European Union leaders failed to agree on a massive stimulus fund to revive their coronavirus-hammered economies on Saturday after two days of fraught negotiations but extended their summit for another day to try and iron out their differences.

Iran PressEurope: As the 27 leaders scurried back to their hotels after a late dinner at the conference hall in Brussels, a source close to summit chairman Charles Michel said they would be handed new proposals before they reconvene at noon (1000 GMT) on Sunday.

With the pandemic dealing Europe its worst economic shock since World War Two, leaders gathered on Friday to haggle over a proposed 750 billion euro ($856 billion) recovery fund and a 2021-27 EU budget of more than 1 trillion euros.

But a group of wealthy and fiscally “frugal” northern states led by the Netherlands blocked progress in the first face-to-face EU summit since spring lockdowns across the continent.

They favor repayable loans rather than free grants for the hard-hit indebted economies mostly on the Mediterranean rim, and they want control over how the funds are spent.

Hopes for an agreement grew earlier on Saturday when Michel proposed revisions to the overall package designed to assuage the Dutch concerns. Under his new plan, the portion of grants in the recovery fund would be reduced to 450 billion euros from 500 billion and an ‘emergency brake’ on disbursement would be added.

But hopes that this would be enough faded quickly, and even before the leaders went in for dinner, Italian Prime Minister Giuseppe Conte made it clear the chances were bleak.

“We are in an impasse now. It is more complex than what was expected,” Conte said in a video on Facebook. “There are many issues that remain unresolved.”

The budget commissioner of the bloc’s executive reminded the leaders - who wore masks and kept their distance from each other - that COVID-19 was still among them and they needed to act.

“Just a solemn reminder: the Corona crisis is not over: infections on the rise in many countries,” Johannes Hahn tweeted. “High time to reach an agreement which allows us to provide the urgently needed support for our citizens+economies!”

An EU diplomat said the “frugal” pressed through the day for deeper cuts to the recovery fund and bigger rebates for net payers into the core EU budget, among other demands.

Other countries had their own demands in negotiations crisscrossing different regional and economic priorities, putting in doubt an unprecedented act of solidarity for the EU under which the European Commission would borrow billions of euros on capital markets on behalf of them all.

The exact size of the EU’s long-term budget and how far to use payouts as leverage for reforms, or whether to withhold money from countries that fail to live up to democratic standards, were unresolved as the leaders left on Saturday.

Hungary, backed by its eurosceptic, nationalist ally Poland, has threatened to veto the whole package over a new envisaged mechanism to freeze out countries flouting democratic principles.

The EU is already grappling with the protracted saga of Britain’s exit from the bloc and has been bruised by past crises, from the financial meltdown of 2008 to feuds over migration.

Another economic shock could expose it to more eurosceptic, nationalist and protectionist forces, and weaken its standing against China, the United States or Russia.

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