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Uncertainty, as day 1 of EU budget and virus recovery fund talks ends in impasse

Uncertainty, as day 1 of EU budget and virus recovery fund talks ends in impasse

An unprecedented €1.85 trillion ($2.1 trillion) deal on the European Union budget and a coronavirus recovery fund remained out of reach on Friday after more than 12 hours of discussions without a breakthrough.

The leaders of the 27-member bloc are meeting in Brussels, for their first face-to-face EU summit since the coronavirus outbreak.

A lot is at stake for the EU nations, as the bloc faces its worst ever recession and the countries need fast cash to reel from the economic crisis induced by the pandemic.

Read more: EU leaders meet for 'very difficult' coronavirus recovery talks

Negotiations were on to reach a compromise for a €1.074 trillion EU budget, that has been proposed to span over seven years, and a €750 billion recovery fund to deal with the coronavirus crisis.

The size of the recovery fund is being seen as the biggest bone of contention as the Netherlands, along with Austria, Denmark, Sweden — the so-called "Frugal Four" — as well as Finland are putting their weight behind a smaller fund and smaller portion of grants.

They demand that any loans or grants should be accompanied with strict conditions to ensure the countries that are under heavy debt carry out labor market reform.

Demanding a veto over how the distribution of the proposed recovery fund will take place, Dutch Prime Minister Mark Rutte has emphasized that grants distributed as part of a planned Recovery and Resilience Facility should mandate a unanimous assent from all EU governments.

Read more: Austria's Sebastian Kurz lays out conditions for EU coronavirus recovery deal

German Chancellor Angela Merkel and French President Emmanuel Macron, on the other hand, are pushing in favour of an ambitious package of loans and subsidies to member states. They have repeatedly appealed for a compromise.

Merkel on Friday had her doubts about reaching a breakthrough.

"I have to say that the differences still are very very great. And therefore I cannot say whether we will come to a result this time," she told the media. "You have to face up to reality."

Macron said he was "confident but cautious", adding that it's a "moment of truth and ambition for Europe."

Friday's marathon talks saw, European Council President Charles Michel working individually with Rutte and Hungary's Viktor Orban, to bridge differences.

Michel came up with a compromise plan that proposed an emergency halt on cash distributions but Rutte responded with a rival plan which would still allow one country to veto.

The summit will resume at 11am on Saturday.