their EU contributions.
‘Rule of Law’
The recovery package will complement the unprecedented monetary stimulus at the European Central Bank, which has largely succeeded in reassuring the financial markets despite a catastrophic recession in Europe.
ECB chief Christine Lagarde welcomed the accord, saying it “shows that when most needed, the EU steps up and comes together to help the people of Europe.”
Overall, the deal will dole out 390 billion in the form of grants to pandemic-hit countries.
That was lower than an original 500 billion euro proposal made by France and Germany. Another 360 billion euros was to be disbursed in loans, repayable by the member state.
Spending will be closely controlled and must be devoted to policies seen as compatible with European priorities, including politically difficult economic reforms as well as the environment.
Today is a big step forward towards recovery. #EUCO pic.twitter.com/jIDVDlqbbj
— Ursula von der Leyen (@vonderleyen) July 21, 2020
The European Commission, the EU’s executive arm, will be in charge of distributing the funds, with the 27 member states able to turn down a spending plan if a weighted majority of them decide to intervene.
The rescue package was agreed along with the EU’s long-term budget, bringing the agreed spending to 1.8 trillion euros through 2027.
The plan was nearly upended by Hungary and Poland due to a demand that EU payouts be tied to the “Rule of Law,” Brussels jargon for upholding laws on freedom of speech and an independent judiciary.
Budapest and Warsaw are under fire for offending EU norms, but a proposal to tie the EU budget to those concerns was watered down to the satisfaction of Hungarian Prime Minister Viktor Orbán and his Polish counterpart.
The package now requires more technical negotiations among member states as well as ratification by the European Parliament, which will begin its scrutiny of the deal on Thursday.