WE’RE ENTERING INTO a crucial seven days for the European Union’s response to the economic fallout of Covid-19.

Next Friday week, the European Council will meet face to face in Brussels for the first time since the start of the crisis to try and hash out the final details of next year’s EU budget and the proposed €750 billion recovery fund.

Announced in May, the fund — dubbed Next Generation EU — will be raised through borrowing on international markets by the European Commission and then split between member states through a mix of grants and repayable loans.

Although German Chancellor Angela Merkel called for European unity yesterday ahead of the crunch talks, significant obstacles lie ahead for countries like Germany, France, Spain and Italy who are pushing for the deal.

Merkel met Wednesday with European Commission president Ursula von der Leyen, and two other EU leaders, Charles Michel and David Sassoli, to prepare for the 17 July meeting.

In a joint statement, they underscored “that reaching swiftly an agreement on an ambitious European recovery package is the EU’s highest priority for the coming weeks.”

In addition, they “stressed that it would be essential that Heads of State and Government reach an agreement during this European Council meeting.”

Today, the German chancellor will welcome Dutch prime minister Mark Rutte to Berlin where she hopes to break down his resistance to the proposed plan.

Rutte leads a group of northern European countries — which also includes Austria, Sweden and Denmark — in opposing certain details of the deal and its focus on southern states.

Specifically, the ‘Frugal Four’ countries are against the idea of handing out billions in obligation-free grants to member states with historic levels of debt, countries like Spain and Italy, which have suffered the worst impact of the virus in Europe.

In return for grants, the Netherlands and its allies want to enforce sweeping reforms to the tax and pension systems of those countries.

Today, Austrian chancellor Sebastian Kurz said that Vienna wanted to find a “compromise” on an EU virus package, which several bloc members, including Austria, are opposing.

Minds will have been focused this week on fresh European Commission economic forecasts, which suggest that the economic blow of the virus has been much worse than expected.

Covid-19 is expected to shave a full percentage point off eurozone and broader European Union GDP in 2020 than previously expected.

Additional reporting by AFP

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