BRUSSELS — When European finance ministers agreed on a half-trillion euros of joint measures to shore up their economies, it felt like an accomplishment. But two weeks later, as European Union leaders meet to approve that package, it already looks like too little, too late.
The bar for the leaders’ teleconference on Thursday has been set so low that European Union officials and diplomats from member states are warning that the leaders will not issue a joint statement, a staple of such meetings.
Instead, leaders from the 27 member nations — population 440 million, wealth $20 trillion, forecast recession this year 10 percent — are expected to lay out just how far they are from agreeing on a bolder joint recovery plan.
The finance ministers’ package this month included a European Commission program that could loan up to €100 billion, or about $108 billion, for unemployment benefits in member states; about €200 billion in investments in small and medium-size enterprises through the European Investment Bank; and €240 billion in loans from the European Stability Mechanism for countries to fund their health care systems.
European Union leaders are set to rubber-stamp these measures on Thursday.
Beyond that, at best, the leaders will ask the European Commission, the European Union’s executive branch, to prepare a proposal to partly repurpose the bloc’s regular seven-year budget to create a “recovery fund.”
What that fund will do, how big it will be, when it will be introduced and virtually every other detail pertaining to its function will be left blank for now, officials said. The Commission’s proposal would come late this month or in early May, and would form the basis for the next round of debate.
“You are in a world of bad options, but the path of least resistance is probably using the budget framework,” said Mujtaba Rahman, the head of Europe practice at the Eurasia Group consultancy.
Finding that path of least resistance at times of crisis is the European Union playbook — but the approach under the current circumstances is generating concern that the economic recovery, just like the last one, will deepen the dysfunction built into the bloc’s architecture.
The battle lines being drawn once again are all too familiar: north versus south, richer versus poorer. What is also becoming clearer is that the fight is not just about the size and details of the response, but also about the timing.
Leaders from Northern Europe are thinking about the economic fallout from the pandemic in two distinct phases: a crisis phase and a recovery phase, while the south, which has been hit harder, the two phases bleed into each other, Mr. Rahman said.
“The Germans, Dutch and Finns are of the view that enough has been done for the crisis phase,” he said. “The recovery phase will be about how to reboot economies over the medium term, and, for that reason, they see Thursday’s discussion in a slightly less urgent light.”
It seems that Northern Europe is setting both the pace and the rules.
Having nipped in the bud the most ambitious proposal to fund the bloc’s recovery efforts — issuing joint debt in the form of so-called corona-bonds — leaders from Northern Europe are now trimming back hopes of Southern Europe for grants rather than loans.
Speaking to the German Parliament on Thursday morning, before the leaders’ summit, Chancellor Angela Merkel reframed the debate, neatly laying out what she saw as the European Union response as short term versus longer term.
She said that the package that the finance ministers agreed on would be the bloc’s crisis response, and that she would help pass the German part quickly so money can be made available by the beginning of June.
For the recovery beyond the immediate crisis phase, Ms. Merkel said the European Union budget was a good start, and that her country would be willing to contribute more than usual.
“We should be prepared, in a spirit of solidarity over a limited period of time, to make quite different, i.e. significantly higher, contributions to the European budget,” she said.
A proposal by Spain floated just before the teleconference set out key issues for this recovery fund. Spain, backed by Italy and other weaker economies, wants this fund to have an endowment of €1.5 trillion to spend over two to three years, beginning in January 2021.
They want the cash in the form of grants, not loans that need to be repaid. While Spain supports the idea of raising this money through the European Union budget mechanism, it believes that the only way to get the necessary capital is by allowing the European Commission to issue perpetual bonds — financial instruments associated with wartime efforts that have a never-ending repayment horizon and thus ultralow installments.
Ms. Merkel was not drawn into such details Thursday morning.
“A European economic recovery plan could support the necessary upswing over the next two years,” she said. “Our discussions today will not yet be about determining the details or deciding on the scope.”
Christopher F. Schuetze contributed reporting from Berlin.