MNI SOURCES: EU Recovery Fund Deal Unlikely At Summit

By David Thomas

     BRUSSELS(MNI) - Some Brussels officials remain sceptical EU leaders have

sufficiently narrowed their differences over the proposed EU Recovery Fund for

an agreement to be feasible by the July 17-18 summit.

     While some EU sources stress the new German EU presidency led by Chancellor

Angela Merkel will pressure leaders to agree a deal as soon as next weekend, a

senior official from within the so-called "Frugal Four" - Austria, Denmark,

Sweden and the Netherlands - was adamant that this was unlikely.

     "I still don't think there can be a compromise on July 17-18. Not much has

changed," the official said, after some sources suggest that southern countries

may be willing to accept a lower overall envelope than the EUR1.85 trillion

proposed by the Commission for the combined EU budget and Recovery Fund.

     An EU source who is close to the talks also doubted agreement was likely

next week, adding that "Maybe a bit more drama is still needed" before a deal "a

bit later."

     --TACTICS

     But the Frugal source said the Four would not give in easily.

     "I understand that the EC and southerners may want to spin that there is a

lot of pressure to have a deal. That's the usual tactics."

     The same source suggested that since summits tend to be political rather

than technical discussions, the focus of next week's leaders' meeting should be

on big-picture issues, such as the overall size of the package and its balance

between loans and grants.

     Following bilateral meetings with EU leaders, EU President Charles Michel

will shortly publish his negotiation box, setting out key areas for discussion

by leaders. In a speech to the EU Parliament Wednesday, Michel made clear big

differences remained on key issues such as allocation, rebates, front-loading of

recovery fund payments and repayment dates for EU loans, as well as the size of

the fund and its balance between loans and grants.

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

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