“Frugal Four” Block Deal On Coronavirus Rescue Package Over Grants To Worst-Hit Countries

The abrupt EU virtual summit held this week to try to break an impasse on a deal to finance the EU’s coronavirus rescue package before the continent slides into what many fear will be a punishing recession – perhaps even brutal enough to finally break up the eurozone – has ended in failure, with the “frugal four” – as they’re called in the European press – having garnered enough support to block the EU recovery plan, which must be approved by the entire EU27.

Yesterday, German Chancellor Angela Merkel ruled out the possibility of a deal being stuck during the hastily scheduled summit. With this in mind, she urged her colleagues again on Friday to try and come up with a deal before the summer break, acknowledging that the starting position isn’t an easy one.

“The pandemic shows us how vulnerable Europe is,” she told MPs…”Therefore I want to stress to you that cohesion and solidarity in Europe were never as important as they are today,” according to comments  shared with the press Friday morning.

Another anonymous EU official told another reporter that if a planned July summit can’t be held in person, an agreement likely wouldn’t arrive until the fall, when the worst hit countries like Spain and Italy may already be in the throes of a serious financial crisis as blown out budget deficits bump up against EU budgetary rules.

On Friday, EU Commission President Ursula von der Leyen, Michel Barnier, the chief Brexit negotiator, and the president of Croatia, Andrej Plenković, held a joint press briefing to discuss the outcome of the snap summit.

During the briefing, journalists from mostly European media outlets peppered the unelected bureaucrats with questions about the nature of the impasse, what, if anything, had been accomplished during the brief summit, and why the Commission believes a deal before the summer break is still possible.

For those who aren’t familiar with Brussels, the city essentially shuts down for a month beginning Aug. 1.

While Angela Merkel joined with French President Emmanuel Macron to back the compromise plan at the outset of the meeting, a group of northern European nations that once mostly relied on Germany to champion their interests in Brussels has turned against Berlin, and instead it has dug in its heels and refused to support any kind of compromise.

On Friday, Dutch PM Mark Rutte, known as the leader of the so-called “frugal four”, told reporters that the chances of a deal by the end of July actually aren’t all that high.

  • RUTTE NOT SURE EU WILL REACH DEAL ON #RECOVERY FUND IN JULY – BBG
  • RUTTE SAYS NOTHING WILL GO TERRIBLY WRONG IF NO DEAL IN JULY
  • RUTTE SAYS ONLY SOLUTION TO EU BUDGET ISSUES IS REBATES

In the FT on Tuesday, Rutte and the leaders of Austria, Denmark and Sweden called for a “realistic level of spending”, and demanded that all of the money doled out in the recovery program eventually be paid back – the so-called “rebates” (thinly disguised sovereign debt). Brussels, meanwhile, insists that at least some of the aid take the form of grants, since the European economy is potentially facing its most terrifying recession in modern times. But on Friday, the frugal four picked up enough support in the Baltic states and eastern member states in criticizing the recovery fund compromise to block a deal from being reached during the summit.

Those tempted to label Rutte and his partners as heartless and ungrateful should keep in mind that Rutte is at the helm of his third government after a decade in power, and although he’s still tremendously popular – he’s widely considered the greatest Dutch leader of the postwar era – at home, euroskeptic forces in the Dutch Parliament recently cost his ruling four-party coalition the outright majority in the Dutch Parliament. The PM must now be extremely careful not to appear to be handing over Dutch taxpayer’s money to the profligate Southern Europeans.

As the urgency intensifies and the negotiations descend into acrimony, ECB chief Christine Lagarde has been pleading desperately with EU states to just strike a deal and get it over with, while each new batch of economic projections grows increasingly dire.

Meanwhile, the Trump White House has lashed out at the EU over its “digital tax” plans and other tax measures that would supposedly help finance the plan, which would effectively force American tech giants, which are being hit by antitrust lawsuits in the EU left and right, to help finance the EU coronavirus bailout. Two days ago, the Trump administration abruptly suspended fraught international tax negotiations with EU countries and warned that the bloc should expect retaliation if it moves ahead with plans to impose the new tax, which it is currently still planning to do. The Commission also wants to introduce new EU taxes, including a level on single-use plastics, a digital tax or a tax on multinationals, to help foot the bill. This will likely only further complicate the situation once Washington really starts throwing around its political heft.

If no agreement is reached, pretty soon, that Continental “worry list” might be growing even longer as millions of Europeans wonder what the point of it all even is?

The original article is located at ZeroHedge.com

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