EU Leaders One Step Closer To Agreeing On Recovery Fund

The extension of the talks to a fourth day shines a glimmer of hope that a consensus may be reached

Monex Europe | While the euro started the week lower at Monday’s open after the EU leaders failed to unlock an agreement on the €750bn recovery fund during their summit on Friday and Saturday, the currency found support in anonymous reports this morning that the frugal four countries are now satisfied with €390bn of the fund coming in the form of grants. The initial proposal included a total of €500bn to be allocated in grants, but the leaders failed to find a compromise on the overall size over the weekend. Germany and France insisted that at least €400bn should be granted, while Rutte and four other fiscal hawks pushed for a much lower amount. The talks will resume at 4pm CEST today to settle outstanding issues such as the size of the fund, the mechanisms for controlling its spending and the conditions attached. Although the euro is currently trading at its highest level since March, the currency remains under the spotlight of the talks, as investors’ hopes for a breakthrough are increasing and the euro is now vulnerable to the downside if no deal is reached. The extension of the talks to a fourth day, however, shines a glimmer of hope that a consensus may be reached. The eurozone joins the US and UK with Purchasing Managers’ Index released this week, with the eurozone’s turn being on Friday. As today is a light day on the eurozone’s data front, all eyes are turned to the resumption of the EU talks this afternoon.