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One leader is all it takes block a deal on the EU’s blockbuster budget-and-recovery package — and on Friday night, Dutch Prime Minister Mark Rutte made it clear he’s willing to take that stand.
Rutte, who is insisting that all EU countries should unanimously approve the disbursement of any recovery funds, rejected a compromise proposal put forward by European Council President Charles Michel. Rutte’s refusal — along with a demand by the Netherlands and other self-declared “frugal” countries for at least €200 billion in cuts to the proposed €500 billion recovery grants program prompted Michel to call off the leaders’ negotiations for the night.
Countering the Dutch, Italy took a similarly hardline position in favor of a more relaxed governance mechanism. Officials closely monitoring the talks said they believed compromise on the governance point was the key to resolving many other outstanding issues, but there was likely to be no movement until that dispute was settled.
The EU’s heads of state and government arrived in Brussels for their first in-person summit since the start of coronavirus lockdown measures to begin at least two days of brokering that will set the financial course for the bloc for years to come. The proposed €1.82 trillion plan is comprised of a €750 billion recovery initiative and a core budget, the Multiannual Financial Framework, of €1.074 trillion.
Some officials and diplomats had predicted that talks could go through to the early hours of the morning. But after Rutte’s opposition brought the negotiations to a shuddering stop, Michel called off the talks at shortly after 11.30 p.m., giving leaders an unexpectedly early night.
Speaking to reporters afterward, Rutte said he was prepared to single-handedly stop a deal if necessary. “I’m not aiming for that,” he said. “But we have a number of opinions and if you always think ‘it has to stay cozy’ then you’re not fighting for the things you believe in.”
Rutte made clear that the Netherlands still dislikes the entire concept of taking on joint debt to finance recovery grants, but said that if the rest of the bloc favored that approach, it must then agree to tougher governance controls.
“The Netherlands has said: If a big group of countries really wants grants, then only under very strict conditions,” Rutte said, adding that the overall size of the recovery fund “is also still a discussion.”
During the leaders’ dinner, Michel had come forward with adjustments to two crucial aspects of the package. One was a new proposal on the governance mechanism for the Recovery and Resilience Facility (made up of a proposed €310 billion in grants) that was a focus of Rutte’s opposition. But it was not enough to convince the Dutch leader.
The other was a new proposal on the allocation formula that would be used to calculate how much in recovery money is directed to each EU country.
In addition to Rutte’s hardline position on the governance mechanism, Michel faced demands from the frugal countries, which also include Austria, Denmark and Sweden, for cuts of at least €200 billion in the proposed recovery grants program. One official said the frugal group was insisting on a grants program of just €200 billion to €250 billion.
“Our position is that we very clearly reject the current proposal for the recovery fund, which foresees €500 billion in grants,” tweeted Austrian Chancellor Sebastian Kurz shortly before the meeting broke up.
The proposed €500 billion grants initiative is strongly supported by German Chancellor Angela Merkel, French President Emmanuel Macron and other leaders, especially Italy and Spain, which suffered among the highest death tolls from coronavirus. Merkel had urged that the recovery fund be maintained at the proposed level to demonstrate a robust response to the severe economic shock of the pandemic.
Other officials said that, given the frugals were still demanding concessions on other points, Rutte had little reason to give ground on the governance issue. “There is no indication of movement on any of the crucial points of [the] frugals so why should Rutte or others move?” said one national official following the talks.
Talks are set to resume on Saturday morning at 11 a.m.
Rym Momtaz and Andrew Gray contributed reporting.
This article is part of POLITICO’s coverage of the EU budget, tracking the development of the seven-year Multiannual Financial Framework. For a complimentary trial, email firstname.lastname@example.org mentioning Budget.