The resilience of the European Union and its ability to confront crises was on display once again this week as leaders worked overtime to arrive at a mammoth coronavirus recovery package for its members. While French President Emmanuel Macron described it as a historic day for Europe, the negotiations saw many hiccups, including attempts by the so-called Frugal Four (Sweden, Denmark, Austria and the Netherlands) to both pare down the grants as well as link the package with rule of law concerns in Hungary and Poland.

There are reports that the Frugal Four were finally brought around with promises of rebates in their EU budget contributions. The recovery package, formalised after 90 hours of deliberations, will involve 750 billion euros in grants and loans to counter the impact of the epidemic. It comprises two components: grants totalling 390 billion euro to nations that were hit the hardest and low-interest loans of 360 billion euro to member states.

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The deal, which will now be subjected to technical negotiations between member states and will need approval of the European Parliament, will be funded by borrowings from the international market. It comes alongside the grouping’s 1.1 trillion-euro budget for the next seven years. To ensure funds are not misused, recipients will have to submit spending plans to the European Commission and a majority of states will be able to block proposals.

What is significant is that while EU countries have borrowed jointly on a small scale from financial markets, this deal marks a potentially giant leap in financial integration. The extraordinary summit that led to the historic deal was the first physical meeting of EU leaders after the virus outbreak and was marked by unprecedented health precautions. Leaders wore face masks, met in far larger rooms than usual, and were forced to cut down the size of their delegations.

The agreement came amid concerns that failure to achieve consensus could have grave consequences for Europe, including plummeting stock markets and worsening of an already severe economic crisis. Earlier this month, the European Commission had predicted an 8.3 per cent shrinkage in the EU economy. Supporters of the plan have hailed it as a massive display of solidarity after an initially disjointed response to the epidemic that saw panic-stricken EU members unilaterally closing borders and blocking exports of emergency medical supplies.

The approval of the plan marks a huge triumph for President Macron and German Chancellor Angela Merkel who forged a close working relationship in the weeks leading up to the negotiations. Said Mrs Merkel, “That was not easy that we needed so many days, it showed also that we came from different directions. But what counts for me is that we ended up getting it together and that we are now all convinced of what we decided to do.”