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EU adopts groundbreaking stimulus to fight coronavirus recession

BRUSSELS — After nearly five days of intense haggling, European Union leaders early on Tuesday stepped up to confront one of the gravest challenges in the bloc’s history, agreeing to a landmark spending package to rescue their economies from the ravages of the pandemic.

The 750 billion euro ($857 billion) stimulus agreement, spearheaded by Chancellor Angela Merkel of Germany and President Emmanuel Macron of France, sent a strong signal of solidarity even as it exposed deep new fault lines in a bloc reshaped by Britain’s exit.

The deal was notable for its firsts: European countries will raise large sums by selling bonds collectively, rather than individually; and much of that money will be handed out to member nations hit hardest by the pandemic as grants that do not have to be repaid, and not as loans that would swell their national debts.

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Those extraordinary steps reflected a difficult consensus among members: that the scale of the crisis facing them required groundbreaking measures to ensure the bloc’s legitimacy, stability, and prosperity.

“Europe has shown it is able to break new ground in a special situation. Exceptional situations require exceptional measures,” Merkel said in a news conference at dawn. ”A very special construct of 27 countries of different backgrounds is actually able to act together, and it has proven it.”

But the lengthy negotiations in Brussels were notable, too, for their exceptional rancor — and it was clear that the pooling of resources and sovereignty had come at a cost.

While there is no underestimating the importance of the agreement — the generosity of its size and the novelty of its mechanisms — the acrimony and dramatics of the four-day meeting betrayed the new divisions within the bloc. They also signaled where the fractures may lie in future crises.

The talks were defined by shifting roles among members now jostling to make their voices heard and for leadership in the absence of Britain, which had often played the part of the thrifty contrarian, fastidious about rules, in past summits.

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This time, Merkel, unusually for a German leader, and holding the EU’s rotating presidency, put her finger on the scale on behalf of hard-hit southern countries and did battle with the nations she once championed, the northern members that have been less affected and are wary of the vast sums being thrown around.

In the end, with a unanimous decision by the 27 nations needed for a plan to go forward, a bitter compromise prevailed. The ambitious plan pushed by Merkel and Macron was watered down, but remained significant. The overall figure of 750 billion euros remained, but an original proposal to offer 500 billion euros of that in the form of grants was trimmed back to 390 billion euros, with 360 billion euros earmarked for loans.

Economists have predicted a recession far worse than anything since World War II.