Merkel Says Need to Combine Aid With Reforms in Signal to Rutte

German Chancellor Angela Merkel said any recovery efforts in the EU should go hand in hand with reforms as she sought to bridge differences over Europe’s planned aid package at a meeting with Dutch Prime Minister Mark Rutte in Berlin.

“All aid measures don’t help if they are not connected with reforms, changes and an orientation toward the future,” Merkel said before a work dinner in the Chancellery on Thursday evening in comments that signaled potential concessions on one of Rutte’s key demands.

The Dutch premier has been one of the most outspoken critics of the European Union’s proposed 750 billion-euro ($845 billion) recovery plan which would be financed through joint borrowing. He is part of the so-called Frugal Four member states -- the Netherlands, Austria, Sweden and Denmark -- which oppose the EU Commission’s plan to hand out 500 billion euros of the recovery package as grants.

Instead, they would prefer just loans and demand that the distribution of the money be linked to binding economic reforms.

“It is also important that such a fund is implemented with reforms so all EU members are strong,” Rutte reiterated before the meeting with the German chancellor.

Tough Negotiations

Merkel, who took over the rotating, six-month-long presidency of the bloc on July 1, is keen to pave the way for an agreement in advance of a special EU summit on July 17-18. On Wednesday, Merkel told the European Parliament that unity and solidarity were needed to overcome the union’s most challenging moment in history and prepare it for the future challenges of climate change and the digital economy. She aims for an agreement before the summer break.

But Hungarian Prime Minister Viktor Orban sees little chance for agreement at next week’s summit, projecting that “very tough” negotiations will last throughout the summer.

Next Monday, Merkel is scheduled to meet Italian Prime Minister Giuseppe Conte at the German government’s guesthouse in Meseberg, 50 kilometers north of Berlin. Italy has been hit particularly hard by the pandemic and has called on the EU for financial aid amid a steep recession triggered by the lockdown measures to fight the virus.

For the nations that share the euro, the European Commission forecast an 8.7% economic contraction this year.

“I think we have one thing in common. That is that we want to make Europe strong again,” Merkel said.

©2020 Bloomberg L.P.

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