By Kate Abnett and Foo Yun Chee
BRUSSELS (Reuters) - European Union leaders appeared to be nearing agreement on a massive stimulus plan for their coronavirus-blighted economies on Monday despite lingering tensions between them after four days of summit squabbling.
EU Council President Charles Michel said he would present the 27 leaders with a new proposal and was confident it could be the basis for a deal that many say is critical to dispel doubts about the bloc's very future.
"I know that the last steps are always the most difficult but I am confident ... and I am convinced that an agreement is possible," he told reporters before heading back to the leaders.
Slow to coordinate their initial response to the COVID-19 pandemic and already weakened by Britain's departure from the bloc, a deal on the economic aid plan would demonstrate that the Europeans can step up to a crisis and remain united.
"It has been a long summit and a challenging summit but the prize is worth negotiating for," Irish Prime Minister Micheal Martin said as the Brussels summit dragged into its fourth day - approaching the record length set at a 2000 meeting in the French city of Nice.
Diplomats said it was far from certain that the leaders could put aside the rancour that stood in the way of a compromise over hours of haggling through the weekend, and one said negotiations could run deep into Monday night.
Indeed, a session of all 27 leaders scheduled for Monday afternoon was delayed by two hours to 6:00 p.m. (1600 GMT) and still hadn't started as of 7:30 p.m.
Emotions ran high at a dinner on Sunday as a group of fiscally frugal northern nations led by the Netherlands stood their ground on the level of free grants within a proposed special recovery fund of 750 billion euros overall.
"STINGY EGOTISTS"
Polish Prime Minister Mateusz Morawiecki railed against the 'frugals' on Monday, branding them "a group of stingy, egotistic states that look at things very narrowly through the prism of their own interests".
Poland would be a top beneficiary of the recovery package, receiving tens of billions of euros in grants and cheap loans, along with high-debt Mediterranean-rim countries that have taken the brunt of the pandemic in Europe.
Despite the continued rhetorical skirmishing, German Chancellor Angela Merkel said the leaders now had a new basis for a deal on the stimulus package and, linked to it, the EU's 2021-2027 common budget of around 1.1 trillion euros.
French President Emmanuel Macron lost patience in the early hours of Monday, however, and banged his fist on the table in frustration at "sterile blockages" by the 'frugals', two diplomats said.
But by daylight, he shared Merkel's optimism, telling reporters: "I'm starting today with a lot of determination to make progress."
Hopes for a deal to help address Europe's deepest recession since World War Two sent Italy's borrowing costs to their lowest since early March and pushed the euro to a 19-week high.
Diplomats said that within the 750 billion euro recovery fund, the leaders may agree on 390 billion as non-repayable grants, down from the 500 billion originally proposed.
Issues over tying payouts to economic reforms were still to be resolved, though diplomats said this would follow smoothly once there was a compromise on the balance between grants and repayable loans in the fund.
There were also differences over a rule-of-law mechanism proposed by liberal western states aimed at freezing funding to countries that flout democratic principles. Hungary, backed by eurosceptic ally Poland, has threatened to veto the package if fund disbursement is made conditional on upholding democracy.
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