MNI SOURCES: Frugal Four To Issue EU Recovery Fund Objections

--Frugal Four Countries Oppose EU Borrowing To Fund Grants

By David Thomas

     BRUSSELS(MNI) - The European Union's so-called 'Frugal Four' countries are

preparing to issue a list of objections in the coming days to the European

Commission's proposals for a EUR750 billion post-crisis recovery fund.

     According to one source close to the Four --Austria, Denmark, Netherlands

and Sweden -- the statement will come in the form of a letter to the EU and will

reiterate their opposition to the principle of mutualised borrowing to fund

grants for the countries, regions and sectors worse affected by the Covid-19

pandemic.

     "We will not live with the current mix of loans and grants [proposed by the

EC]," the official said.

     The source warned that the EU faces at least a couple of months of tough

negotiations to get a deal on any recovery fund, with the June 18-19 meeting of

heads of government likely to prove no more than the first stage in a "series of

rolling summits" over the summer and into late August.

     "It's going to be difficult, but the Frugals have got time," the source

said.

     "We won't abandon the frugal position anytime soon."

     --GERMAN OBJECTIONS

     Other sources close to the Frugal Four confirm that Germany too has some

issues with the Commission proposal, even if in public it has been supportive.

     In particular, sources say Germany is seeking a tighter legal text to more

precisely circumscribe the limits of its liability for state-guaranteed

Commission borrowing to finance the recovery fund.

     The opening EU summits this summer look likely to be taken up with

resolving many of these German issues before tackling the more fundamental

objections raised by the Four.

     "Germany just sees the whole Commission package as too complicated and

opaque on financing."

     The Four regard the Commission's offer of rebates as no more than a token

and is unlikely to flinch in their resistance without more far-reaching

concessions from other countries.

     "This [rebates] was something we would have fought for and probably got

anyway. It's not enough."

     The Four say they are not prepared to live with the mix of loans and grants

proposed by the Commission, which they believe would have 'market-distorting'

effects.

     But the Four are not ruling out that they might finally sign up to some mix

of loans and grants.

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

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