MNI EXCLUSIVE: EU Covid Fund Compromise "Absurd"-Frugal Source

--Senior Frugal Four Source Calls Compromise Proposal No Basis For Deal

--Source: Draft EU Summit Conclusions 'Absurd'

--Sources: Dates For Further EU Summit By End Of July Quietly Being Pencilled In

By David Thomas

     BRUSSELS(MNI) - Proposed amendments to the European Commission's EUR750

billion 'Next Generation' proposal for the EU's recovery from Covid-19 are

window-dressing which fail to address concerns over the size and composition of

the fund, a senior source from one of the so-called "Frugal Four" countries told

MNI, as some officials in Brussels began to talk informally about the need for

another summit following the July 17-18 meeting to clinch a deal.

     A compromise plan put forward by the presidency of the EU Council on Friday

is insufficient, and the Netherlands, Austria, Denmark and Sweden will continue

their fight to reduce the size of the fund, the source said.

     "I have seen (EU summit) draft conclusions and they are absurd. They are 64

pages long and describe in detail the (earlier) proposal of the Commission. No

way can this be the basis of a deal. It's more like a provocation," the source

said.

     --LETTER

     In a letter to the Dutch Parliament on Monday, the country's finance and

foreign ministers insist that they will demand a cut in the size of the proposed

package. The ministers take particular issue with the EUR190 billion 'top up'

which would come in addition to a EUR560 billion Recovery and Resilience Fund.

The Commission and Council propose that top up money be disbursed via

traditional programmes in the EU's 2021-2027 budget, such as cohesion funding

and farm spending.

     In line with the Frugals' earlier call for a more temporary fund based on

loans to member states, the letter pushes for an approach more clearly targeted

at combating the impact from Covid.

     "The government also considers it undesirable to finance current

expenditure from the EU budget with loans and is critical of this construction,"

the letter states.

     The document welcomes some aspects of the compromise proposed by EU Council

President Charles Michel, such as the pledge to end payments to member states

within the lifetime of the next seven-year EU budget, efforts to address

allocation concerns by updating the criteria for aid, and to involve governments

more in decisions on how the aid is disbursed.

     But the Dutch also demand stricter conditions on how money is disbursed and

a 'decisive' role for member states in vetting whether required structural

reforms have been accomplished and also that aid is spent on reforms which

increase sustainable growth potential.

     The EU Council Presidency says it is committed to pushing for an agreement

this weekend. But there is informal talk among officials that another summit

will be needed and dates for further leaders' meeting before the end of July are

provisionally being pencilled in.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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