EU hopes to heal rifts in debate on post-virus plan

Brussels – Europe’s scattergun approach to the coronavirus epidemic has called into question the EU’s ability to rise to the challenge, but Brussels hopes its economic recovery plan will mark a turning point.

The huge 750-billion-euro package, unveiled on Wednesday by European Commission president Ursula von der Leyen, will not emerge unscathed from the coming months of debate between the 27 EU capitals.

But it was not rejected out of hand by the Frugal Four — conservative spenders Austria, Denmark, the Netherlands and Sweden — and it has cautious French and German backing, which leaves it room to breathe.

And, if it does serve as the basis for an economic recovery after the ravages of the epidemic, some in Brussels dare hope that it will prove a breakthrough moment for further European integration.

This comes despite fears raised in the first weeks of the virus’ rapid spread across the open borders and free economies of the continent — when capitals imposed piecemeal measures with little EU coordination.

The first test of Von der Leyen’s plan came at a meeting of EU ambassadors where, in the words of one source familiar with the proceedings, it was “broadly well-received” by member states.

“No-one said ‘no way’,” one European official said. “On that level alone it’s a success for the Commission, which finally brought out something that didn’t self-destruct two minutes later.”

A diplomat acknowledged that the frugals — who oppose transfers of funds to the more heavily indebted countries of the south like Spain and Italy — “had lots of questions”.

“But none of them said the plan couldn’t be a basis of negotiation,” the source said.

The next big challenge will fall on June 19, when the 27 EU leaders will meet — probably by videoconference, given the ongoing epidemic — to hold their planned European Council summit.

“They’ll just discuss it. The need an opportunity to argue and get cross for a bit, before coming to a deal,” the diplomat said.

At a videoconference, without side meetings for private horse trading between member states, there is unlikely to be a deal. But Brussels sources expect a second — face-to-face — summit in July.

If that leads to a deal, then member state parliaments might be able to approve the EU budget and the relaunch plan in time for it to go into action by the start of next year.

If not — as many expect, including the German government, which will hold the EU presidency for the second half of 2020 — then the wrangling could go on all through summer.

And that will again underline the capitals’ diverging priorities.

 

– A real summit at last? –

 

The Frugal Four want to avoid the theoretically time-limited “Next Generation EU” revival plan forming the basis for a future “transfer union” shifting funds from the rich north to poorer south.

In the eastern half of the union, capitals like Warsaw, Budapest and Prague want to protect the “cohesion funds” and agricultural subsidies that support their smaller economies.

And in the Mediterranean, where the financial crisis has left countries like Italy and Spain in deep debt, capitals want support from the EU to come mainly as grants rather than new loans.

The frugals are sceptical about that, and have already ruled out the issue of “coronabonds” to produce shared debt, but some in Brussels think their worries can be assuaged.

“The frugals need to bring some trophies to their parliaments,” the European official said, suggesting that rebates on EU dues or tough conditions applying to support grants might appease them.

“We’re a long way from April’s fight over coronabonds. We’ve made a real step forward,” the source argued.

“We’ll insist on the fact that it’s no longer a North-South fight, but a fight to get economic activity back,” Spain’s foreign minister Arancha Gonzalez told radio station RNE.

If so, it will be a relief to many in Brussels.

 

– German stars align? –

 

As the coronavirus spread to Europe earlier this year and caught hold around the EU — most intensely in Spain and Italy — EU members adopted clashing strategies to deal with it.

France and Germany at first prevented exports of protective gear to their neighbours, states imposed border controls and caused traffic jams while national lockdowns varied in timing and severity.

The row over coronabonds revived the simmering north-south rift, and the Commission came under fire for failing to coordinate.

Now though, a shift in Germany may help bridge the divide. Chancellor Angele Merkel has worked with France’s President Emmanuel Macron to seek compromise — and Von der Leyen is a fellow German.

“That helps,” the European source said. “German stars are coming into alignment.”

By Clément Zampa and Dave Clark