EU leaders failed to break the deadlock after two days of talks over the trillion-euro COVID-19 rescue package, and will return to the negotiating table on Sunday.

Pushing talks into a third day, European Council President Charles Michel is hoping to find a compromise between the 27 heads of state and government, which has so far proved elusive.

 Michel, who chairs the summit, is expected to reveal new proposals ahead of Sunday’s meeting to bridge the gap between the “Frugal four” countries — Austria, Denmark, Netherlands and Sweden — and other countries who don’t want to see big cuts and conditions added to the recovery fund.

‘Ready to compromise’

To kick off the third day of marathon talks, Michel met with Germany’s Angela Merkel, France’s Emmanuel Macron and EU Commission President Ursula von der Leyen.

Macron said on Twitter that France and Germany “stand together” for an “unprecedented recovery plan”.

“We are ready to compromise without giving up on ambition. Everyone must take their responsibilities,” he added.

Merkel meanwhile told reporters that she couldn’t say ” whether there will be a solution” and that “it is possible there will be no results today”.

“There is a lot of goodwill, but there are also a lot of different positions,” she said.

Dividing lines

The previous night, as talks between leaders wound up, Italian Prime Minister Guiseppe Conte described “the clash” between his position and that of his Dutch counterpart Mark Rutte as “very hard”.

The Dutch, along with the other “Frugals”, are in favour of a larger share of repayable loans, rather than grants, and they want more conditions and control over how the money is spent.

A new plan presented early on Saturday by Michel was designed to offer concessions to the Dutch position.

The recovery fund, which had originally counted €500 billion to be handed out as grants, was reduced to €450 billion and an “emergency brake” was added to the mix. It would have allowed a member state to put a stop on the disbursement of funds until EU leaders met to discuss how money was being spent in another member state.

For Conte, the emergency brake from both a legal and political point of view “is not very practicable”.

Rule of law

There were further tensions regarding adding a rule of law conditionality to accessing the funds. The proposed measure, backed by Macron among others, could predominantly impact eastern European countries and especially Poland and Hungary.

Warsaw and Budapest have drawn the ire of Brussels over the past couple of years and been condemned by the European Court of Justice over what is seen as attacks on the independence of the judiciary, media freedom and the treatment of refugees in Hungary.

Hungarian has threatened to veto the recovery package if such conditionality is added to the recovery package.

Yet on Sunday, Hungarian Prime Minister Viktor Orban told reporters: “What’s going on is a little bit strange because there is a 100 per cent agreement on the rule of law.

“If somebody is not ready to accept the rule of law, (they) should leave the European Union immediately. It should not be punished by money or something other than say ‘goodbye son, goodbye guys’ because this community is based on the rule of law. And we like that approach, it’s ok,” he said.

All in all, the scene is set for another tense round of discussions this Sunday.

For the leaders of countries hardest-hit by the coronavirus economic fallout, mostly around the Mediterranean, there is no time to lose in securing a package to shore up eurozone economies.

A warning came from the EU’s budget commissioner, that the pandemic is not over. Johannes Hahn tweeted on Saturday that infections may rise in some countries, so it was “high time to reach an agreement which allows us to provide the urgently needed support for our citizens and economies”.