EU recovery agreement deal may need 'personal' summit

It is expected to nudge the EU towards further integration by allowing the commission - temporarily - to borrow money on the financial markets against an increased own resources in the EU budget, in order to hand out as grants and loans to member states.

The budget and the recovery plan need to be agreed by EU leaders and the EU Parliament, but elements of it, such as the increase in the own resources, need to be approved by national parliaments.

EU leaders - who have so far met via videoconference during the coronavirus lockdown - are scheduled to have their next gathering on 18 June.

Face to face?

EU diplomats and officials suggest a personal meeting of EU will be essential for an agreement on the budget and recovery, as existing deep divisions are difficult to overcome online, and budgets are agreed in last minute haggling.

It also remains a question if EU leaders can agree in one go, or a deal requires a second meeting in July.

Commission vice-president Maros Sefcovic on Tuesday called on governments to agree swiftly.

"We need rapid political agreement, to launch the new programmes there is no time to waste, we need a European Council decision in June to be ready on time with all the programmes, therefore the stakes are so high," he said after meeting with EU affairs ministers, adding "at least" half of the ministers pleaded for speedy decision.

"18 June is our desired outcome," Sefcovic said, adding he told ministers to look at this proposal with different "optics", not only with budgetary, financial aspects.

"Therefore I was pleading [in the meeting] so much for the political leadership to overcome the current crisis, and relaunch the economy," Sefcovic said.

Croatian state secretary for European affairs, Andreja Metelko-Zgombic, whose country holds the EU's rotating presidency, said member states needs to reaffirm the credibility of the EU economy.

"All member states are aware that the time for a final compromise and for providing us with appropriate tools when it comes to MFF [EU budget] and recovery fund has come," she told reporters after the meeting.

Member states are divided over the size of the recovery instruments and whether the EU would provide loans, which need to be repaid by member states, or grants, to EU countries hardest hit by the crisis.

Dutch prime minister Mark Rutte, whose country is part of the so-called 'Frugal Four' along with Austria, Sweden and Denmark, has reiterated on Tuesday that the emergency should only provide loans.

The EU commission argues, however, that an asymmetric recovery, where some countries fall behind even further to others, would hurt all member states, and therefore grants are needed as well.

Regional ratifications?

But its not only the governments which need to bridge their differences to get a deal on the EU budget and agree on the recovery mechanism.

An increase of the own resources for the EU in the budget - von der Leyen earlier suggested to around two percent of the bloc's gross national income - needs to be approved by EU countries, including national and in some cases, regional parliaments.

National ratification could take a long time, while the recovery money would be needed for European economies at the earliest, with the bloc's growth expected to contract by 7.5 percent next year.