The European Union has overcome its most serious political crisis since Brexit by approving a large stimulus package to mitigate the economic fallout from COVID-19. But the watering down of Brussels' initial proposals in the final deal shows that internal divisions continue to complicate the bloc's policymaking process. On July 21, the 27 governments of the European Union approved a 750 billion euro ($862 billion) recovery fund that will be attached to the bloc's 2021-2027 budget, with 390 billion euro ($448 billion) allotted for grants and 360 billion euro ($414 billion) allotted for loans. The fund will allow the European Commission to borrow from debt markets, and will primarily benefit countries in Southern Europe such as Italy and Spain, which have been the hardest hit by pandemic-induced recessions. The deal is a compromise between Northern and Southern Europe, as the Netherlands, Austria, Sweden, Denmark and Finland had opposed the commission's original proposal to award 500 billion euro ($574 billion) in grants. Northern European countries also introduced a clause that allows countries to request the suspension of funding for other countries if they suspect the money is being misused, which could open the door to new tensions with their southern counterparts in the future.  

The softening of the commission's proposal to establish a direct link between the rule of law and the disbursement of money from the fund marks a victory for Central and Eastern Europe. This original plan was risky for countries such as Poland and Hungary, who the commission has both repeatedly accused of increasing government control over the judiciary. The commission will be able to propose severing access to the new recovery fund for countries that violate EU principles. The final decision, however, must be made by the member states using qualified majority, thus providing the opportunity for countries to block sanctions. How, exactly, the sanctions will be approved has also not been decided, with the summit's conclusions noting that the European Council will "revert rapidly to the matter." In any case, Poland, Hungary and others are unlikely to face any meaningful obstacles in receiving EU funding, given Brussels' limited ability to pressure these governments into changing their controversial domestic policies. 

The decision on the recovery fund shows that while the European Union can still reach compromises, the fault lines within the bloc run deep and will continue to create problems during future crises. Northern European countries fear that now that the United Kingdom has left the European Union, the bloc's balance of power will shift toward the Mediterranean countries, where governments want deeper financial integration and greater transfers of money from the north. Southern European countries, in turn, accuse the north of lacking solidarity. Eastern European governments, meanwhile, want to minimize EU intervention in their domestic policies as much as possible while still preserving their access to much-needed EU money. The recent agreement on the recovery fund indicates these divisions will continue to delay the bloc's reaction to crises and result in similar watered-down compromises to accommodate the diverse interests of member states.