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No deal in sight; EU leaders haggle over budget, virus fund

BRUSSELS — European Union leaders hunted for compromises Saturday on the second day of a summit to reach a deal on an unprecedented 1.85 trillion euro ($2.1 trillion) EU budget and coronavirus recovery fund, with tensions running high among leaders weary after months of battling the pandemic.

By the end of the afternoon, there was still no deal in sight, Austria’s chancellor said.

A full day and night of discussions by the bloc’s 27 leaders on Friday only added to the irritations over how the huge sums should be spent and what strings should be attached.

The EU executive has proposed a 750-billion euro fund, partly based on common borrowing, to be sent as loans and grants to the most needy countries. That comes on top of the seven-year 1-trillion-euro EU budget that leaders were fighting over when COVID-19 slammed their continent.

The summit broke up around lunchtime Saturday so each delegation could discuss the new proposals from host Charles Michel, according to a European diplomat.

The new proposals reduce the proportion of straight-out grants in the rescue package and raise the proportion of loans that will need to be paid back, in an apparent nod to a group of “frugal” nations led by the Netherlands, the diplomat said.

But the issue of how to track the rescue money remains the key sticking point, the diplomat said. Michel proposed a measure that would stop short of allowing any country a veto on how governments spend the money.

Another diplomat described Michel’s new proposals as just the first step in what could be a long journey to agreement. Both diplomats spoke on condition of anonymity because they were not authorized to publicly discuss the closed-door negotiations.

Austrian Chancellor Sebastian Kurz said Saturday afternoon that there was “movement in the right direction,” the Austria Press Agency reported, but he wants to see a higher budget rebate for Austria and a smaller proportion of grants in the 750 billion-euro recovery fund. He couldn’t say when an agreement would be in sight.

Kurz said major issues still under discussion include the rule of law in EU nations and certainty on how the funds will be used.

Kurz and Dutch Prime Minister Mark Rutte are among the leaders of four “frugal” nations, also including Sweden and Denmark, that want conditions such as economic reforms attached to EU handouts to help countries recover from the hammer blow of the coronavirus and checks on how the money is being spent.

Rutte met Saturday for crisis talks in a reduced setting with German Chancellor Angela Merkel, French President Emmanuel Macron, Italy’s Giuseppe Conte as well as the leader of the EU’s executive, Ursula von der Leyen, and Michel.

The pandemic sent the EU into a tailspin with 27-nation bloc’s economy contracting by 8.3% this year, according to the latest predictions. Around 135,000 of its citizens have died from COVID-19.

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Associated Press writer Angela Charlton in Paris and Geir Moulson in Berlin contributed.

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