EU divided: Merkel and Macron showdown in bid to secure EU funding plot

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The German Chancellor and French President will meet at the 18th-century Schloss Meseberg, a grand palace 40 miles north of Berlin, as the bloc faces its most devastating economic hit since the Second World War. For Mrs Merkel, the moment marks a defining moment in her career, as she takes over the EU’s most high-stakes rotating presidency on July 1. With the bloc’s future in the balance, Berlin wants to use its six-month leadership role to carve out a rescue package like never witnessed before.

“This crisis that we’re currently experiencing is different compared to any other we have experienced since the founding of Europe,” Mrs Merkel told the Bundestag, during a debate over the EU presidency.

“Alone in Europe, it has claimed more than 100,000 lives. A few weeks of economic standstill was enough to endanger what we have built up over the years.”

And now the European Commission is hoping to lean on the German leader’s vast experience in order to put together a rescue package for the EU – dubbed the “Recovery Fund”.

Its president, Ursula von der Leyen, largely inspired by a Franco-German proposal, has put forward plans for a €750 billion bailout, that will see the bloc raise the funds on the international market before distributing €500 billion in grants and €250 billion in loans to pandemic-stricken industries and regions.

But it faces early opposition from the so-called “Frugal Four” – Austria, Sweden, Denmark and the Netherlands – who have demanded a much more fiscally cautious package.

France and Germany are now hoping to use their considerable influence within EU circles to push through the plan.

Berlin, the EU’s largest economy, has already accepted that it would have to shoulder the financial burden for the bloc’s recovery.

Sources in the German capital believe this will help convince other European leaders to back the fund.

An EU official said: “When the Germans are certain they are right, it’s very bulldozer, there is no margin for discussions.”

An EU diplomat added: “On the Recovery Fund, I expect Germany to dictate the whole process.

“Merkel is holding all the cards and Charles Michel will follow that.

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“She also wants to get Brexit out of the way and she will always for the deal she wants to keep the West together. Third leg will be restoring ties with the US after the election there.”

The next six months could prove to be the most crucial in Mrs Merkel’s 15-year stint as German Chancellor, after she ruled out running for a fifth term.

“This will be a very Merkel presidency, her swan song,” another EU diplomat said.

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They added she is expected to use it “to craft her legacy”.

EU leaders will convene in Brussels on July 17-18 for their first face-to-face summit on the recovery fund since the coronavirus outbreak earlier this year.

However, EU sources are doubtful a deal will be reached and have even suggested a second summit could be used to broker an agreement.

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